There’s a major problem with arithmetic in the minimum wage debate

minimumwage

The debate over Congress raising the minimum wage nationwide is all about numbers. What the rate should be, how many people it would help, how many jobs it would cost, how easy it would be if Evil Rich People just surrendered their money instead. But at least one of these numbers is horribly skewed, resulting in a false narrative about how many people are scraping by on pennies an hour.

The latest brick in this narrative construction project is a report from the Institute for Policy Studies showing that if all the bonuses given to Wall Street bankers were instead distributed among people working minimum wage full time, their income would double. Wow! Let’s do that! For the children! Quick, grab your pitchfork, I’ll get my torch!

Not so fast.

The report cites 1,007,000 as the number of people working full time making the current federal minimum wage of $7.25 or less. Is that right? IRS data for 2013 shows the number of people working 35 hours per week or more at or below hourly minimum wage to be exactly that number. But there’s a huge problem with that figure - it includes people who get tips.

Waiters and other tip-paid professions have a different minimum wage than most other hourly workers: currently $2.13. “What? How can anyone live on that?!”, you might gasp. They don’t, of course. $2.13 is only the base salary they are required to be paid. They are paid tips based on their performance on top of that, which usually adds up to much, much more than even the standard $7.25 minimum wage.

For example, waiters in Houston, a large city with relatively low cost of living, make an average of $36,000 and $49,000 a year. That’s at least three times higher than the standard minimum wage, and ten times higher than the tip-based minimum wage. These people are not scraping by in poverty and should not be included in the minimum wage debate.

But they are. The same 2013 IRS data lists 1,814,000 employeed in the leisure and hospitality industry, including waiters and servers, most of which (1,194,000) make less than minimum wage, which almost certainly means they make the tip-based wage (plus tips). If we eliminate just these likely tipped workers from the total at/below minimum age population (3,300,000), we reduce it by more than one-third.

If we assume that the hospitality industry’s tipped/sub-minwage population works roughly the same hours as the rest of the at/below minwage population in other fields, then about 30% of them work 35 hours or more per week. That results in about 358,200 people working full time for tips. If that’s true, then there aren’t 1,007,000 people working full-time at or below minimum wage, as the IPS report states. There are only 648,800 of them.

Without exact ratios of tip workers and their work week hours, my math probably isn’t exact, but it gives us an idea how skewed the debate is. The picture is being painted as if there are millions of people around the country slaving away all day and all night for pennies to feed their mewling herds of children.

And there certainly are some. But not many. And are we really willing to lose the equivalent of 500,000 jobs to force employers to pay them a little more? If we are, we should at least know exactly how many people we’re talking about first. The numbers we’re being given now aren’t even close.


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