Earlier this month, I wrote about what it looks like when we adjust minimum wages for costs of living across the country. My initial plan was to write a follow up blog post where I looked at publicly available data and estimated the number of people who are paid below their state’s minimum wage. I’m writing this blog post instead though because I wasn’t able to make these estimates. The quality of the data just wasn’t there.
This is one of those questions that seems like something we should have lots of data on, but we for some reason don’t. You’d think with how accessible wage data is for all different industries that someone would have figured out how to estimate the number of people earning their states minimum wage, but that just isn’t the case.
It is possible to find estimates of the number of people below the federal minimum wage line. The Bureau of Labor Statistics publishes statistics on federal minimum wage workers each year, but they don’t make any estimates for the number of people who fall below their effective minimum wage.
There are a lot of reasons why trying to move past the federal minimum wage is an extremely difficult task. The most important one is determining what a survey respondent’s effective minimum wage is. The Current Population Survey records where its respondents live, which does not have to be the same as where they work.
If someone crosses state lines for their job, or even if they work in a different city that has its own minimum wage, they might be exposed to a different minimum wage than if they worked exactly where they lived.
This becomes a larger issue when we are trying to use Current Population Survey data which can have sample size problems when trying to get high geographic resolution. Even looking at state level data, there can be significant sampling errors. We can adjust for these with survey weights which the Current Population Survey has, but those can only go so far. If the survey doesn’t reach enough people with low-wages, we won’t be able to accurately estimate the number of people at the minimum wage.
This is a pretty significant gap in the data. Knowing precisely how many people are experiencing the minimum wage is a really valuable piece of information that could really help drive policy decisions. This is because when we talk about making a change to the minimum wage, the really critical piece of information we need to know is how many people are actually going to be impacted by this change.
To bridge this data gap, we need more robust data collection methods. Enhanced collaboration between state and federal statistical agencies, along with surveys specifically designed to capture this data could help provide a clearer picture of the labor market. This would empower policymakers with the detailed information necessary to craft legislation that truly reflects the economic realities faced by workers across different regions.
While my original goal of estimating the number of people earning below their state’s minimum wage was hampered by data limitations, this experience highlights the importance of quality data in policymaking. Understanding the true impact of minimum wage laws requires comprehensive, accurate data that captures the complexities of the labor market.