Analysis - Facebook meme on Minimum Wage

A friend of mine commented on this meme posted on Facebook by the page "I Acknowledge Class Warfare Exists." I personally couldn't help but fact-check this particular meme, as it (and memes like it) have been circulating Facebook quite often recently.

I thought it sounded a bit spurious, so I decided to check it out in a few different contexts before looking at the exact context of the meme. It seemed like a good fit for matching the rate of increase of the United States's GDP since 1968.

First, one can visit the Bureau of Economic Analysis website and download an .xls spreadsheet titled "Current dollar and 'Real' GDP." Once you've done that, you can calculate the rate of increase of the current dollar GDP, create a new column and apply each year's growth rate to the base minimum wage of 1968 (non-farm minimum wage in 1968 was $1.60/hour). Once finished, your spreadsheet will inform you that the minimum wage, if it had increased at the same rate as GDP, would have been $27.57 per hour by 2012. Overshot by about 21%.

That metric is perhaps a bit unfair, however, since $1.60 in 1968 is equivalent to $10.34 in 2011 dollars (in case you were wondering how Dad afforded to pay his own way through college while working at McDonald's). So by that same measure, the minimum wage would actually be $34.45 per hour if it had kept up with percent increases in Real GDP (2011 dollars)... overshot by about 50%.

Then I thought that I'd actually heard this kind of comparison made before to CEO pay. However, CEO's in 1980 were making around 30-45 times the salary of their average worker, and by 2012 that figure had ballooned (at least in the US) to over 420 times the salary of the average worker. At that rate of increase, minimum wage would be well over $80.00 per hour... so that can't be right. Overshot again; this time by over 250%!

Then I checked out the actual claim made by the meme; I used a Google Image Search with search terms "income top 1% increase" and came up with results that looked like this*:


*I don't know where all of the information comes from, although most of these are sourced to the Congressional Budget Office.

The only one that includes data AFTER 2007 was one from the NY Magazine's website, which does not give a source for the data: http://nymag.com/daily/intelligencer/2012/05/mitt-romney-bain-capital-and-the-1-economy.html

So each of these shows pre-Financial Crisis incomes of different groups, with the one exception being the image from NYmag's article (which has un-sourced data). Most of these show Top 1% incomes to have increased somewhere between 270% - 350% since 1979/1980.

Federal minimum wage is currently $7.25/hour. In 1980, it was $3.10/hour. So if we don't adjust for inflation, then the minimum wage gain (if it were to keep up with the Top 1%) would be somewhere between 2.5 & 3.5 times $3.10 per hour. That's not even close to $22.62 (but on the high end, it still would be more than the current federal minimum wage).

If however, we were to adjust for inflation as I suspect the source data does-- then the 1980 "Real" minimum wage in 2013 dollars would have been $8.79. Comparing that to the growth of income of the Top 1% would certainly bring us in the range announced by this meme-- between $21.97/hour & $30.77/hour.

So the meme is correct, IF and ONLY IF we apply certain (undisclosed by the meme creators) metrics to the analysis.

1. Inflation-adjusted - this one always makes sense if we want dollar amounts to be meaningful in anyway across decades.
2. Start time - The Federal Minimum Wage was adjusted in 1980 from $2.90/hour to $3.10/hour
3. End time - data series is incomplete for years following 2007

However, I will point out once again that Federal Minimum Wage, adjusted for inflation, has actually decreased overall since the aforementioned inflation-adjusted 1968 rate of $10.34/hour. Since 1980, the Federal Minimum Wage has drifted significantly downward in Real terms, with only the adjustment in 2009 bringing minimum wage close to its 1980 equivalent value. Oregon State University did a study on this several years ago. Here is a graph of their findings:

Since minimum wage has never been legislated to increase with any kind of CPI adjustment, we frequently see "Real Dollar" amounts at peaks that fall for several years until a new adjustment is made at irregular intervals.

If minimum wage were designed to keep up with the Top 1%'s income growth, its growth would be wildly erratic, but it would still be growing. As it has been since 1968, federal minimum wage has shrunk, and none of the subsequent adjustments have ever come close to returning it to a wage comparable to the rate that was paid in 1968.

The analysis overall is that the meme posted by the Facebook page "I Acknowledge Class Warfare Exists" is technically correct.

Although it's only fair to point out that according to any/all of the alternate scenarios suggested, the minimum wage would be even higher than the one claimed in the meme... unless you don't adjust for inflation over the past 45 years*. But who doesn't adjust for inflation?

Oh. Right.



*According to the parameters of this meme, even the current dollars (not inflation-adjusted) amount of minimum wage would be higher than the current federal minimum wage, if it had kept pace with income growth of the top 1% at the lowest estimated growth rate... if you start counting any time before 2004.

Global Dynamics: What is this all about?

The Global Dynamics series is an interdisciplinary examination of the limiting factors and inherent problems posed by sustained growth of consumption in the world today, and the non-linear relationships between different realms or aspects of our Human world.

We live in a finite world with finite resources; it is not possible to continue increasing our consumption, our expenditures, or our production forever. The problems that face us as we move through the next century are dependent on many factors- population, economics, political policy, culture, international law, individual behavior, natural processes, industrialization, and war. None of these problems exist within a vacuum-- every single one is intertwined with another, and as we move forward in analyzing the major categories of challenges, we will understand to what extent these are interrelated.

The largest factors in the equation are growth in consumption and growth of population, as they will tend to influence all other areas within our Human world. We must understand growth in order to understand where we stand today and where we are certainly headed for tomorrow.

Here are two videos on the subject that I highly recommend watching:

One is by Dr. Albert Bartlett, from the University of Colorado:

Another is called "There is No Tomorrow," which I think is an entirely unfortunate title. However, this video concisely sums up many of the issues I will be addressing in more detail throughout the Global Dynamics series:

As Global Dynamics progresses, I will be bringing the discussion back to a 1971 book by Prof. Jay W. Forrester, of MIT, called "World Dynamics," after which I have named this series (you can find that on Amazon.com or through inter-library loan). His book studies the effects of reaching the limits of consumption and growth-- and addresses the consequences.

I would like to point out one more detail, and I hope that I can get this across effectively: Our Human world does not exist within a vacuum. We share our planet with countless other species, our world is part of a system of bodies that revolve around our sun, and our sun is influenced by the motion of our galaxy-- which in turn is influenced by the universe itself. None of the events that happen here on Earth, whether in our Human world, within the physical confines of the planet, or at any point in outer space, are entirely closed systems.

Quantum physics has shown us that particles created under similar conditions can become "entangled" and affect each others' behavior over great distances in "no time"-- and this provides a fantastic allegory for understanding the world-- and even the universe-- at large.

Quantum physics is the study of laws of particles-- these govern processes that cause the phenomenon we call "chemistry" to operate. Chemistry is a driving force of biology, behavior and physics are major influences on chemistry and biology, biology and what we call "history" determine the behavior of people around the world, the environment influences our lifestyle and our culture, which influences our political processes, our economics, and the shape of our future. Ultimately we influence the environment, the chemical processes that govern the Earth, and these processes will influence the individual behaviors (and very existence) of all individual organisms on the planet.

Seemingly unrelated factors in the world are "entangled" to an extent that we are only in the earliest stages of beginning to understand, and the Earth is guided by cosmic (and sometimes intergalactic) forces that we have not yet even imagined.

Up until this point in Human history, we could write off our destructive tendencies to our ignorance or our more animal impulses. But we now have the cause and opportunity to create a world that is governed by rules that are both Ethical and Rational. Up until now, the Human race has failed quite stupendously in doing this.

We can do better.