Has boosting the U.S. minimum wage from $4.25 per hour in 1994 to today's $7.25 per hour helped or hurt the U.S. economy?

To answer this question, we'll be tapping the U.S. Census Bureau's data on the incomes earned by 15 to 24 year old Americans in 1994 and 2011 (which until this September represents the most recent year for which this data is available). Specifically, we'll be considering the size of the Age 15-24 population, the number of 15-24 year olds with incomes and, of course, the federal minimum wage that applied in each of those years.

Because we're spanning so much time, we'll also need to account for the effects of inflation on the effective level of the U.S. minimum wage. Our first chart, which we created for a previous post on the topic, shows the original and inflation-adjusted levels of the U.S. federal minimum wage for both 1994 and 2011 in terms of constant 2011 U.S. dollars:

U.S. Federal Minimum Wage in 1994, 2011 and Proposed for 2013

Our next chart illustrates the change in the number of 15 to 24 year olds who were either counted as having incomes, or having no income, in both 1994 and 2011:

Number of U.S. Teens and Young Adults (Age 15-24) With and Without Incomes in 1994 and 2011
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34 Comments So Far
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Kevin348 Wrote: Mar 03, 2013 10:47 PM
Commerce Clause prohibits federal government from enacting an intrastate minimum wage law.

At least that's how the Founders saw it, and the Supreme Court from 1789 to 1937.

Restore the original interpretation of the CC.
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Maureen116 Wrote: Mar 04, 2013 10:29 AM
I agree Kevin. And who was President in 1937 - FDR of course. Hailed as one of the greatest Presidents he was one of the most destructive Presidents. His New Deal ideas were a disaster. His policies just made things worse. He increased the size of Federal Government and Federal Spending. He used entitlements to gain support for his re-election campaign. He was the first President to use the IRS to attack his opponents. He also used 'stimulus' money that congress granted him to get votes in swing states. Sound familiar? He used the money to reduce unemployment in those key states to gain support. After the election the jobs ended and those people were unemployed again. They realized too late that they had been duped.
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Maureen116 Wrote: Mar 04, 2013 10:32 AM
For his second re-election campaign FDR bribed state Governor's to back him with promises of Federal Funds for their state. Those who refused the bribes were then audited by the IRS or lies were spread about them in the media to destroy them. Message was - don't oppose FDR or you'll be sorry. Sound familiar?
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wdwrkr Wrote: Mar 03, 2013 7:57 PM
The Federal gov't should not set a minimum wage. Let the individual states set whatever minimum wage works best for each state.
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Gail20555 Wrote: Mar 03, 2013 4:02 PM
Who pays minimum wage ? Places like supermarkets and gas stations. They make up for the wage increase by raising prices. In the meantime, your own wages don't increase. Minimum wage today doesn't buy anymore than it did 30 years ago.
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Maureen116 Wrote: Mar 04, 2013 10:36 AM
You are so right, yet many intelligent people thing minimum wage is necessary. One argument I got was that a family of four can't survive on minimum wage. Well, minimum wage is supposed to be for those started out in the workforce. Someone with a couple of kids should not be working in a job that would pay minimum wage. When I was a teenager fast food places like McDonald's paid minimum wage and students often worked part time after school. So for fast food places to afford to pay their workers minimum wage they have to raise the price of their food. It's expensive to eat at a fast food restaurant now.
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Moonbat Exterminator Wrote: Mar 03, 2013 1:46 PM
Hiking the minimum wage eventually pushes all wages higher. Since that increase is not linked to productivity, inflation results. The real winner is the gubmint because while incomes increase in a linear fashion, tax rates go up exponentially.
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Colonialgirl Wrote: Mar 03, 2013 2:29 PM
Don't forget the Union contracts tied to minimum wages; When the minimum wage goes up so does the union wage by the same amount. Net result, higher costs , less output and those on a fixed income get screwed royally from BOTH ends.
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uvuvuv Wrote: Mar 03, 2013 12:00 PM
in sydney this bartender (hotel bondi) said she worked 12 hours straight at $8 an hour. i said, wow that's $100. she said, yeah but taxes takes it all. my first paycheck job was at minimum wage in 1966, $1.25 an hour. when i returned to that job in 1969 the pay was $1.35 and believe it or not it was a noticeable difference. then i got hired for my career job in 1971 at 2.70 which was twice minimum wage. taking that to now would be 15 an hour, which would be huge. i am an outlier here but if someone is willing to work instead of lying on his back then there should be some motivation. you can do better on welfare and this is a disgrace.
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wdwrkr Wrote: Mar 03, 2013 7:56 PM
"you can do better on welfare and this is a disgrace."

Well, yeah, welfare is totally out of control (along with unemployment payments, food stamps, education subsidies, farm subsidies, etc.)
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tbashaw Wrote: Mar 03, 2013 11:50 AM
you know, most people don't mind paying a fair tax rate for fair government services. The problem arises when the government is greedy and corrupt, as it is now.
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wdwrkr Wrote: Mar 03, 2013 7:52 PM
If a Fedreal gov't activity isn't constitutionally justified, then the Fed shouldn't be doing that activity. Whether or not it is a "fair" gov't service (whatever that means) is irrrelevant.
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None1257 Wrote: Mar 03, 2013 11:40 AM
Are those who support raising the minimum wage, increasing the minimum wage to help the young, or do they want to raise the minimum wage for a completely different reason?
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Snarkasterous1 Wrote: Mar 03, 2013 12:11 PM
You've missed the larger point, at least in my mind.

That point, made spectacularly well by F.A. Hayek in "The Fatal Conceit," is that socialist libbies in pursuit of utopian society imagine that government programs are "solutions" to "problems."

In the real world, adults recognize that there are NO such "solutions" - life is, in fact, generally a series of choices from among a range of compromises.

Specific to this particular socialist libbie fantasy about "solving" the "problem" of low compensation for entry level jobs:

Libbies see a "solution" - raise minimum wage, and those working entry-level jobs make more! One more step toward socialist utopia!

Thinking adults (i.e., conservatives) see a tradeoff - raise minimum wage....
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Snarkasterous1 Wrote: Mar 03, 2013 12:14 PM
...and those making minimum wage will make more. Of course, many will lose jobs, or hours available, and unemployment, already worse under Obozo than under any other President of the last three-quarters of a century, will be negatively impacted.

Of course, the real world being complicated, thinking adults (yep, conservatives again) have taken the time to recognize that:

- Very few minimum wage earners are "trying to support a family of four" (Obozo's example in his mis-State of the Union travesty)
- Very few minimum wage earners REMAIN such for long; if they add value, the get raises (there's that dreaded free market at work again!)

Utopian socialist libbies, on the other hand, simply vote for the gov't "solution." Sad.
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eevans Wrote: Mar 03, 2013 10:48 AM
A hike in min. wage to $9 would only accomplish two things and that is higher taxes for those getting the increase and higher prices for everyone else. Anyone who took Economics 101 and passed it knows what the Economic Spiral is........you raise one thing in that spiral and everything else goes up. Min. Wagers working more than 15hrs a weeks would suddenly have their income taxes go from 10% to 15% and you can't tell me Obama doesn't know that. Plus, they would no longer not have to file income tax every year! Someone isn't paying attention to what Obama is really trying to do on this one. Check your tax tables and do the math!
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Grant43 Wrote: Mar 03, 2013 1:06 PM
It also makes lower priced goods from other countries more attractive, reducing overall employment in the U.S., further reducing our tax base and increasing dependence on government.
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anrkee Wrote: Mar 04, 2013 12:44 PM
If your numbers are correct then raising the minimum wage does give the worker a 14.7% pay raise (after taxes) (at the consumers expense)
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anonymous Wrote: Mar 03, 2013 9:55 AM
the hike in minimum wage means, prices go up and small business hire fewer people which means the consumer pays more for less goods and services and the government takes in less revenue causing the national debt to rise and the economy to shrink.
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Mike Donohue Wrote: Mar 03, 2013 9:12 AM
The numbers below are from an IBD column earlier this week.
The questions are mine.

In 2011, the latest year for which data are available, the average compensation (salary plus benefits) for a federal worker was $128,000

What does the “average middle class worker” (3rd quintile of tax-payers???) pay in income taxes?

How many of those middle class jobs (not minimum wage) does the Obama economy have to add to the private sector to pay for each $128,000 government job added?

How many of those middle class jobs does the Obama economy have to have added to the private sector to pay for the roughly 130,000 workers added to the federal payroll over the past four years?
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ironman Wrote: Mar 03, 2013 11:32 AM
See the chart here: http://tinyurl.com/cdhsvdl. The relevant middle quintile for individual income runs from roughly $21,000 (about the 40th percentile) to $34,000 (about the 60th percentile).
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para_dimz Wrote: Mar 03, 2013 9:01 AM
What data did you provide to determine that all those who did not have a job wanted one? Using this inflation calculator; http://www.dollartimes.com/calculators/inflation.htm, it calculated an inflation adjusted 1994 wage of 6:25 would be 9.84 today. N
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para_dimz Wrote: Mar 03, 2013 9:05 AM
Nine bucks doesn't even keep up. You also had to assume that the dollar isn't fungible to get a loss of economic activity. I'm pretty sure one good derivative transaction could cover a significant portion of your so called loss, just to make a point of the relative smallness of it. A couple currency trades, a few commodity trades, the likes of which 1994 never dreamed of and viola, your shortfall is covered, usually by noon.
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Colonialgirl Wrote: Mar 03, 2013 2:33 PM
More troll spew to try and justify Obama minimum wage idiocy.
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ironman Wrote: Mar 03, 2013 11:12 AM
You're a bit off in the numbers you're looking at. The minimum wage in 1994 was $4.25 per hour (not $6.25 per hour), which when we compare it to 2011 data needs to be expressed in terms of 2011 U.S. dollars.

Using the same inflation calculator you cited, that $4.25 per hour in 1994 comes out to be $6.39 per hour in terms of 2011 U.S. dollars. The $6.45 per hour we determined for the 2011 inflation-adjusted equivalent minimum wage is based on a little more accurate measure of the total change in inflation from 1994 to 2011 than used in the DollarTimes calculator.
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Colonialgirl Wrote: Mar 03, 2013 2:33 PM
obviously a liberal troll
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DuaneUrban Wrote: Mar 03, 2013 8:54 AM
This type of gerrymandering does more harm than good. There has been an overall job loss that has nothing to do with minimum wage. Secondly the minimum wages jobs that used be taken by younger people living off their parents to buy little luxury's are now being taken by their parents in a vain attempt to pay the bills.
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Jorge40 Wrote: Mar 03, 2013 7:47 AM
Nobama should have set the minimum wage at $100.00 an hour and all his supporters would be happy............
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buster33 Wrote: Mar 03, 2013 7:46 AM
Why Qd =QS at the original minimum wage?
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ironman Wrote: Mar 03, 2013 10:50 AM
Good question!. The reason is to set a base for reference. Ideally, we would have chosen a year before any minimum wage existed, however we don't have detailed data that goes back that far. We selected 1994 because it it is the oldest data for which the U.S. Census Bureau has provided data in an easy-to-access digital format.
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bchase Wrote: Mar 03, 2013 7:24 AM
The minimum wage is a leap frog game. When the minimum wage goes up prices go up. When prices go up the minimum wages goes up. When the minimum wages goes up prices go up. So it goes and goes and goes.
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Gary23 Wrote: Mar 03, 2013 7:35 AM
When prices go up, pay goes up, not minimum wage. Businesses make more, they pay workers more.
Minimum wages go up, businesses charge more to make up the loss of profit. If wages stay the same, and prices go up, profits are higher, giving more money for wages. The only way this doesn't work is when costs go up. Then prices go up with no increase in profits.
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Jorge40 Wrote: Mar 03, 2013 7:49 AM
The higher the profit the higher taxes!!!!!!!!!!!
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