Minimum-wage earners make nearly a third less than minimum-wage earners did 45 years ago.
But it’s “intellectually bankrupt” to point that out, according to The Wall Street Journal editorial page and a Richard Berman front group for low-wage employers.
The Employment Policies Institute’s Michael Saltsman (who disingenuously calls himself a “Defender of the Minimum Wage” on his Twitter bio) wrote an op-ed for the Journal a couple of weeks ago claiming it’s cherry-picking to point out what the minimum wage was in 1968, as Joe Biden did last month, and as I and others have many times.
Saltsman (emphasis mine):
The federal minimum wage was first set in 1938 at 25 cents an hour. Had it tracked the cost of living since, it would today be $4.07 an hour, based on Labor Department data and the Bureau of Labor Statistics’ inflation calculator. This is the only logically consistent “historic” value of the minimum wage, and it’s 44% less than the current amount of $7.25.
A few things here:
First, and most obviously, it’s false to say that the only “historic” value of something is its original value. Shares of Cisco, say, started trading at a split-adjusted 4 cents a share in 1990 (not adjusted for inflation). They hit $82 a share in 2000 and are at $25.50 today. It’s correct to say Cisco shares are down 69 percent since their peak in March 2000. It’s also correct to say they’re up 66,000 percent all time. Both are true. If you want to show how far Cisco has fallen since its peak, and how it’s been dead money for more than a decade, ou use the March 2000 number.
Second, 1968 was indeed the historic peak for the minimum wage, but as you can see in the chart below (I’ve added the yellow line to show today’s minimum wage), it was the crest of a three-decade era. From 1956 to 1985, the minimum wage was always higher than it is today. The $7.25 wage of today is actually a sliver below what it was before the Korean War started, in 1950:
Third, 1968 was a long, long time ago and the economy has grown enormously since then:
Fourth, that minimum-wage workers made $4.07 an hour in 1938—75 years ago, amidst the Great Depression—is interesting historically. Saltsman would have it be a baseline to show today’s low-paid workers how good they have it. Heck, why not go back to Triangle Shirtwaist wages while we’re at it?
Most people whose salaries aren’t funded by lobbies have this odd notion that we should all live better as time passes and technology advances and the economy grows massively richer. One significant measure of a society is how much its poorest laborers earn.
In 1968 we saw fit to pay our poorest workers $3.50 more an hour than we do today, and that says quite a bit about where we’ve gone in the last nearly half century.
And it’s far from cherry-picking to point that out.
Good points, Ryan.
I think the $4-an-hour "original" wage might give us some insight about how inflation is calculated--now and 50 years ago--and how that measure might not be as constant as, say, The Kilo.
Something to maybe consider.
#1 Posted by Edward Ericson Jr., CJR on Fri 26 Jul 2013 at 12:16 PM
Great article.
Of course minimum wage jobs were most generous when baby boomers staffed the service industry.
I'm resubscribing on the basis of your work here, hoping the CJR will zero in
more often on agnotological operators like Berman's.
#2 Posted by Pylon Shadow, CJR on Sat 27 Jul 2013 at 06:37 AM
Re Ryan's odd notion of what constitutes an 'odd notion', from someone who was actually a young unskilled worker during his supposed golden age of the minimum wage earner:
Let's raise the prices of electronic appliances and telecommunications services and computer-related goods/services to what they were in 1968, too, adjusted for general inflation and everything. And let's lower the costs (which include the legal necessity) of the services of our friends the lawyers. Regulation, the kind that imposes hidden costs on economic activities, let's roll that back to 1968 levels, too. (One has to admire the chutzpah of conventional liberals who finally professed to discover, thanks to the new Texas abortion rules, that regulations can potentially put producers out of business, after denying any such effect in other businesses. Where's that Ryan Chuttum article denying that regulation of abortions will cost jobs in the abortion biz when you need it?)
And food. Food is much cheaper as a percentage of income than it was in 1968 - obviously, food workers are not making enough money. Let's also lower the bite taken by FICA of every worker's paycheck, starting with dollar one, to its 1968 levels, as well as state and local tax rates. And - my favorite - let's lower the cost of higher education to its 1968, inflation-adjusted rates. A lot of students work minimum wage jobs, after all. You aren't helping those low-income earners, mostly kids like I was, unless you do something about what those dollars can buy, are you?
All the minimum wage does is price some low-skilled persons out of the labor market. Hmm, 1968. Isn't that around the time US manufacturing started to decline, because of rigid labor markets? There is a lot of data that says 'where we have gone in the last nearly half-century'. When it has gone in the direction of bourgeois urban liberalism, mostly on issues related to race and gender, well, that's the tide of History, but when it has not, that must be a conspiracy of lobbyists. The interesting question, since culture matters more than policy, is whether the progress of the mantra of 'sociallly liberal, fiscally conservative' is in fact related - and whether Ryan and others would trade the social cohesion of 1956-1985 for the gains for low-income persons.
#3 Posted by Mark Richard, CJR on Mon 29 Jul 2013 at 01:10 PM
It's not that you don't earn enough. The wage you earn doesn't buy enough. For which, you can thank your beloved central planners at the FED and on Pennsylvania Ave — oh, and their intellectual bodyguards at the NYT, the AP, HuffPo, WaPo, CJR, etc.
#4 Posted by Dan A., CJR on Tue 30 Jul 2013 at 09:39 AM