I try to stay on friendly terms even with people whom I disagree with emphatically on one or more subjects. A few good friends of mine on the space side of things are also very economically progressive, and recently I’ve been seeing several of them making variants on this argument:
@StephenFleming $11/hour real wage seemed to work just fine in 1968. $14/hr is about right since real per capita GDP has doubled since then.
— Chris (Robotbeat) (@Robotbeat) September 2, 2014
Basically, the inflation adjusted minimum wage was $11/hr in 1968, and that “worked” so we should be able to afford something similar today. By the way this number is bandied about, it makes it sound as though that 1968 number was a number that was sustained for a long time, and the moved away from recently. I was curious what the inflation adjusted minimum wage trend looks like, so I decided to look it up on the Department of Labor website. If you check out this table, and convert it into graph form, you get this for the minimum wage from 1938 when it started to 2012 (the last year on that particular DoL website):
Inflation Adjusted US Minimum Wage from 1938-2012 In 2012 Dollars (Source: US Department of Labor)
Doing some basic statistics on this series, the mean minimum wage over this time was $7.09/hr, slightly lower than today’s $7.25/hr. The standard deviation is ~$1.60/hr.
If you look at the trend though, the pre-WWII numbers look like outliers on the low end. What if we drop them? The new mean would be $7.62/hr (slightly higher than today’s minimum wage), but the new standard deviation would be $2.48/hr.
That means that the 1968 minimum wage was actually 2.5 sigma above the mean minimum wage for the 1950-2012 timeframe–which is pretty obvious from looking at the chart. Is picking the data point that is the largest outlier from the mean over the past 60 years really a legitimate point to extrapolate from?
More importantly, $15/hr would be 6.74 sigma above the mean for the past 60 years. Ignoring all of the other arguments for or against the minimum wage, can anyone seriously claim that being over six sigma over the mean is something where past experience can give us any confidence that this won’t cause serious problems?
$15/hr Minimum Wage in Context of 60yrs of Inflation Adjusted Minimum Wage Data
As I said, there may be other more legitimate arguments for increasing the minimum wage, even to $15/hr, but I don’t think the 1968 inflation adjusted minimum wage is a very strong argument when taken in context.