Data: BLS via RSM US; Chart: Axios Visuals
The federal minimum wage is now just 28% of average hourly earnings. That's just half its level in 1968, when the ratio was 54%.
Why it matters: The federal minimum is so low — well below the living wage in all states — that it has at this point lost most of its power as an anchoring mechanism.
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How it works: Employers like to pay the minimum wage not only because it's the lowest wage they can get away with, but also because it's a wage that the government is explicitly telling them is acceptable.
$7.25 per hour is so low, however, as to be incompatible with dignified hiring. Fewer than 2% of workers now earn the minimum wage or less.
That's how a new consensus has arrived that $15 is, as Joe Brusuelas and Tuan Nguyen of RSM put it, "the de-facto minimum wage."
By the numbers: $15 per hour is higher, in real terms, than the actual minimum wage has ever been. But at 58% of average hourly earnings, it's a perfectly reasonable baseline.
The bottom line: As David Card showed, higher wages don't need to mean less employment.
As Brusuelas and Nguyen write, while higher wages do tend to cause marginal price inflation, "it’s hard to argue that bringing working families above the poverty level would damage the economy."
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