Table
of Contents
1. Introduction
2. Bibliography
3. Abstract
4. History of Nineteen Federal Minimum Wage Increases Between 1956 and 2009
5. Summarizing the Statistics Regarding the Seven Groups of Minimum Wage
Increases
6. Summarizing Statistics Regarding Eight Major Unemployment Spikes Between
1956 and 2009
7. Organizing Groups of Wage Hikes and Unemployment Spikes Chronologically
8. What Conclusions Can We Draw About Possible Causes of These Eight
Unemployment Spikes?
9. Which of Those Conclusions Support My Hypothesis, and Which Don’t?
10. How Many of Those Eight Unemployment Spikes Followed Minimum Wage Increases by Less Than Three Years?
11. What Can Be Learned from the Facts That Didn't Support My Hypothesis
12. How Many Times Did Those Nineteen Minimum Wage Increases Cause Unemployment to Rise?
13. Constructing a More Specific Set of Hypotheses, Based on What I Got Right and What I Got Wrong
14. When Minimum Wage Increases Do Result in Unemployment Spikes, How Many Job Losses Should We Expect?
15. What This Tells Us About the Possible Effects of a $15 Minimum Wage Upon the Unemployment Rate
16. Post-Script
[Note: The only unemployment rate referred to herein is the “U3 measure of labor underutilization”, also known as the “official unemployment rate”.
Sources:
1) Details on the specifics of U1 through U6 are available at the following link from the Bureau of Labor Statistics.
3) For more information on the criteria regarding the calculation of unemployment rates, see the link below from TheBalance.com:
http://www.thebalance.com/unemployment-rate-formula-3305515
3. Abstract
The following study compares inflation-adjusted minimum wage (in 2013 dollars) with historical unemployment rates, during the period of 1956 to 2013.
Using the research shown below, I will explain in this article to what extent federal minimum wage increases result in increases in the unemployment rate (that is, when unemployment increases follow minimum wage increases).
I will cite nineteen specific examples of wage increases, and several examples of spikes in unemployment – and analyze whatever connections seem to exist between them – in order to explain why I believe that minimum wage increases usually result in increases in unemployment, provided that: 1) government doesn’t disqualify large numbers of people from eligibility for unemployment benefits, and other factors.
As it happens, those other factors are: 2) employers, government, and society at large fail to make conscious efforts to employ large numbers of people, and fail to eliminate barriers to their future employment; and 3) some other factor makes it difficult to keep hiring numbers high (such as a crisis of confidence in America and capitalism, a lack of balanced budgets, technological or productive stagnation, or some other a crisis or emergency which keeps large numbers of people out of work).
This article is a continuation of the research I published in my December 2013 article “Inflation-Adjusted Minimum Wage vs. Unemployment Rate, 1950-2013, and Corporate Profits and Labor Income vs. GDP, 1970-2013”.
That article can be read at the link below:
http://aquarianagrarian.blogspot.com/2013/12/inflation-adjusted-minimum
I was prompted to do the research that was published in that article, after publishing a chart on the same topic in December 2012, in my article “Inflation-Adjusted Minimum Wage vs. Unemployment”.
That article can be read at the link below:
http://aquarianagrarian.blogspot.com/2012/02/inflation-adjusted-minimum-wage-vs.html
Two infographics which I created, and originally published in
those two articles, are shown below, in the thirteenth section, titled
"Creating a More Specific Set of Hypotheses, Based on What I Got Right and
What I Got Wrong".
I was also inspired to do this research after hearing radio show host Sam Seder, of Majority Report with Sam Seder, talking about how studies have shown that minimum wage increases cause the unemployment rate to go down.
I am not aware of which of such studies are the most frequently studied, nor have I read any such studies before composing this article. I merely wish to present what I know on the topic, because I have noticed three instances (1956-1958, 1967-1970, and 1978-1981) when - a strong correlation of evidence shows - minimum wage increases have contributed to increases in unemployment.
However, I would be interested in reading any studies which readers of this article would recommend to me. Please e-mail all suggestions to Joe Kopsick, the author of the Aquarian Agrarian blog, at jwkopsick@gmail.com.
4. History of Nineteen Federal Minimum Wage Increases Between 1956 and 2009
Group A: One Raise During the Eisenhower Era
- Wage Raise #1: March 1956
- Wage went from $0.75 to $1.00 (in nominal 1956 dollars).
- One 1956 dollar is the equivalent of $8.49 in 2013 dollars.
- This was a 25-cent increase nominally, and a $1.24 increase in 2013 dollars (as compared with the previous 2013 value of the 1955 minimum wage of $0.75, valued at $7.25 in 2013 dollars).
Group B: Four Raises During the Kennedy-Johnson Era
- Wage Raise #2: September 1961
- Wage went from $1.00 to $1.15 (in nominal 1961 dollars).
- One dollar and fifteen cents, in 1961 dollars, is the equivalent of $8.73 in 2013 dollars.
- This was a 15-cent increase nominally, and a 24-cent increase in 2013 dollars.
- Wage Raise #3: September 1963
- Wage went from $1.15 to $1.25 (in nominal 1963 dollars).
- One dollar and twenty-five cents, in 1963 dollars, is the equivalent of $9.27 in 2013 dollars.
- This was a 10-cent increase nominally, and a 54-cent increase in 2013 dollars.
- Wage Raise #4: February 1967
- Wage went from $1.25 to $1.40 (in nominal 1967 dollars).
- One dollar and forty cents, in 1967 dollars, is the equivalent of $9.69 in 2013 dollars.
- This was a 15-cent increase nominally, and a 42-cent increase in 2013 dollars.
- Wage Raise #5: February 1968
- Wage went from $1.40 to $1.60 (in nominal 1968 dollars).
- One dollar and sixty cents, in 1968 dollars, is the equivalent of $10.69 in 2013 dollars (the peak historical value of the federal minimum wage).
- This was a 20-cent increase nominally, and a one-dollar increase in 2013 dollars.
Group C: Three Raises During the Nixon-Ford Era
- Wage Raise #6: May 1974
- Wage went from $1.60 to $2.00 (in nominal 1974 dollars).
- Two 1974 dollars are the equivalent of $9.39 in 2013 dollars.
- This was a 40-cent increase nominally, and a $1.30 decrease in 2013 dollars.
- Wage Raise #7: January 1975
- Wage went from $2.00 to $2.10 (in nominal 1975 dollars).
- Two dollars and ten cents, in 1975 dollars, is the equivalent of $9.18 in 2013 dollars.
- This was a 10-cent increase nominally, and a 21-cent decrease in 2013 dollars.
- Wage Raise #8: January 1976
- Wage went from $2.10 to $2.30 (in nominal 1976 dollars).
- Two dollars and thirty cents, in 1976 dollars, is the equivalent of $9.41 in 2013 dollars.
- This was a 20-cent increase nominally, and a 23-cent increase in 2013 dollars.
Group D: Four Raises Near the Carter-Reagan Transition
- Wage Raise #9: January 1978
- Wage went from $2.30 to $2.65 (in nominal 1978 dollars).
- Two dollars and sixty-five cents, in 1978 dollars, is the equivalent of $9.67 in 2013 dollars.
- This was a 35-cent increase nominally, and a 26-cent increase in 2013 dollars.
- Wage Raise #10: January 1979
- Wage went from $2.65 to $2.90 (in nominal 1979 dollars).
- Two dollars and ninety cents, in 1979 dollars, is the equivalent of $9.67 in 2013 dollars.
- This was a 25-cent increase nominally, but the 2013 value of the wage did not noticeably change between 1978 and 1979.
- Wage Raise #11: January 1980
- Wage went from $2.90 to $3.10 (in nominal 1980 dollars).
- Three dollars and ten cents, in 1980 dollars, is the equivalent of $9.07 in 2013 dollars.
- This was a 20-cent increase nominally, but a 60-cent decrease in 2013 dollars.
- Wage Raise #12: January 1981
- Wage went from $3.10 to $3.35 (in nominal 1981 dollars).
- Three dollars and thirty-five cents, in 1981 dollars, is the equivalent of $8.77 in 2013 dollars.
- This was a 25-cent increase nominally, but a 30-cent decrease in 2013 dollars.
Group E: Two Raises Under George Bush Sr.
- Wage Raise #13: April 1990
- Wage went from $3.35 to $3.80 (in nominal 1990 dollars).
- Three dollars and eighty cents, in 1990 dollars, is the equivalent of $6.84 in 2013 dollars.
- This was a 45-cent increase nominally, but a $1.93 decrease in 2013 dollars.
- Wage Raise #14: April 1991
- Wage went from $3.80 to $4.25 (in nominal 1991 dollars).
- Four dollars and twenty-five cents, in 1991 dollars, is the equivalent of $7.31 in 2013 dollars.
- This was a 45-cent increase nominally, and a 47-cent increase in 2013 dollars.
Group F: Two Raises During the Clinton Era
- Wage Raise #15: October 1996
- Wage went from $4.25 to $4.75 (in nominal 1996 dollars).
- Four dollars and seventy-five cents, in 1996 dollars, is the equivalent of $7.00 in 2013 dollars.
- This was a 50-cent increase nominally, and a 31-cent decrease in 2013 dollars.
- Wage Raise #16: September 1997
- Wage went from $4.75 to $5.15 (in nominal 1997 dollars).
- Five dollars and fifteen cents, in 1997 dollars, is the equivalent of $7.45 in 2013 dollars.
- This was a 40-cent increase nominally, but a 45-cent decrease in 2013 dollars.
Group G: Three Raises Near the Bush-Obama Transition
- Wage Raise #17: July 2007
- Wage went from $5.15 to $5.85 (in nominal 2007 dollars).
- Five dollars and eighty-five cents, in 2007 dollars, is the equivalent of $6.58 in 2013 dollars.
- This was a 70-cent increase nominally, but an 87-cent decrease in 2013 dollars.
- Wage Raise #18: July 2008
- Wage went from $5.85 to $6.55 (in nominal 2008 dollars).
- Six dollars and fifty-five cents, in 2008 dollars, is the equivalent of $6.94 in 2013 dollars.
- This was a 70-cent increase nominally, and a 36-cent increase in 2013 dollars.
- Wage Raise #19: July 2009
- Wage went from $6.55 to $7.25 (in nominal 2009 dollars).
- Seven dollars and twenty-five cents, in 2009 dollars, is the equivalent of $7.89 in 2013 dollars.
- This was a 70-cent increase nominally, and a 95-cent increase in 2013 dollars.
Sources:
U.S. Department of Labor,
as cited in “Inflation and the Real Minimum Wage: A Fact Sheet” from fas.org
http://fas.org/sgp/crs/misc/R42973.pdf
5. Summarizing the Statistics Regarding the Seven Groups of Minimum Wage
Increases
In this section, I will summarize the aggregate wage
statistics, regarding the seven groups of nineteen minimum wage increases.
I have done this in order to help explain why I
believe that unemployment increases after groups of small
minimum wage increases occur, one small wage hike enacted after the other (for
example, those groups of wage hikes which occurred annually from 1974 to 1976,
1978 to 1981, and 2007 to 2009).
Group A: One Raise During the Eisenhower Era (March 1956)
- One 1956 dollar is the equivalent of $8.49 in 2013 dollars.
- In 2013 dollars, that 25-cent increase was the equivalent of $1.24 (while the
wage’s 2013 value rose from $7.25 in 1955 to $8.49 in 1956).
Group B: Four Raises During the Kennedy-Johnson Era (September 1961,
September 1963, February 1967, and February 1968)
- Wage went from $1.00 to $1.60 (in nominal dollars at the time), a 60-cent
increase.
- In 2013 dollars, that 60-cent increase was the equivalent of $2.20 (while the
wage’s 2013 value rose from $8.49 in 1956 to $10.69 in 1968).
Group C: Three Raises During the Nixon-Ford Era (May 1974, January 1975, and
January 1976)
- Wage went from $1.60 to $2.30 (in nominal dollars at the time), a 70-cent
increase.
- In 2013 dollars, that 70-cent increase was the equivalent of a $1.28 decrease (while
the wage’s 2013 value dropped from $10.69 in 1968 to $9.41 in 1976).
Group D: Four Raises Near the Carter-Reagan Transition (January 1978,
January 1979, January 1980, and January 1981)
- Wage went from $2.30 to $3.35 (in nominal dollars at the time), a $1.05
increase.
- In 2013 dollars, that $1.05 increase was the equivalent of a 64-cent decrease (while
the wage’s 2013 value dropped from $9.41 in 1976 to $8.77 in 1981.
Group E: Two Raises Under George Bush Sr. (April 1990 and April 1991)
- Wage went from $3.35 to $4.25 (in nominal dollars at the time), a 90-cent
increase.
- In 2013 dollars, that 90-cent increase was the equivalent of a $1.46 decrease (while
the wage’s 2013 value dropped from $8.77 in 1981 to $7.31 in 1991).
Group F: Two Raises During the Clinton Era (October 1996 and September 1997)
- Wage went from $4.25 to $5.15 (in nominal dollars at the time), a 90-cent
increase.
- In 2013 dollars, that 90-cent increase was the equivalent of a 76-cent decrease (while
the wage’s 2013 value rose from $7.31 in 1991 to $7.45 in 1997).
Group G: Three Raises Near the Bush-Obama Transition (July 2007, July 2008,
and July 2009)
- Wage went from $5.15 to $7.25 (in nominal dollars at the time), an increase
of $2.10.
- In 2013 dollars, that $2.10 increase was the equivalent of a 44-cent increase
(while the wage’s 2013 value rose from $7.45 in 1997 to $7.89 in 2009).
6. Summarizing Statistics Regarding Eight Major Unemployment Spikes Between
1956 and 2009
Displayed below are the data associated with the eight
largest increases in unemployment which occurred between 1955 and 2013.
- The first increase in unemployment, which
occurred between March 1957 and July 1958
- Trough: 3.7% (in March 1957)
- Peak: 7.5% (in July 1958)
- The second increase in unemployment,
which occurred between February 1960 and May 1961
- Trough: 4.8% (in February 1960)
- Peak: 7.1% (in May 1961)
- The third increase in unemployment,
which occurred between September 1968 and December 1970
- Trough: 3.4% (from September 1968 to May 1969)
- Peak: 6.1% (in December 1970)
- The fourth increase in unemployment,
which occurred between October 1973 and May 1975
- Trough: 4.6% (in October 1973)
- Peak: 9.0% (in May 1975)
- The fifth increase in unemployment,
which occurred between May 1979 and December 1982
- Trough: 5.6% (in May 1979)
- Peak: 10.8% (in November and December 1982)
- The sixth increase in unemployment,
which occurred between March 1989 and June 1992
- Trough: 5.0% (in March 1989), and hovering
between 5.2% and 5.4% between April 1989 and June 1990
- Peak: 7.8% (in June 1992)
- The seventh increase in unemployment,
which occurred between April 2000 and June 2003
- Trough: 3.8% (in April 2000)
- Peak: 6.3% (in June 2003)
- The eighth increase in unemployment,
which occurred between October 2006 and October 2009
- Trough: Hovering between 4.4% and 4.6% between
October 2006 and May 2007
- Peak: 10.0% (in October 2009)
Source:
http://data.bls.gov/pdq/SurveyOutputServlet
7. Organizing Groups of Wage Hikes and Unemployment Spikes Chronologically
This section summarizes and combines the information
displayed in the two previous sections. I have grouped each period of wage
increases (or “wage hikes”) together with the unemployment spike(s) which
followed them.
I have done this in order to make it easier to see
what I believe is a cause-and-effect relationship (i.e., to see
what I believe is evidence that minimum wage increases usually cause
unemployment increases).
I have arranged this information according to the
lettered groups of wage hikes used in the third section of this article. Also,
I have added extra categories to show the several instances when unemployment
increased after there was no minimum wage increase.
Group A
1. March 1956: Wage Hike #1 (rose by 33.3%)
2. March 1957 to July 1958: Unemployment Spike #1
(rose by 3.8%)
3. February 1960 to May 1961: Unemployment Spike #2
(rose by 2.3%)
Group B
4. September 1961 to February 1968: Wage Hikes #2, #3,
#4, and #5 (rose by 60%)
5. September 1968 to December 1970: Unemployment Spike
#3 (rose by 2.7%)
Nixon-Ford Transition
6. October 1973 to May 1975: Unemployment Spike #4
(rose by 4.4%)
Groups C and D
7. May 1974 to January 1976: Wage Hikes #6, #7, and #8 (rose by 43.75%)
8. January 1978 to January 1981: Wage Hikes #9, #10,
#11, and #12 (rose by 45.65%)
9. May 1979 to December 1982: Unemployment Spike #5
(rose by 5.2%)
Reagan-Bush Transition
10. March 1989 to June 1992: Unemployment Spike #6
(rose by 2.8%)
Group E
11. April 1990 to April 1991: Wage Hikes #13 and #14 (rose by 26.87%)
Group F
12. October 1996 to September 1997: Wage Hikes #15 and
#16 (rose by 21.18%)
13. April 2000 to June 2003: Unemployment Spike #7
(rose by 2.5%)
Late George W. Bush Era
14. October 2006 through May 2007, to October 2009:
Unemployment Spike #8 (rose by 5.6%)
Group G
15. July 2007 to July 2009: Wage Hikes #17, #18, and
#19 (rose by 40.78%)
8. What Conclusions Can We Draw About Possible Causes of These Eight
Unemployment Spikes?
9. Which of Those Conclusions Support My Hypothesis, and Which Don’t?
These Conclusions Do Support My Hypothesis
Unclear
- Conclusion #11 (about the possibility that Wage Hikes #17, #18, and/or #19 caused or exacerbated Unemployment Spike #8)
These Conclusions Do Not Support My Hypothesis
- Conclusion #2 (about the possibility that Wage Hike #1 caused Unemployment Spike #2)
- Conclusion #3 (about the possibility that Wage Hikes #4 and #5, and possibly also Wage Hikes #2 and #3, caused Unemployment Spike #3)
- Conclusion #4 (about the possibility that Wage Hikes #4 and #5 caused Unemployment Spike #4)
- Conclusion #7 (about the possibility that Wage Hikes #11 and #12 caused Unemployment Spike #6)
- Conclusion #8 (about the possibility that Wage Hikes #13 and #14 could have or should have caused an unemployment spike)
Out of the eight unemployment spikes which occurred between 1956 and 2009, four of them followed minimum wage increases; the first, the third, the fifth, and the seventh.
The seventh unemployment spike occurred just under three years after the second of two wage hikes which preceded it.
Did the unemployment spike follow minimum wage increases?
Unemployment Spike #1: YES (Began one year after Wage Hike #1).
Unemployment Spike #2: NO (The last wage hike before this spike was nearly four years prior).
Unemployment Spike #3: YES (Began seven months after Wage Hike #5, the second wage hike in two years).
Unemployment Spike #4: NO (The last wage hike before this spike was over four years prior).
Unemployment Spike #5: YES (Began four months after Wage Hike #10, the fifth of seven wage hikes enacted over a seven-year period).
Unemployment Spike #6: NO (The last wage hike before this spike was over six years prior).
Unemployment Spike #7: YES (Began two years and seven months after Wage Hike #16, the second wage hike in two years).
Unemployment Spike #8: NO (The last wage hike before this spike was more than nine years prior).
11. What Can Be Learned from the Facts That Didn't Support My Hypothesis
Below, I have reiterated and
summarized the conclusions which weakened or contradicted my hypothesis that
minimum wage increases usually result in increases in the unemployment rate (i.e.,
Conclusions #2, #3, #4, #7, and #8).
I have also included a summary of Conclusion
#11, which did not directly support my hypothesis, but could be taken either way.
As a reminder, these conclusions are
arranged chronologically, according to the historical period to which they
refer.
Conclusion #2
My hypothesis was wrong, regarding
the possibility that Unemployment Spike #2 (1960-1961) could have been caused
by previous wage hikes (i.e., Wage Hike #1 in 1956), because that “ripple
effect” would have had to suffer a four-year-delay.
But what we can learn from my
mistake, is that – as is evident from the other examples – if and when
minimum wage increases do result in increases in the unemployment rate, then
that effect will usually be seen within three years, or else it will not be
seen at all.
Conclusion #3
My hypothesis was wrong, regarding
the possibility that Unemployment Spike #3 (1968-1970) could have been caused
by previous wage hikes (i.e., Wage Hikes #4 in 1967 and Wage Hike #1968,
and possibly also Wage Hikes #2 and #3 from the early 1960s), because
Unemployment Spike #3 followed a period that featured a solid seven years and
four months of consistent decreases in the unemployment rate.
But we can learn from this, is that
unemployment is probably much less likely to result from previous wage
hikes, if and when employers, government, and society at large make conscious efforts to
employ large numbers of people (and, in the process, cease discriminating
against minorities, stop making excuses for allowing minorities and the
poor to subsist in joblessness and poverty, and eliminate barriers to their future employment).
Conclusion #4
My hypothesis was wrong, regarding
the possibility that Unemployment Spike #4 (1973-1975) could have been caused
by previous wage hikes (i.e., Wage Hike #4 in 1967 and Wage Hike #5 in
1968), because Unemployment Spike #4 came five years and eight months after
Wage Hike #5.
But what we can learn from this, is
that: 1) eroding confidence in government, and in America’s capitalist economy,
may contribute to hesitancy to hire; and 2) this contributes to non-employment (and
possibly also to unemployment) even when increases in the minimum wage (which
make it more expensive to hire an employee) have not been enacted recently.
Conclusion #7
My hypothesis was wrong, regarding
the possibility that Unemployment Spike #6 (1989-1992) could have been caused
by previous wage hikes (i.e., Wage Hike #11 in 1980 and Wage Hike #12 in
1981), because Unemployment Spike #6 came eight years and two months after
Wage Hike #12.
But what we can learn from this, is the
same lesson that we can learn from Conclusion #5. That is, eroding confidence
in government, or a particular administration, may decrease hiring in a way
that leads to job losses and unemployment even when the minimum wage has not been
recently raised.
Conclusion #8
My hypothesis was wrong, regarding
the notion that Wage Hike #13 (1990) and Wage Hike #14 (1991) should have
caused unemployment increases, because the unemployment rate didn’t suffer a
major spike until nine years after Wage Hike #14.
But what we can learn from this, includes
the same lesson from Conclusions #5 and #7; that job losses suffer when
confidence in government and American capitalism is eroded and manifests financially.
It also seems evident that minimum wage increases are less likely to result in
increases in the unemployment rate when the government is doing a good job of
managing the economy and balancing budgets, and/or when the economy is
undergoing rapid transformations (technological, for example) that improve the
lives, and standards of living, for many people at the same time.
Conclusion #11
My hypothesis was more or less inconclusive,
regarding the possibility that Unemployment Spike #8 could have been caused
by previous wage hikes (i.e., Wage Hikes #17 in 2007, #18 in 2008,
and/or #19 in 2009), because Unemployment Spike #8 began two months before
Wage Hike #17.
But what we can learn from this, is that
once an unemployment spike has begun, it’s not likely that increasing the
minimum wage two more times within two years, is going to help; in fact, it
will probably make things worse. I say this because Wage Hike #19 was passed
twenty-two months after Unemployment Spike #8 began, and the result was that
unemployment kept increasing until it finally peaked at 10.0% in October 2009,
the highest it had been in nearly twenty-seven years.
12. How Many Times Did Those Nineteen Minimum Wage Increases
Cause Unemployment to Rise?
Until this point, we have only examined the
relationship between minimum wage increases and increases in the unemployment
rate, from the perspective of whether unemployment results from, or
is caused by, minimum wage increases.
But now we will analyze the issue in the reverse
context; that is, in the context of whether, and how often, minimum wage
increases resulted in the unemployment rate going up.
I have examined each of the nineteen minimum wage
increases, and I have concluded the following:
1) Five of the wage hikes did seem
to result in unemployment rate increases within three years (#1, #4, #5, #9,
and #10).
2) Three of the wage hikes probably resulted
in unemployment increases (#11, #12, and #18).
3) One of them might have caused
or contributed to unemployment (#19).
4) Ten of the wage hikes didn’t seem
to result in unemployment rate increases within three years (#2, #3, #6, #7,
#8, #13, #14, #15, #16, and #17).
If you combine the “yes”s and the “probably”s,
then that’s seven wage hikes that were likely to have caused unemployment
increases, against ten that definitely didn’t.
13. Constructing a More Specific Set of Hypotheses, Based on What I Got Right and What I Got Wrong
regarding the unemployment rate, may be inaccurate.
But from 1960 to 2013, the data is correct,
and from 1968 to 2013, the pattern is clear.]
and/or open in new window (or download)
New Hypothesis #3
If the unemployment rate does not increase within three years of the minimum wage increase being enacted, then the unemployment rate probably will not increase until after the minimum wage is increased again.
This is evident from at least fifteen of the nineteen wage hikes. After Wage Hikes #1, #5, #10, #12, #15, and #19 were enacted, unemployment rose within three years. After Wage Hikes #2, #3, #6, #7, #8, #13, #14, #15, and #16 were enacted, unemployment did not rise until three years later or more.
New Hypothesis #4
If and when employers, government, and society at large make conscious efforts to employ large numbers of people - and, in the process, cease discriminating against minorities, and stop making excuses for allowing minorities and the poor to subsist in joblessness and poverty – minimum wage increases will result in increased unemployment rarely (if ever).
[That is, with the possible exception of, for example, if the federal government did that, while also expanding eligibility for unemployment, and offering people more money to go on public assistance than they would earn getting a job.]
This is evident from Conclusion #3, regarding Wage Hikes #2 and #3.
New Hypothesis #5
If and when the government does not act to disqualify large numbers of people from unemployment benefits, increases in the minimum wage will not be likely to result in increases in unemployment.
[That is, unless the government also expands eligibility for unemployment, and offers people more money to go on public assistance than they would earn getting a job.]
This is evident from Conclusion #3 (regarding Wage Hikes #2 and #3), Conclusion #6 (regarding Wage Hikes #11 and #12), and Conclusion #9 (regarding Wage Hikes #13 and #14).
New Hypothesis #6
Eroding confidence in government (or in a particular administration, or the nation’s predominant economic system) may serve to decrease hiring in a way that leads to job losses and unemployment, even when the minimum wage has not been recently raised.
This is evident from Conclusion #8, regarding Wage Hikes #13 and #14.
New Hypothesis #7
It's likely that balancing budgets, managing the economy well, and/or experiencing a technology boom, can help avoid - or at least delay - increases in the unemployment rate which could result from minimum wage increases.
[However, so can disqualifying people from unemployment eligibility.]
This is evident from what happened in the several years following Wage Hike #16.
New Hypothesis #8
Maintaining the minimum wage at the same rate, will tend to result in rates of unemployment which gradually decrease over time, especially if one or both of the following occur:
1) Government acts to disqualify large numbers of people from unemployment benefits; and/or
2) Crises, emergencies, and conditions and factors aside from those related to wages (such as lack of confidence in government and/or capitalism, technological or productive stagnation, or international pandemics or refugee crises), are experienced, which result in job losses, leading to more people being unemployed (i.e., seeking unemployment benefits, in addition to non-employed and out of work).
This is evident from Conclusion #8 (regarding Wage Hikes #13 and #14), and Conclusion #9 (regarding Wage Hikes #13 and #14).
14. When Minimum Wage Increases Do Result in Unemployment Spikes, How Many Job Losses Should We Expect?
In this section, I have labeled Wage Hike #1 as "Group 1"; Wage Hikes #4 and #5 as "Group 2"; and Wage Hikes #9 through #12 as "Group 3".
Group 1
If Wage Hike #1 (March 1956) caused Unemployment Spike #1
(March 1957 to July 1958), then this was a 33.3% wage increase (rising from 75
cents to a dollar) which caused a 102.7% increase in the unemployment rate
(which rose from 3.7% to 7.5%).
The delay between the wage
hike and the beginning of the unemployment spike (March 1956 to March 1957) was
one year (or 12 months), and the unemployment spike lasted for one year and
four months (or 16 months).
In summary:
1. There was a 33.3% increase to the
minimum wage, then
2. a delay of 12 months, and then
3. a 102.7% increase in unemployment,
and
4. the unemployment spike lasted 16
months.
Group 2
If Wage Hike #4 (February 1967) and Wage Hike #5 (February
1968) caused Unemployment Spike #3 (September 1968 to December 1970), then this
was a 28% wage increase (rising from $1.25 to $1.60) which caused a 79.4%
increase in the unemployment rate (which rose from 3.4% to 6.1%).
The delay between the first
of these wage hikes and the beginning of the unemployment spike (February 1967
to September 1968) was one year and seven months (or 19 months), and the
unemployment spike lasted for two years and three months (or 27 months).
In summary:
1. There was a 28 % increase to the
minimum wage, then
2. a delay of 19 months, and then
3. a 79.4% increase in unemployment,
and
4. the unemployment spike lasted 27
months.
Group 3
If Wage Hikes #9 (January 1978), #10 (January 1979), #11
(January 1980), and #12 (January 1981) caused Unemployment Spike #5 (May 1979
to December 1982), then this was a 45.65% wage increase (rising from $2.30 to
$3.35) which caused a 92.9% increase in the unemployment rate (which rose from
5.6% to 10.8%).
The delay between the first
of these wage hikes and the beginning of the unemployment spike (January 1978
to May 1979) was one year and four months (or 16 months), and the unemployment
spike lasted for three years and six months (or 42 months).
In summary:
1. There was a 45.65% increase to
the minimum wage, then
2. a delay of 16 months, and then
3. a 92.9% increase in unemployment,
and
4. the unemployment spike lasted 42
months.
Based on these three sets of data – and
assuming that the next wage increase would achieve a 35.65% increase in the nominal
value of the minimum wage (which is the average between these three groups of
wage hikes of 33.3%, 28%, and 45.65%) – when minimum wage increases
cause unemployment spikes, the following will usually be true:
1. The duration of the delay between
the wage hike and the unemployment spike, will be somewhere around the apparent
average of 15 and 2/3 months (because the durations of the three delays were of
12, 19, and 16 months).
[Note: Also, if an unemployment
spike does not occur within nineteen months – the longest of
these – then it probably will not occur (and if no such unemployment spike
occurs after three years, then it almost definitely won’t occur
until factors, other than those related to wages, cause economic turmoil).]
2. The duration of the unemployment
spike, will be somewhere around the apparent average of 28 and 1/3 months, or two
years, four months, and ten days (because the durations of the three unemployment
spikes were 16, 27, and 42 months).
3. The average percent by which
unemployment increases, will be somewhere around the apparent average of 91.65%
(because the three unemployment increases were 102.7%, 79.4%, and 92.9%).
4. Any more conclusions that we may be able to draw from the preceding data, would probably be best gleaned from examining the following chart, which I have created in order to display that information. The chart should be read chronologically, from left to right.
and/or open in new window (or download)
15. What This Tells Us About the Possible Effects of a $15 Minimum Wage Upon the Unemployment Rate
As explained in the previous section, if we assume that the average increase in the nominal value of the minimum wage will be 35.65%, then the following will likely be true, whenever minimum wage increases result in increased unemployment:
1) Unemployment will increase by an average of 91.65% (with a range of 79.4% to 102.7);
2) The unemployment spike will last an average of 2 years, 4 months, and 10 days (with a range of 16 to 42 months); and
3) The unemployment rate will start going up an average of 1 year, 3 months, and 21 days later (with a range of 12 to 19 months).
Increasing the minimum wage from $7.25 to $15.00 would be a 106.9% increase in the nominal value of the minimum wage.
This figure is 199.85% greater than the 35.65% increase, upon which, thus far, we have based our projections regarding average effects. Essentially, that means that increasing the minimum wage to $15.00 (at least rapidly) would cause problems three times worse than what's mentioned above.
This is to say that:
1) Unemployment could increase by an average of 274.95% (and would most likely increase by between 238.2% and 308.1%); and
2) The unemployment spike will last an average of 7 years and one month (with a range of 48 to 126 months).
I don't believe that it would be wise or necessary to calculate the delay between the wage hike and the unemployment spike, because I do not think it would triple. I think it would more or less stay the same, for the simple reason that a rapid wage increase would probably cause immediate effects rather than delayed effects. There also seems to be an inverse relationship between the size of the minimum wage increase (shown in red in the chart above) and the length of the delay until unemployment starts rising (shown in green).
To summarize, this means that I'm predicting that increasing the minimum wage from $7.25 to $5.15 all at once would: 1) cause unemployment to increase by about 275% (nearly quadrupling); 2) cause an unemployment spike that could last about seven years (or else between four and 10-1/2); which 3) would begin some time between one year and two years after the minimum wage hike is enacted.
That is, of course, unless any of the following happen: 1) large numbers of people are kicked off of eligibility for unemployment benefits; 2) high confidence in America and capitalism, or a technology boom or balanced budgets, keep hiring high; 3) employers, government, and society make conscious efforts to employ large numbers of people, and eliminate barriers to their future employment.
16. Post-Script
In fact, I acknowledge that for employers to offer high wages, causes workers to demand, and compete for, those jobs. Likewise, I am aware that most workers would prefer a higher wage to a lower wage.
But economically literate workers, whom are aware of inflation, only want higher wages if and when those wage increases will not be quickly eaten-away by inflation, to the point that wage growth stagnates.
and again in July 2021
Written on July 14th, 15th, and 16th
Published incomplete on July 15th, 2021
Completed on July 16th, 2021
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