Perhaps the splashiest proposal from President Obama's State of the Union speech was his call to raise the minimum wage to $9 and permanently index it to the cost of living -- a policy proposal that liberal advocates have long yearned for, and which Mitt Romney suggested as a moderate gesture during the election.
Leaving aside for now the murky and endless argument over whether the minimum wage actually hurts job growth, how many people might stand to be affected by this idea? You might be surprised. Though relatively few workers today earn the federal minimum wage of $7.25, by one estimate, as many as 20 million employees could feel the ripple affects of the big, 25 percent hike the president is now pushing.
Who Earns the Minimum Wage Today?
First, the very basics: According the Bureau of Labor Statistics, 1.68 million Americans, about 61 percent of whom were female, earned the federal minimum wage in 2011. About a quarter of them worked in the food industry, and another quarter in retail. And about forty percent are black, Hispanic or Latino.
Roughly half those workers those workers live in nine big state -- and particularly in Texas.
Meanwhile, forget the stereotype of teenagers flipping burgers in the summer. Less than a quarter of minimum wage employees are under the age of 20.
Whether by choice or by necessity, a relatively small fraction actually work full time.
And they overwhelmingly lack a college education.
In the scheme of the economy, those workers are just a drop the bucket. Even if you add in the 2.1 million Americans who technically earn less than minimum wage, such as waiters who work mostly for tips, you're still talking about less than 5 percent of the hourly workforce.
Who Would Earn Obama's Minimum Wage?
But Obama's proposal wouldn't just be felt by today's minimum wage earners. Although 19 states and the District Columbia have a minimum wage above the federal level, only Oregon's and Washington's are near or above $9-an-hour. And once you start considering the workers who earn between $7.25 and $9, the potential impact swells. (Map via Wonkblog).
In August, the left-wing Economic Policy Institute analyzed Iowa Senator Tom Harkin's proposal to raise the federal minimum to $9.80 by 2014, and produced the chart below. Roughly 20 million workers, they calculated, stood to be affected once it crossed the $8.95 threshold.
That number does need to be qualified: it includes both workers who would be affected directly as their pay automatically rose, as well as workers who would be affected indirectly as companies adjusted their wage scales relative to the new floor. In the end, the EPI estimated that a minimum of $9.80 would directly change the pay of some 19.4 million workers. (In a press release today, the White House suggests the raise to $9 would directly benefit 15 million workers).
Many of these Americans would be employed at some of the country's largest retailers, such as Wal-Mart and Target.
With such a wide reach, the minimum wage would essentially stop strictly being an anti-poverty measure. As the EPI notes, at the $9.80 mark, about 20 percent of the families who would be affected currently earn more than $40,000 a year. Those are still lower-middle-class families -- the median family income in 2011 was $62,000 -- but they're not necessarily what we'd consider outright poor.
So in essence, Obama is proposing a minimum wage that would affect not just teens working at the Gap, but also older Wal-Mart workers with children. Whether you think it's a painless way to redistribute income from corporations to workers, or a sure way to kill jobs, that's the context in which you need to think of this proposal.