Minimum wage debate only as good as the data

David MoonBlog

I spent the late summers and early falls of 1977 and 1978 walking through seemingly millions of acres of cotton fields, using a hoe to remove a specific weed that crop duster herbicide couldn’t kill. My compensation included the $2.65 an hour minimum wage and the motivation to do almost anything other than chop cotton as an adult.

Measured by the consumer price index, my 1978 earnings lost a third of its purchasing power in the ensuing 35 years.

Since 1968 the federal minimum hourly wage has increased 353 percent, compared to a 583 percent increase in the CPI. Numbers like these are one reason that seven Nobel prize winning economists call on the US to increase its minimum wage.

Numbers like that are also misleading if their limits are not understood. The purchasing power of the federal minimum wage peaked in 1968. Supporters of a higher minimum wage do not select that year by accident.

Since its inception in 1938, the minimum wage has increased 2,800 percent, significantly greater than the 1,587 percent increase in consumer prices.

Growth in the minimum wage also outpaced consumer price increases from 1955 to 2014 and numerous other cherry-picked periods.

If you tell me your conclusion, I can tell you what data set supports it.

The minimum wage is important and deserves an intellectually honest discussion.

The US has approximately 3.5 million minimum wage workers, about half of whom are between the ages of 16 and 24. I don’t care how much those kids make. I just want them working. If you show me a 17-year-old who works his tail off at a disgusting, menial job, I will show you an eventual 40-year-old who won’t be working at a minimum wage job.

Yet there are 40-year-olds earning $7.25 an hour. Approximately 41 percent of those 3.5 million minimum wage workers are between 25 and 54 years old. Those adults earn less than $15,000 a year.

Economists – even those presumably non-partisan – disagree on whether increases in the minimum wage result in meaningfully higher unemployment. Non-economists typically cherry pick data to support their beginning bias.

President Obama has proposed raising the minimum wage 40 percent, to $10.10 an hour.

Regardless of your personal bias or even learned interpretation of the data, there is no question that an artificial, government-mandated increase in anyone’s wages will not increase economic output. Those higher wages must come from somewhere.

Supporters of a higher minimum wage assume that the money will come from either business owners or executives. Perhaps. Some of it, anyway.

More likely, however, the money to pay a higher minimum wage would also come from middle – wage earners, consumers and some entry-level workers who lose their jobs.

The US will eventually increase the federal minimum wage. It’s what we do. The conclusions we use to eventually justify the increase, however, are only as legitimate as the data supporting those conclusions are complete.