 minimum wage declined steeply and steadily between 1979 and 1989, when inflation whittled it down from $8.38 to $5.87 (in 2011 dollars), a fall of 29.9 percent. The legislated increases in the minimum wage in 1990 and 1991 and again in 1996 and 1997 raised the value of the minimum wage from 1989 to 2000 by 14.6 percent (in 2011 dollars). The value grew another 7.8 percent from 2000 to 2011.
A more appropriate way to assess the level of the current minimum wage in historical terms is to examine the minimum wage’s share of the average worker’s wage (as measured by the average hourly earnings of production/nonsupervisory workers), as shown in Figure 4AE. In 2011, the minimum wage was worth only about 37 percent of what an average worker earned per hour, not far above its lowest point, reached in 2006, in 47 years. In contrast, the minimum wage’s share of the average wage was about 50 percent in the late 1960s, about 45 percent in the mid-1970s, and about 40 percent in the early 1990s. This analysis shows that the earnings of low-wage workers have fallen significantly behind those of other workers, and that the decline in the real value of the minimum wage is a causal factor in rising wage inequality.
It has been argued that the minimum wage primarily affects teenagers and others with no family responsibilities. To address this claim, Table 4.40 examines the demographic composition of the workforce that would benefit from an increase in the minimum wage in 2014 to $9.80, about 47 percent of the average wage. This analysis takes into account the many workers benefiting from a state minimum wage higher than the current federal level (discussed further below). Assessing who would benefit sheds light on who has been affected by the long-term drop in the real value of the minimum wage.
An analysis of only those earning between the current and the proposed new minimum wage would be too narrow, since a higher minimum wage would affect workers who earn more than but close to the proposed new minimum; they would receive increases if the minimum wage rises. For these reasons, Table 4.40 also includes other low-wage workers who would gain from the “spillover effect” of a higher minimum wage. The table presents information on these workers in the column labeled “Indirectly,” a group totaling 8.9 million workers, or 7.0 percent of the workforce. The increase would affect 19.5 million workers directly, or 15.3 percent of the workforce. In total, the change in the minimum wage to $9.80 would affect a substantial group, 28.4 million workers, or 22.3 percent of the workforce. By this metric over a fifth of the workforce has been affected by the eroded value of the minimum wage.
A higher minimum wage would disproportionately affect women: They constitute a majority (54.5 percent) of those who would benefit, greater than their 48.3 percent share of the workforce. The vast majority (87.9 percent) of those who would be affected by the higher minimum wage are age 20 or over; thus, it is clear the increase would not mainly benefit teenagers. Similarly, single parents would disproportionately benefit from a higher minimum wage: 10.4 percent of those who would be affected are single parents, higher than their 7.5 percent share of the workforce. In addition, many beneficiaries (17.6 percent of the total) of the proposed minimum-wage increase are parents in a married-couple family; this share is less than their 27.2 percent share of the workforce. While minorities are disproportionately represented among the potential beneficiaries (23.6 and 14.2 percent are, respectively, Hispanic and African American), the majority, 56.1 percent, are white. A majority (54.1 percent) also work full time (at least 35 hours weekly), and another 30.9 percent work at least 20 hours but less than 35 hours each week.
Table 4.40 also shows that the beneficiaries of a potential minimum-wage increase are disproportionately concentrated in the retail and hospitality industries (42.8 percent are employed there, compared with just 21.1 percent of all workers), while other indus