HOURWAGE2 values below the federal minimum wage


I was using CPS monthly data to look into people earning less than $10/hour and learned that the Census Bureau implemented a new rounding scheme for hourly wage variables in April 2023. The HOURWAGE2 documentation explains that the new rounding scheme no longer allows the identification of those earning less than the federal minimum wage and that workers who originally reported a wage below the federal minimum are identified in SUBMINWAGE.

When I summarized HOURWAGE2 for those paid hourly in August 2023 and limited to those identified as originally reporting earning less than the federal minimum, I was surprised to see workers earning less than $7.25/hour, as I expected their hourly wage variable to be recoded to $7.25/hour under the new rounding scheme.

Can you please clarify what I am misunderstanding about the new rounding scheme?

Thank you so much!

. summ hourwage2 if subminwage==1 & paidhour==2 & month==8 & year==2023, detail

                    Hourly wage (rounded)
      Percentiles      Smallest
 1%            1              1
 5%         1.15              1
10%            2           1.15       Obs                  63
25%         2.15           1.15       Sum of wgt.          63

50%         2.85                      Mean               4.05
                        Largest       Std. dev.      2.606521
75%            6           7.25
90%         7.25           7.25       Variance       6.793952
95%         7.25           7.25       Skewness       1.885572
99%         16.5           16.5       Kurtosis       9.166996

Due to hourly earnings between $0.08 and $29.99 being rounded to the nearest $0.05, it is unclear whether respondents with HOURWAGE2 = $7.25 are earning at or above the minimum wage ($7.25-$7.27) or whether they are earning below ($7.23-$7.24) since both cases are rounded to $7.25. This is what is meant by it is no longer possible to identify which persons are earning less than the federal minimum wage. For more information, please refer to the Census Bureau’s user note.

Hope that helps!

Hi Ivan!

Thank you for the quick response! I see - so we can still identify many people earning less than the federal minimum wage, just not those whose hourly wage hovers right around $7.25 because people earning $7.23-$7.27 are all rounded to $7.25?

Thank you!

Yes, you can still identify respondents earning less than the federal minimum wage by using HOURWAGE2 as long as their unrounded hourly wage is less than or equal to $7.22. I will see if we can make the language more clear on this.

Okay! It appears I was taking the language too literally. Thank you so much for the help, Ivan!