Soon after Sen. John Kerry proposed raising the national minimum wage from $5.15 to $7 by 2007, that proposal received predictable cheers from some quarters and predictable boos from others. Yet both the supporters and critics of a higher minimum wage keep missing one critical point.

 Take a careful look at the precise wording of a recent Bureau of Labor Statistics (BLS) report on this topic: "Slightly over half of workers earning $5.15 or less were under age 25, and about one-fourth were age 16-19. ... About 2 percent of workers age 25 and over earned the minimum wage or less."

 The key phrase in that report -- strangely ignored by both supporters and critics of a higher minimum wage -- is "or less." Among 73 million workers still paid by the hour in 2003 (40 percent of us are salaried), only 545,000 or 0.7 percent earned the minimum wage. Three times as many -- 1.6 million or 2.2 percent -- earned less than the minimum wage. That is a huge improvement over 1997, when 3 million earned less than the minimum wage. Contrary to a universal confusion between words and reality, those paid the official "minimum" wage are not the nation's lowest-paid workers.

 The federal minimum wage does not apply to those working on small farms or at seasonal amusement or recreational establishments. It does not apply to newspaper delivery people, companions for the elderly, outside salesmen, U.S. seamen on foreign-flag ships, switchboard operators or part-time babysitters.

 Any employer with an annual income below half a million dollars is free to ignore the minimum wage, except in states with their own minimum for such small establishments (such as $2 an hour in Oklahoma, $2.80-$3.35 in Ohio and $4 in Montana). Such jobs offer a crude safety valve, preventing the full brunt of minimum wage hikes from taking the form of higher unemployment.

 Not all the unskilled job applicants precluded from minimum wage jobs end up being added to the ranks of the unemployed, or (another neglected effect) to the ranks of discouraged labor force dropouts. Instead, many are just displaced into jobs exempt from the federal minimum wage.

 Jobs paying less than the minimum wage, legally or otherwise, are typically more arduous and less secure than jobs in, say, chain stores or restaurants, where the minimum wage is more easily enforced. Jobs exempt from the minimum wage generally offer no pension or health benefits,and no effective regulation of overtime hours, sick pay or other working conditions. Employer payment of Social Security taxes is notoriously negligent, leaving affected workers ineligible for benefits.

 Past experience shows that an increase in the minimum wage is not only likely to reduce the number of workers earning the minimum wage, but also to increase the number earning less than the minimum. The resulting increase in the supply of workers forced by a higher minimum wage to compete for sub-minimum wage jobs can be expected to push the lowest wages even lower.

 The minimum wage was increased from $2.65 to $2.90 in January 1979 and to $3.15 in 1981. The percentage of hourly wage workers earning less than the minimum reached 5.6 percent by 1979 and 6.8 percent in 1981. The unchanged $3.35 minimum wage gradually became less burdensome as wages and prices rose during the strong 1983-89 expansion, so that by 1989 the percentage earning less than the minimum had fallen to 2.2 percent. But the minimum was then increased to $3.80 in April 1990 (and to $4.25 a year later) and the percentage earning less than the minimum jumped to 3.8 percent in 1991. The economy was in recession during part of 1981 and 1991, however, so we cannot be entirely certain the increased minimum wage was the main culprit. Continued...