Minimum wage workers and the collapse of the job ladder
FiveThirtyEight’s Ben Casselman recently explained that it’s becoming harder and harder for U.S. minimum-wage workers to move up the wage ladder. According to his analysis, during the mid-1990s, only one in five minimum-wage workers was still earning their state’s minimum wage a year later. But in 2014, the most recent year for which data are available, that number jumped up to one in three. Casselman also finds an increase in the proportion of workers who stay in minimum-wage jobs for three years.
Casselman’s results seem to indicate that raising the minimum wage might not be susceptible to some of the criticisms that opponents throw its way. Minimum-wage workers, for example, are often characterized as teenagers who will soon jump to higher-paying jobs. Casselman finds, however, that minimum wage workers are increasingly older—almost a quarter of U.S. minimum-wage workers in 2014 were 40 or older. Minimum-wage workers are also often mischaracterized as less-educated immigrants, although Casselman finds that minimum-wage workers today are more educated than in previous decades.
The facts about minimum-wage workers are important for thinking about the merits of increasing the federal minimum wage, but they are also emblematic of broader trends in the U.S. labor market. As Casselman points out, the job ladder—or the ability of workers at low-paying jobs to move up to higher-paying jobs—continues to collapse, the evidence stretching back to well before the Great Recession. Economists John Haltiwanger of the University of Maryland and Henry R. Hyatt and Erika McEntarfer of the U.S. Census Bureau show that the flows between jobs are still below their levels from the year 2000. Casselman’s data shows that movement away from minimum-wage jobs peaked in 1998, about the same time.
Equitable Growth’s Marshall Steinbaum and Austin Clemens recently showed other ways that the job ladder has failed during the 21st century. Young workers, for example, are increasingly working in low-paying industries. The percentage of workers between the ages of 19 and 34 hired into low-paying industries has been on the increase while the share of these workers hired into high-paying industries has declined.
An earlier analysis by Steinbaum and Clemens showed that this trend was particularly pronounced for new college-educated workers. This “cruel game of musical chairs” means that more-educated workers are increasingly taking jobs that would have gone to workers with a high school education. This cascade down the job ladder means that workers who before would have had, to borrow an example from Casselman, factory line jobs instead take minimum-wage jobs. And the workers who would have previously had those minimum-wage jobs are then pushed out of the labor force altogether.
It’s also worth noting that the share of prime-age workers (ages 25 to 54) that have a job is well below its level during the 1990s. That’s another sign of employment being constrained by the number of jobs, which breaks the job ladder.
So while Casselman’s interesting new analysis might be interpreted as a story just about the minimum wage, it’s really a piece about larger, structural changes in the labor market. These larger changes may indicate that an increase in the minimum wage will help these workers, but policymakers need to think also about the larger problems in the labor market that have led to a job ladder with too many broken rungs.