Updated: Jobs Above and Below the Minimum Wage Line

With the release of the BLS’ report for 2011 on the Characteristic of Minimum Wage Earners, we can now update our pioneering chart illustrating how the federal minimum wage-earning composition of the U.S. workforce has changed in each year since 2006.

Here, we start with the year 2006 because that is the last full year, before 2010, in which the U.S. federal minimum wage was set at a constant level throughout the entire calendar year. Using our very accurate model of the income distribution of that year, we then measure the difference between the number of jobs recorded at each year’s minimum wage level to the same number recorded at the same reference wage levels in 2006, taking into account the amount of time at which a given minimum wage level applied during each year.

The result is the candlestick-style chart below, where the horizontal axis defines the break between those earning the time-weighted federal minimum wage or less for the indicated years, which are shown below that “zero” line. The purple vertical bars show the full number of people recorded as being employed during the year, while any black ends show where reductions in the U.S. workforce have occurred since 2006. The values shown on the chart indicate the size of the change of the “above” or “below” minimum wage workforce for the indicated years with respect to the starting year of 2006.

Reading the chart from left to right, we see that 2007 saw some 402,850 jobs lost from the U.S. economy, which were all below the time-weighted minimum wage level for that year, as the otherwise growing economy of that year added 2,033,767 jobs above the minimum wage line. The U.S. federal minimum wage was increased in July 2007 from $5.15 per hour to $5.85 per hour.

In 2008, the economy added some 46,482 jobs above the time-weighted minimum wage line for that year, raising the total difference from 2006′s job level above the federal minimum wage level to 2,080,249. Meanwhile, the U.S. economy shed an additional 725,982 jobs paying the federal minimum wage or less, as the full difference with respect to 2006 for jobs paying the federal minimum wage or less fell to 1,128,832.

The federal minimum wage was increased in July 2008 to $6.55 per hour.

For all practical purposes, the net job losses that occurred during the first year of the recession that officially began in December 2007, as measured from the peak of the previous period of economic expansion that took place in that month, were entirely confined within the minimum wage-earning portion of the U.S. workforce.

That situation changed in 2009 with the fallout from the rapid decline of the U.S. automotive industry. Here, compared to 2008, a total of 4,919,970 jobs paying more than the federal minimum wage were lost in 2009, which brings the total number of jobs paying more than the federal minimum wage down to be 2,839,721 lower than the number of jobs paying more than the same time-weighted minimum wage levels of 2006.

Things continued to go badly for those earning the federal minimum wage or less, as another 563,613 fewer people disappeared from this portion of the U.S. workforce as compared to the previous year, bringing the total reduction with respect to the number of people being paid the same wage level or less in 2006 to 1,691,445.

We note that the recession that officially began in December 2007 officially ended in June 2009. July 2009 marks the last increase in the U.S. federal minimum wage, reaching its current level of $7.25 per hour.

2010 saw job losses continue both above and below the now steady U.S. federal minimum wage level. Compared to the previous year, an additional 274,896 people earning more than the U.S. federal minimum wage disappeared from the U.S. workforce, while another 542,938 people earning the U.S. federal minimum wage or less also disappeared from the U.S. workforce. These year over year changes bring the difference with respect to the same wage levels in 2006 to a reduction of 3,114,617 for those earning more than the federal minimum wage, and a total reduction of 2,234,383 for those earning the federal minimum wage or less in 2010.

2011 marked the first real year of improvement for those earning more than the federal minimum wage, as the number of people in this category increased by 1,335,584 over the level recorded in 2010. Compared to 2006 however, there are still 1,779,033 fewer people with jobs that pay more than $7.25 per hour today.

But the bleeding has yet to stop for those who earn the federal minimum wage or less. Here, we observe that 2011 saw 531,000 fewer people earning the federal minimum wage of $7.25 or less, lowering the number of people earning those wages to be 2,765,383 below the same level for 2006.

The average number of individuals earning the federal minimum wage or less has decreased by 551,855 per year since 2006, with the best year being 2007 when only 396,744 such jobs disappeared and the worst year being 2008, when 725,982 such jobs vanished from the U.S. economy.

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