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Elizabeth Warren cherry-picked $22 per hour minimum wage number

Elizabeth Warren cherry-picked $22 per hour minimum wage number

Guess which she picked from $9.22, $10.01, $10.52, $12.25, $15.34, and $21.72

True to form, Elizabeth Warren has proved adept at grabbing a headline for a talking point made at a Senate hearing, and the media is swooning without actually examining the substance.

The talking point is that if the minimum wage kept pace with the increase in worker productivity since the 1960s, it would be $22.

Warren wants to know where the money has gone, as if someone stole it.

Perhaps it went into lower consumer costs, increased employment, summer jobs for teenagers, some spending money for retirees or stay-at-home moms who work part time, or heaven forbid, profits of the struggling retail and restaurant businesses which employ the relatively small percentage of the workforce which makes minimum wage for full time jobs. None of these possibilities entered into Warren’s question.

There is a lot wrong with Warren’s approach, but I wanted to make a quick point.

How do we know that the productivity increases of minimum wage workers kept pace with the productivity increases of the average worker?  Intuitively, one would think that minimum wage worker productivity gains lag far behind, which is why they are minimum wage jobs in an increasingly high-tech job market.  Think the person serving burgers versus high tech information-based workers, which is more productive due to technology compared to 40 years ago?

Warren did not cite the study she was relying on, but it likely was a study which gained a lot of notoriety in February when HuffPo ran an article Minimum Wage Would Be $21.72 If It Kept Pace With Increases In Productivity: Study.  A chart accompanying that post demonstrates that average worker productivity skyrocketed beginning in the 1970s, right in sync with the computerization of the economy:

So is it fair and appropriate to use the $22 figure?

The study, The Minimum Wage Is Too Damn Low, presented several alternatives, and did not argue for the $22 figure.

First, if the minimum wage kept pace with inflation, it only would be $10.52 or $9.22, depending on how inflation is measured:

If the minimum wage in that year had been indexed to the official Consumer Price Index (CPI-U), the minimum wage in 2012 (using the Congressional Budget Office’s estimates for inflation in 2012) would be at $10.52. Even if we applied the current methodology (CPI-U-RS) for calculating inflation – which generally shows a lower rate of inflation than the older measure – to the whole period since 1968, the 2012 value of the minimum wage would be $9.22. (See Figure 1.)

Second, if the minimum wage kept pace with its relative position to other wages, it would be $10.01.

Using wages as a benchmark, in 1968 the federal minimum stood at 53 percent of the average production worker earnings. During much of the 1960s, the minimum wage was close to 50 percent of the same wage benchmark. If the minimum wage were at 50 percent of the production worker wage in 2012 (again, using CBO projections to produce a full-year 2012 estimate), the federal minimum would be $10.01 per hour.

Only if measured against average worker productivity would the minimum wage be substantially higher. The author, however, appears not to have data on the extent to which minimum wage worker productivity had increased, because he presented several alternatives without arguing which should apply. Only the highest value of all the measurements gets to $22 (emphasis added):

A final benchmark for the minimum wage is productivity growth. Figure 2 below compares growth in average labor productivity with the real value of the minimum wage between the late 1940s and the end of the last decade. Between the end of World War II and 1968, the minimum wage tracked average productivity growth fairly closely. Since 1968, however, productivity growth has far outpaced the minimum wage. If the minimum wage had continued to move with average productivity after 1968, it would have reached $21.72 per hour in 2012 – a rate well above the average production worker wage. If minimum-wage workers received only half of the productivity gains over the period, the federal minimum would be $15.34. Even if the minimum wage only grew at one-fourth the rate of productivity, in 2012 it would be set at $12.25.

Three were many possibilities raised in the study: $9.22, $10.01, $10.52,  $12.25, $15.34, and $21.72.

Warren picked the absolute highest figure to make her point, a figure which makes no sense because it assumes that minimum wage worker productivity gains kept pace with worker productivity gains in the overall economy.

This is just another example of how the hype for Warren does not match reality.

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Comments

These people are crazy. A job should pay what the work to be done is valued at by the person doing the hiring given the level of skill required to do it. Suppose you need envelopes stuffed. These jokers would have an employer pay some guy $22 per hour to stuff them. So, then, how much should the guy making small welding joins make? What about the guy who still fixes stuff, like bicycles, electronics, and that sort of thing?

If we follow nuts like Warren, nobody would be able to afford anything because the labor costs associated with the production of something would exceed the what anyone would want to pay at all. If labor costs are so high, whe will the money come from to purchase materials, to pay taxes, to pay for depreciable items?

Just crazy.

There is also an issue with productivity. As private sector productivity started increasing in the 80s, public sector productivity did not, so the government stopped measuring it. So one likely answer to where did the money go is that government workers took it.

TrooperJohnSmith | March 19, 2013 at 10:29 am

This is typical Lefty thinking.

First, the Democrats need a smoke-screen to hide the fact that wages have plummeted during the tenure of Teh Chicago Jesus. What better way than to do that than some semi-officious 2+2=22 pronouncement.

Lizzy asks down what hole the balance of the 22-dollars and hour disappeared. Has the woman been in the same hole for the past 40 years? Look at the tax-burden and regulatory requirements and associated costs, you idiot! Look at the whole Wall Street mess. Look at insurance costs. Look at the global economy.

You cannot equate the productivity of flipping burgers at Mickey Dees with the benefits of the high-tech revolution brought on by the microchip.

We’ve truly become a kakistocracy, whereupon we’re governed by the worst elements in our society.

Elizabeth Warren has got to be the stupidest person ever elected from Massachusetts, and that is really saying something!

    TrooperJohnSmith in reply to TrooperJohnSmith. | March 19, 2013 at 10:33 am

    Also, by destroying the education system and the very structure of poor families, the Democrats have assured us of so many minimum wage workers that wages will stay low. Besides, minimum wage was never considered a “living wage” for young and entry-level workers.

    Elizabeth Warren has got to be the stupidest person ever elected from Massachusetts, and that is really saying something!

    She’s not stupid. She’s evil.

OK, then…….typical moron argument put forth by morons. I have been working industrial jobs since 1985, starting as a material handler in a textile mill (the lowest job on the totem pole)and working my way into maintenance by going out and learning new skills. I am currently an equipment service associate for a large Bavarian automaker at their only North American manufacturing site. I get paid more than 30 dollars an hour to not only attend the totally-automated framing line but to repair the highly-sophisticated technical equipment used to frame and weld the bodies together. The money is out there for the low-wage earner but you have to work for it, you have to want it to earn it. I could have stayed on as a material handler and continue to smoke dope in a low-wage job with ZERO responsibility other than to show up for work each shift BUT…..I wanted a better life for myself. Sadly, the next generation wants “helicopter mommy” to do it all for them, including scoring them a high-wage job with super benefits that contains ZERO responsibility. This is the portrait that is being painted of Lieawatha……the magnanamous nanny-mammy that is crusading for your slacker rights. We MUST become more outspoken or we will lose to “Santa Claus”. Rush is right!
More on the wage gap………Prior to becoming an employee of a large automaker I worked for a small company that provided weldments and fabricated components for the automotive industry. There was a young employee there that had no desire to move from his assigned work station….a resistance welding station that required pretty much no thought at all. A position came open in maintenance and I begged Brandon to put in for it. His reply? “I can make more money than you by selling crack after work”. This is what America is becoming…….a nation of shady characters, not willing to work and trying as best as they can to get over on “the man”…..the same man they are intent on keeping in power due to their ignorance. I pray daily for our great nation.

By her thinking its obvious the woman has spent her life in a ratified atmosphere like Harvard in a useless govt job cranking out drones like herself & thinking herself productive. The closest she’s been to the private sector is to hire a “boy ” to trim her trees so she can watch from a window while she fingers herself for pleasure.

None of these possibilities entered into Warren’s question.

Or, none of these possibilities entered into Warren’s mind.

Liberals seem to have the equivalent of tunnel vision when it comes to thinking. Tunnel thinking: focusing on small details that fit the narrative, overlooking major facts that don’t.

    TrooperJohnSmith in reply to rinardman. | March 19, 2013 at 1:53 pm

    Lizzie is likely to have an nonworking clock on her wall, which is, she proclaims is, “Exactly right twice a day!”

    When you live in a world of figures with no facts or facts with no figures or a world where both facts and figures are contrived, you come up with the damnedest conclusions, which are completely wrong.

As a Conservative, I believe that states should experiment. I would like Republicans in Congress to write (and vote for) a law that would raise the min-wage to $22 in all the states that voted for Obama.

This way, everybody gets what they want: the Dems get $22/hour min-wage in their home states, and the Republican states get all the companies and jobs moving from the Dem states to the Rep states. It’s a win-win.

Now, if the Dems in Congress vote AGAINST the $22/hour deal in their home states – they’ll have to explain why they’re suddenly evil Capitalists.

This woman is a genius.

I can see it now: HRC/Warren 2016.

I’m going to go watch Preppers now.

While it seems sort of “economic-ish”, the Dube relation of productivity to pay is bogus. It is typical clap-trap from a radical “labor economist”.

It has all the validity of charting wages against the number of cars on the road since 1960. The two things are disjointed.

Productivity gains are…broadly speaking…brought about by innovations in technology. These are, in turn, put to work via investments in capital equipment.

Happily, we ALLLLLLL share in this system, as our standard of living increases, which is the REAL measure of our rewards for work.

Note that over the last few years, the American standard of living has actually declined. This is not an accident.

Henry Hawkins | March 19, 2013 at 11:02 am

$22 minimum wage? Welcome to the world of $15 Large Fries.

Squaw no count wampum good.

$22? Why not $44?

Viaduct? Vy not a goose? Chico Marx

Her not being able to figure out why the minimum wage isn’t $22/hr is just further proof that she and most of her comrades in Congress haven’t worked a real job a single day of their lives.

“Where did the money go?” she asks. In large part, that money was spent on technology. It bought things like computers, software, robots, mobile electronics, and internet services. Those are the things that enabled the worker to be more productive.

I suppose in lieu of that capital expenditure, the employer could have chosen to double the number of employees in order to double the output of his factory. That would have required him to double the size of the factory. Which, again, is a capital expenditure.

Neither suggests that the employer is stealing labor from the employee.

    JerryB in reply to jeffrey. | March 19, 2013 at 12:02 pm

    I see you have no sympathy for telephone operators or bank tellers, all displaced by technology. I say, a $22/hour job for everyone, and horse and buggy in every driveway! Forward, Liz!

Warren is invoking the fumes of Teddy. Minimum wages increases are a back door way of increasing tax revenues.
But minimum wage increases also depress the market place and ultimately remove revenue which make Democrats scream for more wage/tax increases.
And as many people can readily observe, motivation’s correlation coefficient drops between 0 and -1 as the minimum wage/welfare is increased. The higher the minimum wage/welfare the lower the motivation to improves one’s lot in life.

The only question that needs to be hammered is ‘why does Warren need to quote the popular press?’.

Mister Natural | March 19, 2013 at 11:52 am

sometimes a broom is just a broom

casualobserver | March 19, 2013 at 11:57 am

Doesn’t everybody understand???? If YOU become more productive I should benefit. If the nation becomes more productive, social justice requires EVERYONE benefit, and benefit equally!!! “Fairness” overrides sound economics.
(sarcasm pointing out progressive thought as I’ve experienced it).

Isn’t affirmative action wonderful? First Hussein, now Lieawatha.

She may be a moonbat senator, but she’s MY moonbat senator. And you ain’t seen nothin’ yet.

“the media is swooning without actually examining the substance.”

That’s the point. Obama’s lesosns haven’t been for nothing. It’s why she’s smart, it’s how she’ll be angling for the 2016 nomination, and why she stands a good chance of winning it.

Midwest Rhino | March 19, 2013 at 12:20 pm

Her hypothetical is designed to gender strife and envy, nothing more.

“Rich versus poor, see how they cheat you?”

I guess it takes clever one line sound bites to refute the nonsense (which I don’t have yet 🙂 ). But why do so many have cell phones now, when no one had them 40 years ago and long distance was expensive? Clothing is cheap, flat screens are HD, medicine is better and essentially free for the minimum wage family, because they no doubt get Medicaid and food stamps.

A better question than where the “extra (non-existant) $14/hr went”, is:
How are we able to keep so many people employed when they are so productive? What in the world are they producing, and who is consuming it?

Capitalists can make the world better for everyone, but communists (and crony capitalists/socialists) don’t like freedom for all, so they choke us with class envy and unicorn promises of “fairness”.

I wonder if the Chicago underworld is more productive … drugs are better I hear, what about gambling and prostitution, or loan sharking? Has the race baiting industry kept pace? The entitlement industry has done well for sure. If a crime syndicate has over 50 workers, will they be forced into Obamacare? Will they turn in their Uzi’s when gun control passes?

I just bring that up because Democrats seem to run the Chicago badlands and they spawned Obama, but the Democrat talking point man always has the small businessman in his crosshairs.

How much of that $14/hr goes to pay lawyers like Warren to settle lawsuits? Defending DOW Chemical takes a little away from those minimum wage workers making breast implants. But I laud Warren for her own productivity, taking the bar exam while nursing a child or two. And being very white, but still cashing in as a “woman of color”, could be deemed “productive” in Warren world.

I’d like to see what that graph looks like farther to the left before 1950. Did the real minimum wage track productivity before 1950? It seems like the labor supply is ignored in this analysis.

From 1939-1945 (really 1948-49ish) there was a huge disruption and reduction in the global labor supply along with massive capital destruction abroad. This drove up the price of labor in the U.S. especially because of the availability of scarce capital in the US.

In the graph productivity and real minimum wage break at about 1970 which is almost exactly one human generation (assuming 20 years) after the the aforementioned events when presumably the labor supply begins to return to pre-conflict levels.

I think if anything the period 1950-1970 should be excluded from any analysis as an anomaly because it was built on the spoils of war. Unless Warren is advocating the destruction of Europe and Asia again as a way to increase real minimum wage. That is assuming we could get by virtually unscathed again, which I doubt.

TL;DR: WWII made everyone in the US wealthy because the US was the only country not starving or dead. The post WWII boom cannot be recreated without, duh, WWII.

Pick you poison: inflation through debt creation on the supplier side or consumer side. Either way, there is a progressive devaluation of capital and labor. In fact, that is the cause of our present crisis: excessive debt (or leverage).

This is the problem: finitely available and accessible resources, both natural and human.

This cannot be overcome through manipulation of perception. It will, however, poll well with people who are opportunistic or vulnerable.

As for productivity increases, in order to control inflation, it must exceed the rate of inflation. It has never done that on a continuing basis.

Today, the federal government is capable of running trillion dollar deficits, not because of 10% productivity increases, but because they have provided incentives to remove capital (via the Federal Reserve) from the private economy.

In any case, increasing the debt multiplier is a treatment of symptoms, not causes. It is a feel good measure to delay accountability.

    n.n in reply to n.n. | March 19, 2013 at 2:03 pm

    re: delay accountability

    It is very proper that Warren should suggest this “solution.”

If an employer pays $2 million investing in new equipment which enables his employees to be more productive he should also pay them more? Huh?

Warren wants to know where the money has gone, as if someone stole it.

Bravo for calling out, and refuting, her demagoguery.

However, note the sleight of hand. By framing the debate in terms of how much much the minimum wage should be raised, the Left leaves off the table the issue of whether there should be a minimum wage at all.

IMHO it seems Keynesianly plausible that the minimum wage should be reduced or suspended when unemployment is high. In contrast, raising it during high unemployment makes me wonder about deliberate, demagogic economic sabotage.

If the government insists on minimum wage from Fantasyland, then perhaps the employers can pull a “Who is John Galt?” moment. Just stop employing people. I’m sure the government would love to have all those people on unemployment rolls, without the tax revenues to support it. After all, they can just print money, right?

I LIVE IN AN INSANE ASYLUM, AND THE INMATES ARE IN CHARGE! GAH!

it went into supporting congress lavish no responsibility needed lifestyles.
where they work (thats a relative term) for a short time and get a lifetime of free shit.

I may only be speaking for myself, but I am on the warpath because we apparently don’t teach Economics on our revered Indian reservations.

[…] other words, where did Warren get her numbers?… Here…And it's as bogus as the day is long… Elizabeth Warren cherry-picked $22 per hour minimum wage number […]

[…] Originally Posted by cnredd Earlier I pointed out that the article doesn't mention the ACTUAL study… In other words, where did Warren get her numbers?… Here…And it's as bogus as the day is long… Elizabeth Warren cherry-picked $22 per hour minimum wage number […]

TheLastBrainLeft | March 20, 2013 at 2:35 pm

Congrats. You’ve managed to make the case for at least a $2 raise in the minimum wage for liberals without even knowing it. And people wonder why conservatives are losing.

Warren probably didn’t plan it, but she accomplished her goal. I expect stupidity like this from GOP elected officials, not respected conservative bloggers. I’m disappointed in you, Mr Jacobson.

[…] including the normally left-leaning commentators on the /r/politics board on Reddit.  Perhaps William A. Jacobson puts it most succinctly when he points out that if the minimum wage was indexed to inflation, it […]

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