Tuesday, July 21, 2009



Even under defunct Malthusian theory, LBJ's $10/hr minimum wage ($1.60/hr in 1968, adjusted) should have shrunk only 33% as US population grew 50%. But by the time GWB's $5.30/hr minimum wage ($5.15/hr in 2007, adjusted) came to be it had sunk nearly 50%.

Adding 72.5% to today’s $7.25/hr minimum wage would make it $12.50/hr; would raise a $6.00 fast food meal to $7.45, but would raise nearly 40% of the US labor force to (a still shamefully low for the 40 percentile US wage?) $500/wk -- the fast food buying 40%. Direct inflation would be 2% -- not “1000%” with the fantasy “$100/hr."

Two short years ago the federal minimum wage was $212/wk. Today it is just short of $300/wk. Michigan Democrats are pondering $400/wk next. Does anybody expect -- has anybody yet experienced -- any great unemployment tragedy? $212/hr never should have happened!

A realistically* assessed (if never ever reported) 30% US poverty level shouts that there is lots -- and lots -- of room for more fairly set labor costs (which should be all the market will bear, just like ownership's prices) to be re-inserted into US products and services -- the same missing labor costs that have siphoned 15% of income share from the pockets of bottom 90 percentile earners mostly into the buckets of top fraction of 1 percentile earners over the past few decades -- with neither matching increase in relative output from the top nor decrease from the bottom. (*see charts, pp. 44-45)

This “http”* illustrates that minimum wages do not affect employment below half the median wage. Unfortunately (unbelievably?) the US median wage rose only 20% while average income climbed 100%, probably making half the US median no longer a true test (meaning that if the minimum could be pushed harmlessly to $12.50/hr that the median could sensibly be pushed to $25/hr?). *http://worthwhile.typepad.com/worthwhile_canadian_initi/2006/11/when_the_minimu.html

LBJ's 1968 minimum was about 80% (!) of the median (around $12.50/hr) -- really pushing it. It must have been recognized back then that nobody could live on half their day's median ($6.25/hr). LBJ's minimum wage earners would fit into today's $20,000/yr income tax paying bracket -- GWB'S were in 2007's $10,000/yr almost no income tax paying bracket. (If LBJ's minimum wage had kept up with average income growth, today, it would be $5/hr higher then Obama's median wage!)

Re-inserting (re-asserting!) fair US labor costs across the board must needs cause a boat load of inflation – but that just quantifies the depth of what I call America's "Great Wage Depression."

My neighborhood McDonald's enjoyed a noticeable up tick in business following Illinois' minimum wage jump from $6/hr ($5.15 in 2003, adjusted) to $8/hr -- noticeably (to myself and others) all in the low wage, foreign born customer segment. Minimum wage earners beginning to afford the products of their labor? My neighborhood owners even closed both their stores -- one at a time -- for 6 months to beautifully rebuild them for $1 million dollars apiece -- right in the teeth of the 33% real minimum wage increase which apparently did not phase them much.

Given the too long, below fair share US labor market, those who perform minimum wage studies ought to separate US born from foreign born employment statistics to get a realistic assessment of the effect on both. How else can they detect whether today’s minimum wage may often (most often?) be too low for Americans to even show up for? Ditto for measuring teenage and adult minimum wage work participation simultaneously: a higher wage may merely attract a few more, more employable adult applicants.

Meantime my neighborhood Ronald's has begun to attract a few (very few) American born workers now that Illinois' 2009 minimum wage has caught up with Ike's (read senate majority leader LBJ's) $8/hr minimum wage ($1.00/hr in 1956, adjusted).


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