Search This Blog

Friday, December 17, 2021

Looking at Minimum Wage

With both the "great resignation" and inflation in the news, I decided that it was time to look at the US minimum wage. I've put my findings in a single chart.

Since the minimum wage was last raised in 2009, I converted all values to 2009 dollars. To my eye, a couple of things stand out.
  • After stabilizing around 1950, there appears to be a floor near $6.00 (2009 value) for the minimum wage. The current wage is $6.01 in 2009 dollars.
  • The highest minimum wage was in 1968 with the second highest in 1978. There was significant inflation during this time period.
Since we are approaching the historical floor, I think that one can make a fairly strong argument in favor of increasing the federal minimum wage. 

The bigger question is how far it should be raised. The data gives us three points to consider.
  • If we wish to match the highest historical value, then 1968's wage translates to $12.62 today.
  • If the highest historical value seems too high, then we could aim for the second highest. The 1978 wage would give us $11.30 today.
  • If we simply wanted to match the last increase, then 2009's $7.25 would be $9.39 today.
Combining those, one could reasonably argue for a new minimum wage anywhere between $9.40 and $12.65.

Disclaimers: I am well aware that many historical "minimum wage" jobs now pay more than minimum wage. I will let others argue about whether that is due to labor supply/demand or political pressure. My analysis is based on nothing more than the data. It is not an analysis of human value.  

However, I'll make one political statement. It would be a great bipartisan move to increase the minimum wage. Sure, the argument about the exact figure could get ugly, but our political leaders could also decide to act like grown-ups, look at the data, find a compromise number, and show the country that they can work together. It could be done quickly. 


Thursday, December 16, 2021

"Great Resignation" or "Great Retirement"?

Over 10 years ago, I wrote Will the Baby Boomers Ever Retire? in response to an article predicting tremendous retirements among financial professionals in "three to five years".

Here is a quote from early in post:

"Today is March 17th, 2011. The funny thing is, I've been hearing about mass retirements in the next "three to five years" since the 1990s."

My overall conclusion/prediction was: 

"So what's going to happen? Will there be a "tremendous number" of retirements in "three to five years"? I don't know for sure, but I don't think so. Of course the Boomers will all eventually retire or die but I think they'll go by attrition rather than en masse. Most of the Boomers I know simply do not have the resources to retire any time soon. Some will be forced to retire when their health fails. Others might get a nice inheritance along the way and decide that they finally have the resources to retire. Others will work well into their 60's and even their 70's either because they have to or they just plain want to."

For several years, I think that my prediction held up well. 

Then Covid-19 came.

We're hearing a lot about the "Great Resignation" and the depleting labor force. However, this article makes the argument that it's not a general abandonment of the labor force. Instead, it's driven by retirement

"Last month, there were 3.6 million more Americans who had left the labor force ... compared with November 2019. ... Older Americans, age 55 and up, accounted for whopping 90% of that increase."

There is disagreement on exactly where the line is between the Boomers and GenX, but most demographers put it somewhere between 1964 and 1966. In other words, "age 55 and up" pretty much catches the tail end of the Boomers.

After 25 years of "three to five year" predictions, it looks like the Boomer are finally retiring.