AEI’s Mark Perry Inadvertently Makes the Case that $15 is 31% Below the Peak Minimum Wage

Seattle2017

Over at the American Enterprise Institute’s Carping Diem blog, Professor Mark J. Perry flexes his Excel spreadsheet muscles by producing a chart (above) tracking Seattle’s minimum wage since 1938. The dark blue line is the real (inflation-adjusted) minimum wage in 2015 “dolalrs” [sic]. The light blue line you can ignore; nominal dollars are just plain stupid.

Pointing out that Seattle’s  2017 minimum wage of $15 an hour will be about 36 percent above its 1968 peak (actually, closer to 32 percent when you account for two additional years of inflation), Perry asks: “Economic death wish? Free lunch?”

Well, to help Professor Perry answer his own question, I’ve annotated his chart (below) to put his numbers in some actual, you know, context:

anotated_perry_chartTurns out that Seattle did quite well during most of the first three decades of Perry’s chart, quickly growing to become our nation’s 19th largest city. It was only after the federal minimum wage was unpegged from productivity growth that Seattle’s economy hit the skids. Then, starting in the late 1980s, right around the time Washington State started boosting its minimum wage substantially above the eroding federal rate, Seattle’s economy started to boom! Today, Seattle not only has one of the highest minimum wages in the nation, it is also one of the fastest growing big cities!

Sure, correlation does not equal causation. But it’s hard to look at past performance and conclude that a $15 minimum wage is some sort of economic death wish.

Still, the larger problem with Perry’s chart is that when he talks about our 2017 minimum wage being 36 percent above the 1968 peak (well, 32 percent), he glosses over the question, peak of what? For example, from 1938 through 1968—through Democratic and Republican administrations alike—there was a bipartisan commitment to raising the real value of the minimum wage roughly in step with rising productivity. Just take a look at the chart below (rather than the lazy straight lines I pasted into Perry’s chart):

Productivity vs Min. Wage (via CEPR.net)

Productivity vs Min. Wage (via CEPR.net)

That’s productivity growth versus the real federal minimum wage, rather than Seattle’s, but the point remains the same. Through 1968, the minimum wage largely tracked productivity—not inflation or median wage or anything else. So if Perry truly believes that the 1968 minimum wage is a meaningful standard by which to compare Seattle’s 2017 minimum wage, wouldn’t it be more accurate to describe $15 as 31 percent below the productivity-adjusted peak rather than 32 percent above?

If Perry says “no”—that productivity is not an index by which we should adjust the minimum wage—then what’s his point? That $15 is economic suicide because it’s 32 percent higher than some arbitrarily arrived-at number? That’s not much of a persuasive argument. But if Perry says “yes”—that the productivity-adjusted 1968 minimum wage is a reasonable standard by which to judge future minimum wage increases—isn’t he just validating the very notion of a productivity-adjusted minimum wage?

The 1968 metric is either bullshit or it isn’t. Which is it, Professor Perry?

Comments

comments

Goldy
David "Goldy" Goldstein has written about politics for The Stranger, The Nation and the Huffington Post. He hosted “The David Goldstein Show” on Seattle’s news/talk 710-KIRO from 2006 through 2008, and has been pissing off readers at his blog HorsesAss.org for more than a decade.