Monday, June 21, 2004

Minimum Wage; Staying Ahead of Inflation or Becoming Unemployed?

Kerry wants to increase the federal minimum hourly wage from its present $5.15 to $7.00 by 2007. Being a liberal issue, the NYTs reports in glowing terms.

First, does Kerry have to pay Teddy some sort of copyright fee for floating this proposal? Seems Teddy has proposed this exact same increase over the exact same time frame in Senate (108th) Bill 2370. It was placed on the legislative calendar in May of this year. But don't take the Senate's word on it, go to the DNC's West Coast affiliate, the Seattle PI. The article helpfully points out that Kennedy does this minimum-wage two-step every year.

Not to be outdone by congressional records or liberal media reports, the Kerry campaign enjoys the novelty of the number they "picked." Back to the NYT article, "Campaign aides said they picked $7, a 35 percent increase phased in at about 12 percent a year, because it would bring a family of four with one minimum-wage earner above the poverty line with food stamps and other assistance." (Boy, if I could "pick" things and claim credit months after the fact, I could afford an editor to clean up my typos!)

Back to the NYT. "Both the experts and Mr. Kerry pointed out that the minimum wage has been flat since 1996, the second-longest stretch since it was established in 1938, and that its inflation-adjusted value is now $4.18, below the $4.25 rate that prevailed in the early 1990's." They gave us history, something my children could look up. So I asked them to. I knew that "$4.18" seemed conveniently under $4.25., an on-line encyclopedia, thinks the inflation-adjusted hourly wage is $4.40; humorously, the AFL-CIO thinks it is $4.75. Both are current calculations.

So what is it, factually? Since inflation is a known number, it seems all we need to do is find a non-political calculator. Politics, of course, bring calculations like Kerry's Misery Index, that dropped out of sight like a stone in a pond. I found such a calculator at NASA. I input today's minimum wage of "5.15" in the "Cost" field, and selected "2003" in the from field. I then chose "2002," then "2001" and so on in the "To" field - until I reached a result that was equal to "4.18." That occurs somewhere between 1994 and 1995. So using constant 1994/95 dollars, today's minimum wage is equal to approximately $4.18. Useless. No one recognizes 1994 or 1995 as a base year. The $4.40 by Infoplease checks with the recognized base year of 1996.

Let's not quibble over purchasing power. How many people earn the minimum wage? (A useful summary of to whom the law applies is found here.)

Our Bureau of Labor Statistics provides easily digested data.

Some comparisons:

Le Papier Rapport writes "His aides circulated a report by nine labor economists showing that the raise would affect 7.4 million minimum-wage workers ..."

BLS, Table 1, 2003 data, total people earning minimum wage or below: 2,100,000. Where are the other 5.3 million people?

Le Papier Rapport writes "[t]he wage study circulated by the campaign showed that 1.8 million of the nation's minimum-wage workers have children ..."

As stated above, BLS reports that 2.1 million people earned minimum wage in 2003. Of this total, 0.534 million are age 19 or younger (Table 1). This means that not only does every minimum wage earner age 20 and older have children (1.566 million), but so do half of the younger ones. That's amazingly prolific. Could Kerry's number include that nice man behind the McDonald's counter or just likes to get out for several hours a week and when asked if he has kids, says, "Yes"?

Next, Kerry and the Nine Experts offer that an increase will result in a "... $3,800 windfall over a year [that] would pay for 10 months of groceries, eight months of rent, or a year's tuition at community college." Sounds great, but what if you lose your job as a result of the increase in minimum wage?

Linda Gormam writes, "[a]ccording to a 1978 article in American Economic Review, the American Economic Association's main journal, fully 90 percent of the economists surveyed agreed that the minimum wage increases unemployment among low-skilled workers. It also reduces the on-the-job training offered by employers and shrinks the number of positions offering fringe benefits. To those who lose their jobs, their training opportunities, or their fringe benefits as a result of the minimum wage, the law is simply one more example of good intentions producing hellish results." We're talking about macro-economics, so 1978 opinions haven't changed that much.

So, Kerry will increase an understated purchasing buyer, and then instantly remove 5.3 million people from the minimum wage roles through "data correction" and perhaps many more by shifting them from the workplace cafeteria line to the unemployment line. The latter will remove the inconvenience of having to buy groceries, pay rent, or attend a community college.

I think he may have something here.

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