IEI Insight: Who pays for a higher minimum wage?

This week’s IEI Insight is provided by Renato Morais, a Gail Werner-Robertson Fellow and author of a forthcoming paper on the Nebraska minimum wage.

When we think of increasing the minimum wage, many people believe it is going to help the workers most in need — that it is going to provide them a “living wage.” But who needs more help: those workers who already have a job but earn a low wage, or those who do not have a job at all? A minimum wage increase does not help the worst off of the worst off. It does not even help all of the minimum wage earners.

Who earns the minimum wage? Half of minimum wage employees are between the ages of 16 and 24. Of these, 79 percent are part-time high school students, college students, and entry-level workers — they are not the primary breadwinners of their household. Their average family income is $65,900, and only 22 percent of them live at or below the poverty line. The other half of workers earning the minimum wage — those 25 and older — have an average family income of $42,500, and only a quarter of them live at or below the poverty line. Thus, raising the minimum wage only “helps” a tiny portion of those who the public believes it is intended to help.

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