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
Content
1. Introduction
In this study, I explore the issue
of whether (and to what extent) minimum wage increases to the federal minimum
wage, may cause, result in, contribute to, and/or precede, increases in the
unemployment rate.
This study covers the period of 1955
to 2013 - and refers to the nineteen federal minimum wage increases which occurred between 1956 and 2009, as well as eight major increases in unemployment - and analyzes the relationships between them.
2. Bibliography
Herein, I make use of information, covering the years 1955 to 2013, sourced from publicly available data from the U.S. Bureau of Labor Statistics (including information from the Inflation Calculator).
[Note: The only unemployment rate
referred to herein is the “U3 measure of labor underutilization”, also known as
the “official unemployment rate”. U3 is distinct from “the real
unemployment rate”, which is called U6. There is also “the real real
unemployment rate”, which is called U7. U1 through U6 are used by the federal
government, while U7 has not yet been defined specifically enough to merit inclusion
in the government’s statistical criteria.]
Sources:
1) Details on the specifics of U1
through U6 are available at the following link from the Bureau of Labor
Statistics.
Readers should keep in mind that the unemployment rate referred to herein, is by no means the most inclusive method by which the number of people suffering from difficulties remaining employed, can be measured.
2) A detailed chart of the historical
data associated with the U3 employment rate is available at the link below,
from the St. Louis Federal Reserve.
This link also includes an
explanation as to how U3 is calculated: “The unemployment rate represents the
number of unemployed as a percentage of the labor force. Labor force data are
restricted to people 16 years of age and older, who currently reside in
institutions (e.g., penal and mental facilities, homes for the aged), and who
are not on active duty in the Armed Forces.”
http://fred.stlouisfed.org/series/UNRATE 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
4) More information on how U3 is
calculated, see the link below from the Bureau of Labor Statistics.
5) The Bureau of Labor Statistics
Inflation Calendar is available at the following address:
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
Below, I have grouped nineteen minimum wage
increases from 1956 to 2009, into seven groups, lettered A through G.
I have done this for the sake of simplicity, and to
show when the wage raises occurred in quick succession and/or occurred under
the same president (or presidents).
The value of the wage at the time it was enacted, and
the value of the wage in 2013 dollars, are shown below.
I have provided these details so that the reader can
discern the differences between the apparent change in the wage at the
time, versus the change which really resulted from the wage
hike, based on what we know today about inflation.
I have also provided these details in order to make it
simpler to calculate the effects of wage increases on unemployment, as well as
to provide a second option regarding how to measure the wage.
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?
Conclusion #1
Unemployment Spike #1 (March 1957 to July 1958) could
possibly have been caused (or at least exacerbated) by the nominally
twenty-five-cent Wage Hike #1 (March 1956). If that is the case, then a $1.24
wage increase (in 2013 dollars) caused a 3.8% increase in the unemployment
rate.
Conclusion #2
Unemployment Spike #2 (February 1960 to May 1961) could
possibly have been caused (or at least exacerbated) by late “ripple effects” of
the nominally twenty-five-cent Wage Hike #1 (March 1956). If that is the case,
then the $1.24 wage increase (in 2013 dollars) enacted in 1956, caused the 3.8%
increase in the unemployment rate (from March 1957 to July 1958) as well as the
2.3% increase which occurred from February 1960 to May 1961. But it’s also
possible that Wage Hike #1 didn’t cause Unemployment Spike #2,
because to argue that it did would require proving that the secondary effects of that wage
hike were delayed by nearly four years, which is a hard sell. A two- or three- year delay is
believable, but four years or more is stretching things. (I’ll explain why in some of the examples that follow).
Conclusion #3
Unemployment Spike #3 (September 1968 to December 1970)
could possibly have been caused (or at least exacerbated) by Wage Hikes #2, #3,
#4, and #5 (September 1961 to February 1968). However, it seems more likely
that only Wage Hikes #4 and #5 (which, combined, increased the nominal minimum
wage by 35 cents) could have caused Unemployment Spike #3, because the
unemployment rate did not undergo any sustained periods of increases during
almost the entire Kennedy-Johnson era (January 1961 to September 1968), and
this period followed Wage Hikes #2 and #3 (which increased the wage by 25 cents
total). The fact that Wage Hikes #2 and #3 did not cause any noticeable
increase in unemployment (at least not for five years), makes the data from
1963 to 1968 the strongest counterexample against my assertion that minimum
wage increases cause unemployment increases. [Note: This is why I specify that
I believe that minimum wage increases usually result in
unemployment increases. I will stipulate that further by adding that I suspect
that the reason why the unemployment rate did not increase from 1963 to 1968,
is that the country was undergoing a widespread, intentional effort to
desegregate, integrate, modernize, open culturally, and (most importantly)
employ large numbers of people (and dismantle barriers to their employment). I suspect that minimum wage increases will
result in unemployment increases whenever there is stagnation instead of
growth, and whenever people are not disqualified from enrolling in unemployment
benefits. I will not make any effort to pretend that the unemployment rate
sometimes goes down solely because people are thrown off of eligibility for
unemployment.] If it is the case that Wage Hikes #4 and #5 caused Unemployment
Spike #3, then the $1.42 wage increase (in 2013 dollars) from those two wage
hikes, caused a 2.7% increase in the unemployment rate.
Conclusion #4
Unemployment Spike #4 (October 1973 to May 1975)
followed a period of three solid years of steadily decreasing unemployment. It
is not likely that minimum wage increases caused Unemployment Spike #4, but if
they did, then Wage Hikes #4 and #5 (in 1967 and 1968) would have had to result
in an unemployment spike that occurred five to six years later. But I feel that
that time period is too long to conclude that there is a statistically
significant relationship between Wage Hikes #4 and #5, and Unemployment Spike
#4. Rather than late 1960s wage hikes causing Unemployment Spike #4 (which
began in late 1973), I believe it’s more likely that eroding confidence in the
Nixon Administration contributed to economic stagnation and decreased hiring,
causing unemployment rates to begin to rise nine months before Nixon left
office.
Conclusion #5
Unemployment
Spike #5 (May 1979 to December 1982) could possibly have been caused (or at
least exacerbated) by Wage Hikes #6, #7, #8, #9, #10, #11, and #12 (May 1974 and January 1981), which, combined, raised the wage from $1.60 to $3.35 over seven
years. Although Wage Hikes #11 and #12 could be considered as having had a
negligible effect on Unemployment Spike #5 (because they started after the
unemployment spike began in May 1979), five of those seven
wage hikes occurred before May 1979, when unemployment was at
a trough. So it’s entirely possible that Wage Hikes #6 through #10 caused Unemployment
Spike #5, while Wage Hikes #11 and #12 merely exacerbated that unemployment
spike. If those seven wage hikes from 1974 to 1981, caused the unemployment
spike which occurred from 1979 to 1982, then the $1.92 effective wage decrease (in
2013 dollars) which resulted from those seven wage hikes (totaling $1.75
nominally), caused a 5.2% increase in the unemployment rate.
Conclusion #6 (regarding the Reagan years)
Unemployment very nearly consistently fell from
December 1982 to March 1989. This followed Unemployment Spike #5, which
followed seven wage hikes that were enacted between 1974 and 1981. I believe
(because I observe from the data) that keeping the minimum wage the same,
results in gradually decreasing unemployment rates. But I will also admit that
it’s possible that the unemployment rate could have decreased during the Reagan
years because people became ineligible for unemployment benefits.
Conclusion #7
Unemployment Spike #6 (March 1989 to June 1992) was
almost definitely not caused by wage increases. That’s because
Unemployment Spike #6 followed more than six straight years of decreasing
unemployment, and because it would be ridiculous to suggest that Wage Hikes #11
and #12 had a delayed effect on unemployment which took over six years to
create the first “ripple” (i.e., the effect of unemployment
beginning to increase in March 1989). Rather than early 1980s minimum wage
increases causing Unemployment Spike #6, I believe it’s more likely that
eroding confidence in the administration of George H.W. Bush could have
contributed to economic stagnation and decreased hiring, causing unemployment
rates to begin to rise just two months after Ronald Reagan (much more widely
beloved than Bush) left office.
Conclusion #8 (regarding the middle years of the George H.W. Bush
Administration)
Wage Hikes #13 and #14 were enacted in April 1990 and
April 1991. It’s possible that the reason why these wage hikes did not result
in increased unemployment, is because: 1) confidence in America and capitalism
increased as the Soviet Union was imploding; and/or 2) just a few years later,
Bill Clinton and Congress were experiencing sufficient success at managing the economy and balancing the budget (due to the technology boom) that increased unemployment was just too unlikely to be a result of those factors, at least in the short-term. These two possible
explanations are debatable, though.
Conclusion #9 (regarding the Clinton years)
Unemployment very nearly consistently fell from June
1992 to April 2000. This followed Wage Hikes #13 and #14, which were enacted in
April 1990 and April 1991. I believe that the reason why unemployment did not
go up, as the result of those two Bush Sr. -era wage increases, was because the
Clinton Administration passed measures to decrease eligibility for federal
welfare benefits (as I presume that eligibility for unemployment, in
particular, was tightened during this time). As I explained above, throwing
people off of unemployment rolls, will give you the appearance of
less people out of work. But that appearance is not reality, because
being unemployed (and on unemployment benefits) is not the
same thing as being non-employed (out of work).
Conclusion #10
Unemployment Spike #7 (April 2000 to June 2003) could
possibly have been caused (or at least exacerbated) by Wage Hikes #15 and #16
(October 1996 and September 1997). That is possible because it would be easier
to argue that a minimum wage increase caused an unemployment increase three
years later, than it would to argue that such a thing could happen five
or six years later. If that is what happened, then the $0.76 effective
wage decrease (in 2013 dollars) which resulted from the
nominally $0.90 increase, caused a 2.5% increase in the unemployment rate.
Conclusion #11
Unemployment Spike #8 (May 2007 to October 2009)
could not have been caused by Wage Hikes #17,
#18, and #19, because Unemployment Spike #8 began in May 2007, while Wage Hike
#17 was passed two months later, in July 2007. Still, those wage hikes could
very well have exacerbated the crisis of increasing
unemployment which had begun two months before the first in that series of wage
increases. It might not be unreasonable to blame the severity and exacerbation of
Unemployment Spike #8, on Wage Hikes #18 and #19, however. If Wage Hikes #18
and #19 did exacerbate Unemployment Spike #8, then the extent to which it did,
would not be as easy to quantify, as it was to quantify how much the other wage
hikes may have caused unemployment to rise. But suffice it to say that
Unemployment Spike #8 was an increase of 5.6%, while Wage Hikes #17, #18, and
#19 each increased the wage nominally by 70 cents (the first 70 cents
decreasing the wage by 87 cents in 2013 dollars, the second 70 cents increasing
the wage by 36 cents in 2013 dollars, and the final 70 cents increasing the
wage by 95 cents in 2013 dollars.
9. Which of Those Conclusions Support My Hypothesis, and Which Don’t?
I have determined that Conclusions #2, #3, #4, #7, and
#8 don’t fit my hypothesis (that minimum wage increases cause unemployment
increases); and that Conclusions #1, #5, #6, #9, and #10 do fit
my hypothesis; while Conclusion #11 is unclear.
Here is that information, separated by category,
according to whether those conclusions support my hypothesis. I have summarized
the content of the conclusion in parenthesis.
These Conclusions Do Support My Hypothesis
- Conclusion #1 (about the possibility that Wage Hike #1 caused Unemployment
Spike #1)
- Conclusion #5 (about the possibility that Wage Hikes #6 through #10 caused
Unemployment Spike #5, and Wage Hikes #11 and #12 exacerbated it)
- Conclusion #6 (about the possibility that maintaining the minimum wage during
the Reagan years caused unemployment rates to decrease)
- Conclusion #9 (about the possibility that maintaining the minimum wage from
1991 to 1996 caused unemployment rates to decrease)
- Conclusion #10 (about the possibility that Wage Hikes #15 and #16 caused
Unemployment Spike #7)
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)
10. How Many of Those Eight Unemployment Spikes Followed Minimum Wage Increases by Less Than Three Years?
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.
Wage Hike #1 (1956): YES (Unemployment Spike #1 began a year
later).
Wage Hike #2 (1961): NO (Unemployment Spike #3 began seven years later).
Wage Hike #3 (1963): NO (Unemployment Spike #3 began five years later).
Wage Hike #4 (1967): YES (Unemployment Spike #3 began one year later).
Wage Hike #5 (1968): YES (Unemployment Spike #3 began later that year).
Wage Hike #6 (1974): NO (Unemployment Spike #5 began five years later).
Wage Hike #7 (1975): NO (Unemployment Spike #5 began four years later).
Wage Hike #8 (1976): NO (Unemployment Spike #5 began three years later).
Wage Hike #9 (1978): YES (Unemployment Spike #5 began the following year).
Wage Hike #10 (1979): YES (Unemployment Spike #5 began later that year).
Wage Hike #11 (1980): PROBABLY (enacted as Unemployment Spike #5 was already ongoing,
and unemployment increases didn’t stop).
Wage Hike #12 (1981): PROBABLY (enacted as Unemployment Spike #5 was already ongoing,
and unemployment increases didn’t stop).
Wage Hike #13 (1990): NO (Unemployment Spike #7 began ten years later).
Wage Hike #14 (1991): NO (Unemployment Spike #7 began nine years later).
Wage Hike #15 (1996): NO (Unemployment Spike #7 began four years later).
Wage Hike #16 (1997): NO (Unemployment Spike #7 began three years later).
Wage Hike #17 (2007): NO (Unemployment Spike #8 began two months before this
wage hike).
Wage Hike #18 (2008): PROBABLY (enacted as Unemployment Spike #8 was already ongoing,
and unemployment increases didn’t stop).
Wage Hike #19 (2009): MAYBE (enacted as Unemployment Spike #8 was already ongoing, and
unemployment increases didn’t stop until four months after Wage Hike #19 was
enacted. Unemployment also hit a 27-year high when that happened, in October 2009, so - I repeat - minimum wage increases may contribute to increasing unemployment. It may very well be that the reason why Wage Hike #19 did not seem to contribute to unemployment – or even seemed to help it – could simply be attributed to the fact that unemployment was approaching that historical high (ten percent), and simply couldn’t rise any higher, even if a new minimum wage hike placed additional strain on the economy. It’s also possible that Wage Hike #19 did cause the four months of economic stress which followed it, and that restored confidence in government in late 2009 was what helped unemployment go back down).
13. Constructing a More Specific Set of Hypotheses,
Based on What I Got Right and What I Got Wrong
Below, I enumerate eight hypotheses, regarding the relationship between the federal minimum wage and unemployment rates, which I would now feel confident to conclude, from my interpretation of the facts borne-out by my analysis of when the historical data proved my initial hypothesis wrong, and when the data proved it right.
I have alluded to several of these hypotheses already, in the above sections of this study, when clarifying that I suspected that wage hikes usually caused unemployment increases (when people aren't thrown off unemployment rolls, and when there is no crisis of confidence in government, etc.).
New Hypothesis #1
Increases in the federal minimum wage sometimes - perhaps half of the time, or a little less - cause the unemployment rate to increase within three years of the wage increase being enacted.
This is evident from Conclusions #1, #5, and #10, regarding Wage Hikes #1, #6, #7, #8, #9, #10, #11, #12, #15, and #16.
New Hypothesis #2
Increases in the minimum wage which occur after unemployment spikes have begun, cannot be said to have caused unemployment spikes, but they may still contribute to increasing unemployment and make it worse.
This is evident from Conclusions #5, #10, and #11, regarding Wage Hikes #11, #12, #17, and #18.
The fact that unemployment increases do not follow minimum wage increases after a time period greater than three years, is especially evident from the graph below (part of which I originally published in December 2013).
[Note: In the graph above, some of the data for the 1950s,
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.]
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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?
As I have explained in the above sections, Wage Hikes #1, #4, #5, #9, and #10 were the five of nineteen wage hikes which preceded major unemployment spikes within three years, while Wage Hikes #11, #12, and #18 probably contributed to rises in unemployment.
However, I will omit Wage Hike #18, because (uniquely) it was the second of three successive wage hikes, the first of which began after Unemployment Spike #8 began. There is not nearly as much evidence to support a direct causal relationship between the minimum wage increase(s) and the unemployment spike which pertain to Wage Hike #18, as there is to support the existence of a direct relationship between the other seven wage hikes and the unemployment spikes which followed them.
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".
Below I have provided the relevant statistics regarding the apparent relationships between these wage hikes, and the unemployment spikes which followed them.
I have done this in order to make it possible to discern how much of an increase in unemployment we should expect (and how long after the hike is enacted, that unemployment spike will occur), if and when such an unemployment spike does occur at all.
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.
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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.
I hope that I have done a good job
of explaining what happens when my hypothesis is right (and minimum wage
increases appear to contribute to unemployment increases), and of explaining
what we can learn regarding why that doesn’t happen, when it
doesn’t happen.
I will conclude by explaining three
reasons why I think the very existence of the federal minimum wage contributes
to economic difficulties, and why I think the minimum wage makes it more
difficult for us to tell whether minimum wage increases negatively affect
employment (and, if so, how much of the problem is being caused by wage hikes,
and how much of it is being caused by other factors).
First:
I believe that one factor which may
help explain why the minimum wage has continued, for so long, to be a problem,
is that the federal minimum wage functions as a suggestion as to what kind
of wage should be tolerable. I suspect that the federal minimum wage, in
this way, functions as a double-edged sword; helping people whose skills are
already so high that they indisputably deserve to earn more than the
minimum wage, while promoting the idea that people can subsist on whatever the
wage is, as long as it is raised a little bit.
Second:
It is more important, to me, that
the prevailing wage go up – or that the value of the average person’s compensation
go up – than that the federal minimum wage increases. I am absolutely not saying
that increased wages in general, or increased prevailing wages, lead to
unemployment, nor am I saying that they increase joblessness.
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.
Third:
I do not mean to suggest that federal
minimum wage increases directly impact the lives of the average workers;
I only mean to suggest that there is an indirect relationship.
I say this because the federal
government has been, and continues to be, deceptive, regarding how many workers
are eligible for federal minimum wage increases.
Part II of my January 2021 article “Half
of the Federal Laws Do Not Apply to All Americans: Explaining Positive vs.
Non-Positive Law” explains that there is conflict between the exemptions
mentioned in the Fair Labor Standards Act and the federal government’s questionable
claim that all workers who use federal utilities are covered by federal minimum
wage laws.
That article can be read at the
following address:
Of the approximately 155 to 160
million Americans who are currently employed, only about 400,000 of them are federal
employees earning the minimum wage. That amounts to only one-quarter of one
percent (that is, 0.25%) of the American workforce.
In fact, according to the article below, less than 400,000 federal workers receive minimum wage.
These nearly 400,000 workers are the only American workers who are indisputably covered by federal minimum wage laws. The other 99.75% of the workforce may not be covered, and should consult the Fair Labor Standards Act for more information.
Above, I have written in
terms of federal minimum wage increases “causing” minimum wage increases. But I
mean to clarify that I have only meant to suggest that there is something of a
causal relationship (albeit an indirect one), because the federal minimum wage
functions as a suggestion as to what the wage should be (as I explained). Also,
because workers (and some investors) think that federal minimum wage
increases will apply to most or all workers in the country, and will usually
behave - and make decisions regarding acceptable levels of compensation - according
to that incorrect belief.
Based on research collected in 2012 and 2013,
and again in July 2021
Written on July 14th, 15th, and 16th
Published incomplete on July 15th, 2021
Completed on July 16th, 2021
