Congress has not
raised the federal minimum wage since 1997, and some Members of
Congress say that a raise is overdue to help low-income workers get
These lawmakers appear to believe that low-income workers will not
get a raise unless the government steps in to help them. But most
minimum wage jobs are entry-level positions, and as workers gain
skills and experience on the job they move up the career ladder and
earn substantial raises. And the most productive workers earn the
largest raises. The market works and rewards those who work to get
ahead; the government does not need to step in for minimum wage
earners to get a raise.
Starting at the Bottom Rung
minimum wage increased to $5.15 an hour on September 1, 1997, and
has remained there since. Over the past nine years, the
inflation-adjusted value of the minimum wage has fallen to a
Many Members of Congress say that this means low-income worker's
wages have failed to keep up and that Congress needs to raise the
minimum wage to help them get ahead. Senator Edward Kennedy (D-MA),
for example, argues, "There's no state in America where $5.15 an
hour meets the basic needs of a working family. We have waited far
too long to give these hardworking men and women a raise."
implies that hundreds of thousands of low-income American workers
have gone nine years without a raise. But that is not the case.
Minimum wage jobs are the first rung on a career ladder that soon
leads to higher paying work. The workers who earned the minimum
wage a decade ago are not the same workers who earn it today.
This is because
minimum wage jobs are entry-level positions. Fully 40 percent of
minimum wage workers did not have a job the year before.
Minimum wage workers are typically low skilled and have little
workforce experience. The majority are under 25.
Minimum wage jobs teach these workers valuable job skills, such as
how to interact with customers and coworkers-expertise that is
difficult to learn without actual job experience. Once workers have
gained these skills, they become more productive and earn higher
wages. The notion that workers are trapped earning $5.15 an hour
ignores the role that minimum wage jobs play in starting
low-skilled workers out the workforce.
Effort Earns Raises
in Short Order
The evidence shows
that minimum wage workers experience rapid upwards mobility.
Between 1998 and 2003-a time when the federal minimum wage did not
rise-the median minimum wage worker earned a 10 percent raise
within a year of starting work. During this period, over two-thirds
of workers starting out at the minimum wage earned more than the
minimum a year later.
Once workers have gained the skills and experience that make them
more productive, they can command higher wages.
cannot force employers to pay their workers more than they are
worth in terms of their productivity. A firm will not pay an
employee $7.25 an hour if his labor only raises profits by $6.00 an
hour. However, workers can and do choose to become more
productive-increasing their earnings in the process.
minimum wage earners work part time, and many are students and
young adults who desire this flexibility.
But minimum wage workers who choose to work longer hours gain more
skills and experience than those who work part time, and as
expected, they earn larger raises. A typical minimum wage employee
who works 35 hours or more a week is, within a year, 13 percent
more likely to be promoted and, on average, will enjoy a raise
worth five percentage points more than that of a minimum wage
worker putting in fewer than 10 hours per week.
better-educated employees are more productive and so more likely to
receive raises. Workers with college degrees who start at the
minimum wage earn ten percentage points more one year later than
those who have not graduated from high school.
productivity, not government fiat, raises wages, and employees can
choose to work harder and become more productive in order to earn
larger raises. Minimum wage earners who work longer hours and
improve their education have more skills and earn larger raises
Many members of
Congress argue that the government needs to increase the minimum
wage to give American workers a raise. But they misunderstand the
nature of minimum wage work. These jobs are entry-level positions
filled by employees with limited work experience and often few job
skills. As workers become more productive, they earn raises and
promotions. Over two-thirds of workers in minimum wage jobs earn a
raise within a year. Employees who become more productive by
gaining experience and improving their education earn larger
raises. Minimum wage jobs do not trap low-income workers in
poverty. They are the first step on a career path of upward
is a Policy Analyst in the Center for Data Analysis at The Heritage
Jared Bernstein and Isaac Shapiro,
"Buying Power of the Minimum Wage at 51-year low," The Center for
Budget and Policy Priorities and the Economic Policy Institute,
June 20, 2006, at .