A few weeks back, in response to this post, Barron’s Gene Epstein sent the following to me by e-mail. It’s an excerpt of an e-mail that he’d sent earlier to a colleague. I offer it here, in full, with Gene’s kind permission (link added):
From recent BLS study of minimum wage: “The proportion of hourly paid workers earning the prevailing federal minimum wage or less declined from 5.2 percent in 2011 to 4.7 percent in 2012. This remains well below the figure of 13.4 percent in 1979, when data were first collected on a regular basis.”
Share was as high as 9.9% in 1985. Worth mentioning because it helps unravel the productivity issue raised naively by Krugman. Minimum wage is lower in real terms, but a much lower share of hourly workers are at the minimum wage. Ergo, the higher wages of unskilled workers indicate some increase in productivity over the decades.
And of course, if the minimum-wage workers really are twice as productive as their wage reflects, there is a hugely profitable entrepreneurial opportunity to bid these workers away from their exploitative employers with a wage hike of, say, 50%. Profit margins on employing them at a 50% higher wage would still be huge. The fact there are no takers would seem to indicate that their wage probably does about reflect the discounted value of their productivity.