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The Minimum Wage: Markets vs. Laws

Published Thursday Dec 20, 2018

Author Andrew Cline

The Minimum Wage: Markets vs. Laws

As of July, the average hourly wage for private employment in NH was $26.22, according to the Bureau of Labor Statistics. In February, NH recorded its highest average hourly wage on record, $26.89.

Even counting for inflation, NH’s real per capita annual personal income is up more than $4,000 since the recession. Hillsborough County was in the top 10 counties in the country for wage growth last year, and NH was among the top five states, according to the Bureau of Labor Statistics data released in August.

Amid this good news, activists and some politicians are telling people that things are bad for the simple reason that state law doesn’t mandate a higher entry-level wage. This fixation on government mandates rather than the actual economy is a telling difference in the way some people view the world. The crowd pushing to raise the state minimum wage to $15 an hour asserts that $7.25 an hour (NH’s minimum wage is the federal minimum) is not a living wage.

The Data Story
This is where the gap between the actual economy and economic notions widens. The state Labor Market Information Bureau has compiled U.S. Census estimates for the number of people working at or below the minimum wage in NH. (Tipped jobs can pay below the minimum.) The data, based on surveys, show only 8,004 Granite Staters working at the minimum wage or less in 2017.

That’s really low—a 48 percent decline from the 15,284 Granite Staters estimated to have worked a minimum wage job in 2016. Why the drop? We don’t know yet. And because of the small sample sizes, it’s possible that a sizable chunk of the decline is a measurement error. Next year’s data will help fill out the picture. But even if 50 percent of the drop is a reporting error, NH would still have only about 11,600 people working at or below minimum wage. That’s out of a working-age population of around 913,000, according to Census figures.

At the current estimate of 8,004 people, less than 1 percent of NH’s working-age population makes minimum wage or less, with data indicating that 73.5 percent of them work in food preparation and serving-related occupations.

Tips, commissions and overtime pay are not included in minimum wage figures, so the actual take-home pay of about three-fourths of NH employees who are classified as minimum-wage workers would be considerably higher than the minimum wage.

Experience and Value
Of those making minimum wage or less, Census estimates show that 3,951, or 49.4 percent, are between the ages of 16 and 24. These are high school and college-age employees with fewer skills and limited experience. And experience is a key factor. The lowest-paying sector, food preparation and serving-related occupations, pays an entry-level wage of $8.36 an hour, a mean wage of $10.55 an hour, and an experienced wage of $13.76 an hour—just $1.24 an hour less than the $15 per hour minimum wage some activists and politicians are demanding.

This tells us that wages are not a measure of a person’s moral worth or dignity, but of economic value. Employers pay inexperienced teens less than experienced adults for reasons that ought to be obvious to anyone who’s ever had a job or waited in line at a McDonald’s. And they pay higher wages to attract better employees.

Even in the fast food industry, competition for good employees is driving up wages so that the minimums in many places are $10 an hour or higher.

More than doubling the minimum wage to $15 an hour would have a relatively small effect on the pay of experienced employees even in the lowest-paid industries. But it would have a big effect on entry-level positions, effectively pricing younger, less-experienced people out of those jobs.

In an economy in which employers are voluntarily raising wages, we are told that the government must mandate a high wage floor, which gets us back to the point about markets versus laws. Laws are expressions of moral values; markets are expressions of economic values (mostly). Even when markets are pushing pay rates higher, people who view the world a certain way find this unacceptable precisely because it does not come from a moral directive.

Markets don’t operate that way. They consider tradeoffs, which the conspicuously virtuous rarely do. So even if markets are driving wages higher, society must act collectively to mandate that wages never fall below whatever the virtuous wage floor of the moment is. Refusal to pass such a mandate is considered a society-wide moral failure.

Or to put it in the contemporary vernacular, minimum wages are virtue signaling.

Andrew Cline is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord. For more information, visit

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