From: Political Calculations: Data for the Slaves of Wages

Our final chart for this post shows the distribution by age of the portion of the U.S. workforce that earns less than or equal to the current U.S. minimum wage of $5.15 per hours:

Pretty startling, eh? This chart confirms that the minimum wage is primarily earned by the very young. We find that 26.1% are between the ages of 16 and 19, and if we go up to age 25, we find that 53.3% of the people earning minimum wage or less fall into this group. If we add the 12.2% of the minimum wage earning workforce who are between 25 and 29 years old to this latter value, we discover that nearly two-thirds (65.5%) of the so-called minimum wage workforce is under the age of 30.

By contrast, at the old end of the age distribution, there were just 4.7% minimum-wage earning workforce members above the age of 60. Minimum wage earning would seem to mostly be a phase for the young!

I have to wonder what assumptions this blog author has about low wages that this data startles him. The fact that young people overwhelmingly earn very low wages is a direct result of the fact that they haven’t very many skills to begin with.

One may think that to help increase the welfare of young people, one ought to raise the federal minimum wage. But this is a bad move, for a number of reasons. First, the demand for low wage earners is not perfectly inelastic. If a store owner employs 6 minimum wage workers and his costs suddenly increase by 16% (as might occur if the minimum wage is raised by $0.50/hr at the current rate of $5.15/hr, taking into consideration that an increased payroll will increase the taxes required), that store owner may well reduce the hours of his workers by the same amount or end up laying one off.

Second, increasing the minimum wage creates a greater incentive for employers to hire “illegally.” The notion that there are “legal” and “illegal” ways to hire people is pretty absurd on its face, but that said, if the cost of keeping your employees just jumped by 16%, perhaps you will hire somebody “under the table.” It’s a lot cheaper to pay somebody $7/hr on the side than it is to hire them for the same position at minimum wage.

If there were no minimum wage, that wouldn’t mean that employers could pay “whatever they want,” not exactly. The set of people willing to work for $1.00/hr, say, is probably consisted mostly of people who aren’t worth very much in terms of their skills, trustworthiness, etc. The existence of a minimum wage, however, ensures that they will probably never get any “legal” employment. Furthermore, the fact that we don’t all earn minimum wage is evidence that government intervention in the price of labor is unnecessary.