As far as employment effects go, the minimum wage has a minimal effect on the economy. The total number of workers earning the minimum wage or less has been on a long-term decline since the 1980s, though it’s slightly higher than pre-recession levels.
New data from the St. Louis Federal Reserve, however, finds an interesting change: “the share of the most-educated workers is increasing” among minimum-wage workers. In 2003, only 11 percent of minimum-wage workers had a college degree. By 2015, it increased to 16 percent. For workers who didn’t complete high school, they dropped from 42 percent to 33 percent over the same time period.
That’s not because more college graduates have slipped into a McDonald’s hat. It’s because the least-educated have dropped out of the workforce as the most-educated remain and ride out a weak economy.
Millennial graduates and dropouts again find themselves fighting underemployment. They’re overqualified for the jobs they have, but they tend to find a job that aligns with their education and skills within a few years. It’s an economic wave they absorb, then advance afterward.
That post-recession phenomenon holds the answer for why the least-educated have held fewer minimum-wage jobs. They’re getting displaced.
Employers, when they have applications from college graduates and non-graduates, use the degree as a signal. Those potential workers can maintain a schedule, arrive at work on time, and follow instructions. It’s a bigger gamble to hire non-graduates, even if the graduates might jump for a better job when they get an offer.
“The long-term decline we see here may reflect many things: states increasing their minimum wage, fewer workers in jobs that earn tips, or movements in the wage distribution,” Christian Zimmermann wrote for the Fed.
The general decline of low-wage work is an encouraging example of national economic growth, but the compositional changes of who makes the minimum wage exposes fault lines within the economy.
