Rising above the Minimum Wage.

An in-depth analysis was made of how quickly most people move up the wage scale from minimum wage, what factors influence their progress, and how minimum wage increases affect wage growth above the minimum. Very few workers remain at the minimum wage over the long run, according to this study of data drawn from the 1977-78 May Current Population Survey (CPS) and the 240 monthly CPS Outgoing Group Files from January 1979 to December 1998. Of the youngest, most inexperienced workers, 12 percent earn the minimum wage, but less than 1 percent earn the minimum at ages 46-55. The percentage of those earning the minimum wage also declines as workers achieve higher levels of education. The study also found that over the last 20 years, nearly two-thirds of minimum wage workers moved above the minimum wage within one year of working at the minimum wage. The median annual wage growth for minimum wage workers was 10 percent between 1977 and 1997. Labor market factors also affect wage growth; for example, higher unemployment rates are associated with lower wage growth among minimum wage workers and increases in median wages among high school graduates increases the probability of exiting minimum wage by 2 percent. The industry in which employees are employed also has some effect on rate of exiting minimum wage. Cashiers seem to be the most likely to move beyond the minimum wage. In addition, persons with more access to training tend to rise above the minimum wage more quickly. Finally, an increase in the minimum wage is accompanied by a sharp reduction in workers rising above the minimum wage, and substantial drops in wage growth are measured in the second year following a minimum wage hike. (Contains 14 references and nine tables.) (KC)