 Hi, I'm James. And I'm Anthony. And this is Words and Numbers. So, how are you doing, Ant? I'm well, James. I'd be a lot better if people would stop talking about the minimum wage. Yeah, well, now we're going to just add to it, though, right? Well, yeah. And this is interesting because we've gone through a period of what looked like experimentation with some cities raising the minimum wage, some states raising the minimum wage. And now the federal government wants to get in on the act by raising the federal minimum wage up to $15 an hour. Yeah, no. And, you know, we've seen this come and go before. The real shock here is that it's not election season and people are talking about minimum wage. Right, which raises the question, why would that be so? I mean, we know that it brings out the voters, but why now? Yeah, no, that's exactly the case, isn't it? Because, you know, election cycles come and go and every single time we get these arguments, but now all of a sudden it's just sticking around. So there's something that's keeping this in the popular imagination. And I actually think it's because the difference between the two parties has become so inconsequential that there are very few wedge issues left, something that differentiates them one from the other. And this one's kind of swimming out there. This one does, in fact, differentiate them to some degree. Yeah, it does seem to be a point on which they're consistently different. I have a hypothesis and it goes like this. What's happened is we've seen over the past couple of years, cities and states not just raise their minimum wages, but raise them a tremendous amount, right? Going from $7 to 10 up to 12 than 15, right? So you're talking about basically a 100% raise over the course of a small time period. And that magnitude of a raise is going to make it very clear to everyone what economists have been saying all along, which is when you raise the minimum wage, you hurt the very people you're trying to help. The lower educated, the lower skilled, the lower experienced workers, they get shut out of the workforce. So I think we're on the verge of seeing an experiment, right? And my hypothesis is that what the federal government is doing by raising the federal minimum wage, it's whitewashing the whole experiment because we're not going to be able to see differences now between lower and higher. Everyone's going to be at the same 15. Yeah, but there's a little more here, isn't there? Because, you know, I did a quick straw poll this past week knowing that we were going to talk about this this week. I asked people who I consider to be reasonably well-informed, reasonably intelligent, but by no means economists, right? They have no special insight into the matter. I just asked them what percentage of the American workforce they assumed was making minimum wage. Oh, this is great. Okay, so what got you numbers? It is. And at the low end, I got a couple of people that said 20%, and then any number of folks came in right around 30%. And over the years, what I've noticed is that 30% on this is the answer that people are just inclined to give. I have no idea why that is. But everybody just naturally assumes that roughly 30% of the American workforce is making minimum wage. And given the amount of breath wasted by politicians on this issue, year in and year out, you know, maybe that's a sensible thing for them to think. But we've got a bit of a surprise for you today, don't we? Well, it's an interesting observation bias, because I think what's going on is we keep hearing about the minimum wage. And like anything, if you keep hearing about it over and over, you start to naturally think this must be a big problem. And of course, the truth is not anywhere close to 30% of workers' minimum wage. Not even close. So what is the magic number here in the United States? Well, it's interesting because the magic number changes depending on how you want to measure it, right? Do you want to measure all workers? Do you want to measure just hourly workers? Let's start with minimum wage workers as a percentage of the total workforce. As a percentage of the total workforce, you're talking about 1.5%. Come again, Ian? 1.5% of the entire U.S. workforce earns the minimum wage. Well, surely this... Come on now, that's not 30%. No, it gets better than that because the largest chunk, if you break it down by industry, the largest chunk of minimum wage workers are in food preparation and serving. And of course, we know that people, at least people who are good and persistent in those industries, they earn lots of tips, right? This is what keeps them in the industry. And so the average food worker, food preparer, food server is earning actually far more than the minimum wage. Now, if we take them out of the mix, the number we're left with is about 1.5% of the workforce. What about when we think about it in terms of simply the percentage of people making minimum wage as opposed to those who work hourly? Yeah, so if you talk about hourly workers, so take out the salaried workers, you're still at a very low number. You're about 2.5%, 3% maybe. So no matter how we cut this, we're not coming close to 30%? No, not anywhere close to it. It's a very small sliver of the population that earns minimum wage. All right, so if that's true, and we're here to tell you it is, right, we looked into the numbers, and these are government numbers, it's not like we're just making this stuff up, right, Ant? Oh, absolutely. This comes direct from the Census Bureau. Yeah, so we're not making things up today. We'll see what happens next week. But, you know, when we start to take a look at these things, and you realize that the perception and the reality are so completely at odds with one another, you've got to start asking some hard questions. Why is it that we talk about this to the extent that we do? Yeah, and this is a good question, and I think the answer has a lot less to do with economics than it does with politics. I mean, the economics on this is very clear. Politicians like to present it as economists aren't in agreement as to the effects of the minimum wage. We're extremely in agreement. In fact, it's one of the places next to trade that economists are in most agreement. Now, we'll disagree about who specifically is hurt, but almost universally, economists will tell you as you raise the minimum wage, you're going to get unemployment amongst the least qualified, the least educated workers. So it's got to be the case that if politicians keep pushing this, it's not about the economics. It's about the politics. Yeah, no, and the politics are quite clear, aren't they? Because when you turn on the news and you see people wandering about holding signs, chanting in unison about the fight for 15, you always know something's getting somewhere when there's an alliterative phrase that people chant as they march, right? So clearly, the politics on this one, the politics are working. Yeah, they're certainly getting people out. And the thing I like to... I talk to my students about this, of course, and when we get through the whole discussion of minimum wage, they'll look at me incredulously and ask, how is it that this is even an issue? And what I say to them is, it's taken me in a class three or four weeks to get you to the point of understanding why the minimum wage actually hurts people. But I can't handle that in a five-second soundbite if I'm a politician, but in a five-second soundbite, I can easily lie to you and say, vote for me and I'll put $15 an hour in your pocket. Well, it's the fight for 15 at. Yeah, lies are much easier to tell, apparently. Well, even if we don't have to go all the way down that road, because I can see why certain people would say, well, everybody should make a good wage, a fair wage and honest wage, and you and I would never disagree with that, actually. We think people should earn a fair wage. However, it's how one defines a fair wage. And we define fair wage as something along the lines of what you're worth in an open market. Yeah, that's absolutely right. If we're going to define fair, it should be the number that two people willingly agree to. But I think it's worth underlying as well. It is not the case that the minimum wage universally hurts people. There are a lot of people who are very nicely helped by an increase in the minimum wage. The problem is that the way it's presented is as worker versus business. And you've got this, you know, the stingy business person. We need the government to come in here and force him to pay more. And so the money goes out of the pocket of the employer, into the pocket of the worker. And that's actually not the dynamic. The dynamic is as you raise the minimum wage, you force the employer to let some of his employees go. And who does he let go? He tends to let go the people who have the least experience and least training, right? The marginal workers. And with the money he saves from not paying them, that's what he uses to pay the workers who remain. So it's actually not worker versus employer. It's worker versus worker. You're right. And let's be perfectly clear about this. An employer will let go the employee who is not worth $15 an hour. Oh, absolutely. And if you want evidence of that, look at your own house and tell me how many people do you employ to vacuum your house or to do your dishes, right? Or to make your bed? And the answer is largely none of it. I don't employ any people to do that. Why is that? It's because the price I would have to pay someone to do those jobs is greater than what the value of having the jobs done is. Therefore, I'll just do it myself. That same calculus is what goes on in the head of the employer. Right. And why wouldn't it? Right. Why wouldn't it? An employer strives first to have his business turn a profit. Right, exactly. And one of the things that people will say is, well, yes, but these employers, they're out to turn a profit. So the minimum wage is what prevents them from paying zero because that's what they'd really like to do, drive wages all the way to zero. Well, stop and think about that for a moment. There's no law requiring employers to pay more than the minimum wage. And yet, 99% of jobs in the United States pay more than the minimum wage. How can that possibly be if there's no law requiring it? It's because the thing that pushes wages up isn't the minimum wage. It's the value of the workers' labor. Right. And even the vast majority of hourly workers in the United States make more than minimum wage. Oh, yes. I mean, it's not just jobs. We're not being fooled and hoodwinked when we look at the data because all these people making big salaries are skewing the data. No, no, no, no, no. Everybody is skewing the data. When we're talking about somewhere between 1% to 3%, depending on how you cut up the data, clearly the perception and the reality are two completely different things here. Yeah, and I think that's worth mentioning as well that when we think about minimum wage, we picture on the one hand the poor workers who are working all these hours for nothing, and on the other hand the super-rich CEOs. And that's the image of the super-rich CEO is as much an outlier in reality as is the minimum wage worker in reality. The fact is, you know, half of businesses in this country have less than 500 employees. That's what the government classifies as a small business. It's even more ridiculous than that, right, because the average business owner pulls in the princely sum of $72,000 a year. Yes, that's absolutely right. So we're not talking about those fat cats down on Wall Street. We're talking about guys who barely make more than the median household income in the United States. Yeah, that's right. And basically a $75,000 job, that's a CEO of a small business, and that's about 50% of businesses in the country. And yes, there are CEOs who are making multi-millions, but there is rare in the CEO world as LeBron James is in sports, right? You'll get some LeBron James once in a while, but that's not the rule that's the exception. So what we end up with, oddly, are CEOs that make not nearly what people think. A group of minimum wage workers that's infinitely smaller than people suppose. Who's telling the truth here? Yeah, well, this is the fun thing. Everybody can look at this data, you just Google it, it's right there, it's for free. Anybody who's interested can find this with, you know, five minutes worth of work. But what you have to do is get up out of your chair and stop listening to the talking heads, whose job it is to earn money by selling advertising, which they could do if they're telling you things that you find extreme. Said the talking head. And on that happy note, that's all we've got time for today on Words and Numbers. Thanks for watching this episode. Leave a comment, let us know what you think about the minimum wage if you'd like, ask a question or two if you've got them. And if you like this episode, come on back every Wednesday around about 12.30, give or take, Eastern time for a brand new one. We'll see you next week. Until then, check us out at fee.org and at fee online on social media. And I guess that's about it for today. And so you have a sparkling week. Catch you next week. See you next week, James.