The Federal Minimum Wage Is Irrelevant to Most Workers

It has been 13 years since the federal government last raised its minimum wage — currently $7.25 an hour — and that’s totally fine. It’s fine because the federal minimum has become irrelevant to a vast majority of workers. Wages have long since soared well beyond that and are still rising. It may seem like hiking the federal minimum wage would have little impact, but in the real world, raising the floor again would chip away at existing wage gains.

Recall that, just two years ago, there was a push in Congress to make the federal minimum $15 an hour on the theory that this would lift the lowest earners out of poverty. “Raising the minimum wage to $15 an hour is about more than economics—it’s about our values,” Senator Elizabeth Warren tweeted in 2021. “The Senate needs to fight for working families.”

The push in Congress stalled, but working people were uplifted anyway: The economy did this on its own.

The current average hourly wage for private-sector workers is $32.82 an hour and rising, according to the Department of Labor. Wages have increased 4.6 percent in the last year alone. While we are seeing layoffs in the tech sector, the overall unemployment rate currently stands at 3.5 percent, tied for its lowest level in the last half century. In short, it’s still highly competitive out there, with employers scrambling to hire workers.

For most of those workers, the federal minimum wage isn’t a factor. There are 159 million people employed in the country. Only 1.1 million — about 0.7 percent of all employed — get paid at or below the federal minimum. The bulk of those earning below the minimum are students, who have long been exempted from minimum-wage rules. What’s left is the 181,000 people whose employers pay the absolute lowest they can get away with for regular workers — exactly the federal minimum. That is just 0.1 percent of the hourly workforce.

It is true that the federal minimum wage isn’t a living wage, but it has traditionally not been seen as one. The stereotype of a minimum-wage worker being a teenager living with his parents and flipping hamburgers at a fast-food joint didn’t emerge in a vacuum. Most minimum-wage or lower-wage workers are young people just entering the workforce and/or still in school: Sixty-one percent are 24 years old or younger, and most are in the food-service industry.

The federal minimum is also rendered mostly irrelevant because it effectively only applies in 20 states. That’s because 30 states have already set a higher minimum wage: New York and California are among the highest, at $14.20 and $15.50 an hour, respectively. Those are also two of the states with the highest unemployment rates — 4.3 percent and 4.1 percent, respectively — both significantly above the national average unemployment rate of 3.5 percent. Those unemployment numbers are likely a result of the states’ higher minimum wages. The higher the minimum rate, the fewer people employers can afford to hire at that rate because labor costs have gone up. It doesn’t help low-wage workers to make them too expensive for the employers who would otherwise be able to hire them.

The usual argument for raising the minimum wage is to ensure that low-end workers earn a living wage. Raising the minimum, however, gets things backward. A robust, growing economy where employers are in competition for workers will boost things better than any government mandate. Instead of calls for a minimum-wage hike, our leaders should be demanding jobs that pay people better than the minimum wage.

Read the full article on the National Review.