Minimum Wage Hike Doubles Portion Of Workers At The Bottom

The minimum wage goes up today, from $6.55 to $7.25. By this time, the economic arguments for and against are so boiled down, they're practically condensed. On the pro side:

The minimum wage hasn't kept pace with inflation and carries less buying power than 40 years ago. // Minimum wage workers tend to spend the money they get, so the raise will move right back through the economy. // The increase affects just under five percent of all employees, so it's not a big deal.

On the con side:

By imposing a minimum wage, the government is setting an artificial price on labor instead of letting the market decide. // Businesses struggling through the recession can't afford to pay their workers more. // Increasing the minimum wage has an inflationary effect, as it causes other wages to rise, too. // Hiking the minimum wage hurts younger workers, the biggest single group at the bottom, and because employers will tend either to trim those jobs or fill them with older, more experienced workers whom they perceive as worth the extra money.

But in all our conversations about the minimum wage, here's the one bit that has stuck with me — and I'll warn you that it's a weird paradox of a thing:

 

Economist Howard Rosen, who supports raising the minimum, told us that today's change in pay will double the percentage of the workforce getting the minimum wage or less, pushing it to just over 9 percent. Rosen says that reverses a long trend in American labor:

Back in the late '70 and '80s, something like 10 percent of the workforce was getting paid at the minimum wage or below. And that share has been dropping precipitously, down to less than 10, five, and now three or four percent. So what's been done by increasing the minimum wage is that not only is it helping those people who get paid the minimum wage, but it's also increasing the coverage of those people who are getting the minimum wage.

When Rosen looks at the numbers, he sees an America in which higher-paying manufacturing jobs are being replaced by lower-paying service jobs. When I look at them, two things stand out for me. On the one hand, I see a mathematical accident — we've doubled the number of minimum wage workers, but by only by raising the wage — and on the other, yet another mention that we're approaching an economic condition of the '70s or '80s. But you could also say that back then, the minimum wage bought more, so it wasn't quite as tough to live on (not that it was easy).

I'm not sure what to make of all this just yet. You?