September 28, 2013 by David K. Sutton
CHART: Minimum Wage vs. Unemployment Rate, 1948 – 2012
Most Americans believe the minimum wage should be increased. It would make good economic sense, and it would help pull people out of poverty. But many Republicans in Washington say this is a non-starter because raising the minimum wage would be a job killer. But how do we know this is true? Should we just take their word for it? And come to think of it, calling something a job killer seems to be the boilerplate Republican response to just about anything these days, including Obamacare and raising taxes. Republicans aren’t lying to us, are they?
Anyway, as I was saying, raising the minimum wage is a winner both economically and politically but Republicans remain unconvinced. Since they say raising the minimum wage will result in fewer jobs, I thought it might be a good idea to chart those two things. So here’s a chart showing inflation adjusted minimum wage (in 2012 dollars) compared to the unemployment rate. After all, if a higher minimum wage kills jobs, then the unemployment rate should rise with minimum wage, right?
The first thing that stands out to me is the over 40-year trend for minimum wage. After hitting a peak in 1968, minimum wage has trended down ever since. There’s a small recovery in the last six years, but as you can see, it’s trending down again with a growing economy, and that’s because of inflation. Every time you see the minimum wage trend down in this chart that’s because minimum wage was not increased to keep up with inflation. Through the 1950s and 60s, the rate at which congress increased the minimum wage outpaced inflation, resulting in a minimum wage peak of $10.56 (in 2012 dollars) in 1968 while at the same time the unemployment rate was under 4%.
The next thing I notice is the unemployment rate trend. At the same time minimum wage is trending down, over the last 40 years the unemployment rate is clearly trending up, including two massive peaks of nearly 10%. So if raising the minimum wage kills jobs, then the inverse should also be true, right? But clearly that is not the case.
This chart doesn’t prove there is a direct correlation between minimum wage and the unemployment rate, but it does indicate Republicans are either lying or have no idea what they are talking about. Say it ain’t so!
The bottom line is this: With a minimum wage currently at $7.25, which is over three full dollars below the 1968 inflation adjusted peak, we could stand to increase it by a dollar or two at the very least.
