United States minimum wage -- how much is, and how much WAS, it?

[xiphias]

So, I saw a Facebook icon one of my friends had that said "I support an $11 minimum wage." So I was wondering how often in our history the minimum wage was at that level.

The United States implemented a Federal minimum hourly wage in 1938, of 25 cents an hour, going up to 30 cents the next year. After that, the minimum wage has been periodically raised as inflation devalued the dollar.

So I went year-by-year and plugged the minimum wage into the Bureau for Labor Statistics inflation calculator, to put everything on the same footing. I then made a graph of it, but honestly found the graph less interesting than just the numbers. Somehow, to me, the list of numbers told more compelling stories than the wobbly line.

I reproduce the numbers behind the cut, so you can see if the numbers are as interesting to you as they are to me.

Year	Minimum Adjust Unemp.
        Wage    to '13

1938	$0.25	$4.14	
1939	$0.30	$5.04	
1940		$5.00	
1941		$4.77	
1942		$4.30	
1943		$4.05	
1944		$3.98	
1945	$0.40	$5.19	
1946		$4.79	
1947		$4.19	3.9
1948		$3.88	3.8
1949		$3.92	5.9
1950	$0.75	$7.27	5.3
1951		$6.74	3.3
1952		$6.61	3
1953		$6.56	2.9
1954		$6.51	5.5
1955		$6.53	4.4
1956	$1.00	$8.58	4.1
1957		$8.31	4.3
1958		$8.08	6.8
1959		$8.02	5.5
1960		$7.89	5.5
1961	$1.15	$8.98	6.7
1962		$8.89	5.5
1963	$1.25	$9.54	5.7
1964		$9.42	5.2
1965		$9.27	4.5
1966		$9.01	3.8
1967	$1.40	$9.79	3.8
1968	$1.60	$10.74	3.6
1969		$10.18	3.5
1970		$9.63	4.9
1971		$9.22	5.9
1972		$8.94	5.6
1973		$8.41	4.9
1974	$2.00	$9.47	5.6
1975		$8.68	8.5
1976	$2.30	$9.44	7.7
1977		$8.86	7.1
1978	$2.65	$9.49	6.1
1979	$2.90	$8.97	5.8
1980	$3.10	$8.78	7.1
1981	$3.35	$8.61	7.6
1982		$8.11	9.7
1983		$7.85	9.6
1984		$7.53	7.5
1985		$7.27	7.2
1986		$7.14	7
1987		$6.89	6.2
1988		$6.61	5.5
1989		$6.31	5.3
1990	$3.80	$6.79	5.6
1991	$4.25	$7.29	6.8
1992		$7.07	7.5
1993		$6.87	6.9
1994		$6.70	6.1
1995		$6.51	5.6
1996	$4.75	$7.07	5.4
1997	$5.15	$7.49	4.9
1998		$7.38	4.5
1999		$7.22	4.2
2000		$6.98	4
2001		$6.79	4.7
2002		$6.68	5.8
2003		$6.54	6
2004		$6.37	5.5
2005		$6.16	5.1
2006		$5.97	4.6
2007	$5.85	$6.59	4.6
2008	$6.55	$7.10	5.8
2009	$7.25	$7.89	9.3
2010		$7.76	9.6
2011		$7.53	8.9
2012		$7.37	8.1
2013		$7.25	

The first story that I find in these numbers is the story of the United States' structural inflation in the first place. Watching how consistently the buying power numbers shrink, being periodically bumped up by the minimum wage increases, tells a lot about how our culture has decided to handle money. The idea of structural inflation is basically "use it or lose it." If you have money and just plain hold onto it, it will shrink in value. Structural inflation is designed to encourage anybody who has money to invest it, rather than hoard it. Even the simplest form of "investing" -- putting your money in an interest-bearing savings account -- largely offsets inflation, and allows banks to have capital to lend. Again -- this is by design. Money that sits in one place doesn't help anyone. Money that goes from place to place IS economic activity. As far as I can tell, that's why inflation is supposed to help unemployment -- if your money shrinks QUICKLY, you HAVE to do things like start or expand businesses just to break even.

Another story is what happened in 1978 to 1981 -- the Carter "stagflation" years, when inflation went up RAPIDLY, but without helping unemployment. Notice that, in those years, the minimum wage goes up significantly each year -- but its actual value goes down. Inflation is SO bad that raising the minimum wage can't even keep up.

The next story is looking at the actual buying power of the minimum wage, and thinking about what was going on at those times. Were those eras that we generally think of as prosperous, or hard times?

What about the range of minimum wages? The lowest minimum wage was in 1948, at the equivalent of $3.88 an hour. Three years earlier, ten percent of the population of the United States was in uniform. Not 10% of the male population, or 10% of the adult population -- one in ten Americans TOTAL was getting their paycheck from the government. What did this minimum wage mean, and how many former GIs were affected?

The highest minimum wage was the equivalent of $10.74, in 1968. Why? Unions? The counterculture? Vietnam? Did that minimum wage help or hurt the economy as a whole? I don't think of 1968 as a time of ECONOMIC turmoil per se -- but was that just because so much ELSE was in turmoil that it sort of falls into the background?

An $11 minimum wage would be the highest minimum wage the United States has had. What would that help or hurt? Again -- how does the minimum wage compare to the general economic health of the United States? I'm not seeing any patterns jump out at me, positive OR negative, but I'm not sure what years I should be looking at as particularly good or particularly bad.

Edited to Add I added in another column: the average yearly unemployment rate for each year since 1947. This is an attempt to start looking at one point that brought up -- does a higher minimum wage lead to higher unemployment? If it does, we should see unemployment drop as inflation reduces the value of the minimum wage, then rise again each time the minimum wage goes up.

On the other hand, if higher minimum wages lead to lower unemployment -- another theory, based on the idea that if people are making more money, they'll spend more money, which will expand the economy -- we should see the opposite.

On a first glance, I'm not seeing either thing. I've been trying to play with the numbers some, making graphs and looking at them, and so forth, but, at least for right now, no relationship really appears to be jumping out at me. There might be one in there that I'm not seeing, of course.

Comments

[bemused-leftist.livejournal.com]

The first story that I find in these numbers is the story of the United States' structural inflation in the first place. Watching how consistently the buying power numbers shrink, being periodically bumped up by the minimum wage increases, tells a lot about how our culture has decided to handle money.

I found this a little confusing. On a quick first reading before caffeine, it sounds like you're saying that the minimum wage increases are what's causing the inflation.

[xiphias.livejournal.com]

No, no. I'm just looking at the third column on its own. That statement is unrelated to the minimum wage -- it's separate.

[dancing-crow.livejournal.com]

That is a great graph, and I appreciate the work that went into it. Do you have similar numbers for the wages Congress was paying itself? I've always thought that the minimum wage should be indexed to the congressional pay scale, so every time they voted themselves a raise they improved minimum wage as well.

[teddywolf.livejournal.com]

Oh, if they indexed the minimum wage to the salaries of the House of Representatives it would be somewhere more like $17 an hour--which, according to a NYTimes editorial, is what it would be if productivity gains in part had gone to workers.

[metahacker.livejournal.com]

You might find this article interesting. In summary, changes to the wage floor don't have a large impact on GDP--they redistribute production from corporate profits to worker wages, and a small amount at that.

However, they have a large impact on the quality of day to day life for the affected workers. That sounds like an effect to me; it just doesn't show up in economic statistics.

[jordan179.livejournal.com]

You are ignoring the workers who don't get hired, or who lose their existing jobs, because of the higher minimum wage. You're also ignoring the possibility that companies which were barely profitable before the new minimum wage now go under.

[metahacker.livejournal.com]

I'm not ignoring either. Did you read the linked-to article, or the paper it references within?

[jordan179.livejournal.com]

Minimum wages are at best ineffectual, if they be below the natural minimum wage (the lowest which an employer believes he can offer to get an employee who is an asset to his enterprise); at worst produce unemployment, if they be above that natural minimum wage.

[xiphias.livejournal.com]

Do you have some references for that? The information I've seen suggests that employers have a number of employees they need, and that's how many employees they hire. They don't say, "I'm going to spend $X on employees, and however many people that gets is fine" -- rather, they tend to go, "Hmm. In order to do the work I want to have done, it's going to take X employees can do it", and then will spend that amount of money.

Are there situations in which a person simply doesn't go ahead and start or expand a business because it's too expensive? Sure. Are there situations in which the difference between a below-minimum-wage cost and a minimum-wage cost make that difference? Well ... it seems like there MUST be such situations, but it's really hard to find them. There are cases where people CLAIM that they're not hiring because of minimum wage costs, but then when you look at their books, you're generally looking at situations where it wouldn't be profitable to expand the business anyway.

On the whole, even the maximum $11/hr doesn't seem to frequently make the difference between whether adding a position is a profitable idea or not. The driver of hiring or not hiring is basically whether the employer would find another employee useful. People don't hire people they can't use, even if they don't pay them very much.

[teddywolf.livejournal.com]

There is no such thing as a natural minimum wage.

Let me repeat this: there is no such thing as a natural minimum wage. Any minimum wage is subject to legislation, as is any maximum wage. In fact, absolutely everything to do with money is subject to legislation, including its creation, its destruction, and what you can spend it on.

And I do not believe your argument that minimum wages are ineffectual. Minimum wages ensure that people who are most vulnerable to getting an insufficient paycheck don't get an even more meager paycheck. Plus, they feed into a factor of Keynesian economics: Your spending is my income (in the broad sense), and vice versa. The more money moves, the bigger the economy is. The less it moves, the smaller the economy.

[navrins]

Wouldn't the "natural minimum wage" be the minimum wage that anybody would actually choose to work for in the absence of legislation mandating it? Surely there is such a thing, even if we can't say what it is. Pointing out that it can be legislated doesn't invalidate the question of what it would be if it weren't legislated.

[gingicat]

If it were, then no-one would be making $7.25/hour, they'd be making enough money that they wouldn't need public assistance. And trust me, if you're a single person (not a single parent, ONE PERSON taking care of zirself only) making $7.25/hour for 40 hours per week, you definitely need public assistance in order to have a non-leaky roof to sleep under and food to eat for all 52 weeks of the year.

[xiphias.livejournal.com]

Yes, that's the fallacy on the idea of not having a minimum wage. People will work at wages that can't support them, because they'd like to at least pay for PART of their upkeep, even if they rely on family, friends, or society to survive. That's the Wallmart problem: even if a person needs public assistance to survive, most people would rather make SOME money in order to need LESS public assistance.

[xiphias.livejournal.com]

Okay, I threw in another column to track unemployment rate to see if I could find a correlation, either positive or negative. I'm not seeing one at a first glance, but maybe if you look at the numbers, you could do better?