Republished from The Unz Review
When I first began investigating the minimum wage a couple of years ago, one of my early surprises was its sharp decline across the decades, having fallen by roughly one-third in real value since its 1968 peak.
This drop was greatly magnified when we considered the economic growth of American society given that our per capita GDP had roughly doubled during that same period, meaning that the minimum wage had declined by almost 70% relative to average income. A 70% drop in a crucial parameter of our wage structure is quite remarkable and clearly explains why lower wage workers could generally support their families a few decades ago, but today subsist in desperate poverty despite massive government social welfare subsidies. I emphasized some of these statistics in my December 2013 New York Times piece on the subject, pointing out that even raising the minimum wage to $12 per hour would merely make up a fraction of this long lost economic ground.
I was hardly the first person to note these remarkable facts, and earlier that same year Sen. Elizabeth Warren had pointed out that if the minimum wage had merely kept pace with the growth in average per capita income, it would have reached a rate close to $22 per hour. Given such figures, the increases to $9 or $10.10 advocated by the Democratic leadership in Congress stood revealed as the paltry and pusillanimous goals that they were.
The devastating power of this simple economic point is easily apparent to the business lobbyists tasked with blocking an increase, and they have regularly suggested that this argument is totally misleading because it ignores that the gains in national economic output have hardly been uniform across all sectors. The doubling in real per capita GDP has been driven almost entirely by increases at the high end, in sectors such as computer software, finance, and biotechnology, with little of it due to changes in the value of the work produced by janitors and waitresses. They argue that wages must follow productivity and if the output of nannies is roughly unchanged from forty years ago, it is absurd to expect their real hourly wages to double or triple. On the face of it, this rejoinder seems quite telling, and I have never seen an effective rebuttal provided in the numerous articles and columns by liberal wage advocates I have read on the subject. Continue reading