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‘If the Minimum Wage Increased at the Rate of Productivity Since 1960, It’d Be $24 Today—Not $7.25’

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"If the [minimum] wage increased at the rate of productivity since 1960, it'd be $24 [in 2021]—not $7.25[.]"

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On December 8 2021, Imgur user Lanhdanan shared a screenshot of a tweet claiming that if the federal minimum wage rose in concert with worker productivity, it would be $24 an hour in 2021.

That image showed a December 5 2021 tweet by user Qasim Rashid:

On Imgur, u/Lanhdanan titled the post, “Insatiable affluence is creating massive exploitation.” Rashid’s tweet in its entirety bore a similar sentiment:

If the min wage increased at the rate of productivity since 1960, it’d be $24 today—not $7.25. That means billionaires & corporations have stolen at least $17/hour from working Americans for 60 years—an estimated $50T.

We don’t suffer a lack of resources—but an excess of greed.

Earlier in December 2021, we examined a separate Imgur post (also submitted by u/Lanhdanan) concerning the accurate claim that a cap on campaign donations was indexed to inflation, whereas the minimum wage was not. In that post and others, we explained that the federal minimum wage sat at $7.25 per hour in 2021:

‘The Maximum Legal Campaign Donation is Indexed to Inflation, But the Minimum Wage is Not’

In that fact check, we noted that projecting a proportionate minimum wage was not straightforward, thanks in part to the fact that it was not indexed to inflation or other dynamic economic conditions:

An April 2021 Chicago Tribune piece (“How much the US minimum wage was actually worth the year you were born”) about the minimum wage’s relative buying power over the years explained that any figure would be tacked to relative fluctuations in the rate since its inception

It was not difficult to locate a source for the specific figure of a $24 minimum wage in relation to worker productivity. In January 2020, the Center for Economic Policy (CEPR, a progressive economic think tank) published “This is What Minimum Wage Would Be If It Kept Pace with Productivity,” which began:

Until 1968, the minimum wage not only kept pace with inflation, it rose in step with productivity growth. The logic is straightforward; we expect that wages in general will rise in step with productivity growth. For workers at the bottom to share in the overall improvement in society’s living standards, the minimum wage should also rise with productivity.

The distinction between inflation and productivity is an important one. If the minimum wage rises in step with inflation, we are effectively ensuring that it will allow minimum wage earners to buy the same amount of goods and services through time, protecting them against higher prices. However, if it rises with productivity that means that as workers are able to produce more goods and services per hour, on average, minimum wage earners will be able to buy more goods and services through time.

While the national minimum wage did rise roughly in step with productivity growth from its inception in 1938 until 1968, in the more than five decades since then, it has not even kept pace with inflation. However, if the minimum wage did rise in step with productivity growth since 1968 it would be over $24 an hour today

At the bottom of the page, a footnote appeared and articulated context for the estimates:

This calculation uses a productivity growth figure that is economy-wide, is based on net output, and adjusts for differences between the NDP deflator and the consumer price index. These issues are discussed in more detail here.

The word “here” was hyperlinked, but it unfortunately led to a 404 error page (and we were unable to retrieve an archived copy). Nevertheless, the article was published on January 21 2020 — narrowly preceding the massive economic shakeup ushered in by the global pandemic that began around that same time.

Our search also returned a CBS News article from September 2021 with a similar, but not identical, claim. It was headlined, “Minimum wage would be $26 an hour if it had grown in line with productivity,” and cited both the same source (CEPR) and author of the January 2020 blog post (Dean Baker).

It began:

The federal minimum wage in the U.S. has remained glued at $7.25 an hour for the last 12 years, the longest stretch without a boost since it was first adopted in 1938. Yet there’s another revealing figure that underscores how the minimum wage — created by Congress after the Great Depression as a way to ensure that Americans were fairly paid for their labor — has failed to keep up with the times.

Even as workers have been more industrious — helping drive corporate profits, the stock market and CEO compensation to record heights — their pay has flatlined, or even declined when factoring in inflation. If the minimum wage had kept pace with gains in the economy’s productivity over the last 50 years, it would be nearly $26 an hour today, or more than $50,000 a year in annual income, one economist notes.

“That may sound pretty crazy, but that’s roughly what the minimum wage would be today if it had kept pace with productivity growth since its value peaked in 1968,” wrote Dean Baker, senior economist at the left-leaning Center for Economic and Policy Research, in [an August 2021 CEPR] blog post.

Baker’s blog post (“The $26 an Hour Minimum Wage”) was partly editorial in nature, stating in part:

The problem is that we have made many changes to the economy that shifted huge amounts of income upward, so that we cannot support a pay structure that gives workers at the bottom $52,000 a year. This is the whole point of my book, Rigged [it’s free], we have restructured the economy in ways that ensure a disproportionate share of income goes to those at the top. If the bottom half or 80 percent of the workforce got the same share they got 50 years ago, we would have an enormous problem with inflation.

Just to quickly run through the short list, we can start with my favorites, government-granted patent and copyright monopolies. Items like drugs, medical equipment, and computer software, which would all be relatively cheap in a free market, instead cost us huge amounts of money because of these monopolies. In the case of prescription drugs alone, patent monopolies and related protections may add more than $400 billion a year (roughly $3,000 per family) to our annual bill. In total, the cost from these protections can easily exceed $1 trillion a year (almost $8,000 per family).

And the beneficiaries from patent and copyright monopolies are overwhelming those at the top end of the income distribution. Many workers in the tech sector make high six or even seven figure salaries. Lucky winners can walk away with tens or even hundreds of millions of dollars because of these government-granted monopolies. Bill Gates would probably still be working for a living if the government was not prepared to arrest anyone who made copies of Microsoft software without his permission.

However, Baker cited a source for the productivity figures that formed the basis of his calculations — the Bureau of Labor Statistics (BLS). Our search also returned an April 2021 page on the site minimumwage.com, an arm of a group in strong opposition to minimum wage increases.

That particular perspective did not quibble with the frequently cited increase in labor productivity since 1960 as a benchmark for the basis of minimum wage. Rather, it argued that sectors like food service ought to be decoupled from overall productivity:

One such argument seems to be that the federal minimum wage should correlate with gains in labor productivity. This idea is so pervasive that various members of Congress have adopted it as a main talking point – Sen. Elizabeth Warren suggested in 2013 that the minimum wage should be raised to $22 per hour in line with productivity gains. More recently, Rep. Alexandria Ocasio-Cortez reasoned that because the minimum wage should be upwards of $22, passing a $15 federal wage mandate is just a “deep compromise”.

Yet, this logic doesn’t actually reflect historical reality. A majority of minimum wage-earners work in food services, yet productivity in the industry has had minimal growth compared to other industries who hire few, if any, minimum wage employees. While labor productivity for all businesses has grown by nearly 80 percent since 1990, the food service industry has only risen by 11 percent.

We found several sources (such as Forbes.com, The Intercept, and investing site Acorns) reiterating the claim that the minimum wage would be $24 an hour or more had it been indexed to labor productivity. However, all three cited Baker’s blog posts in 2020 or 2021.

Bureau of Labor Statistics data in its available format did not directly produce the data to attempt to replicate the figure widely cited. The closest thing to a firm, calculable figure appeared on an April 2021 item from the progressive Economic Policy Institute, in the form of a 142.9 percent increase in overall productivity between 1960 and 2021.

Adjusting 1960’s $1 minimum wage to 2021 dollars led to a figure of $9.34. Applying a 142.9 percent increase to that resulted in a figure of $22.68 — not dissimilar to the 2013 proposal quoted above.

Likewise, Our World In Data indicated an overall productivity increase of 178.7 percent, from $23.49 in 1960 to $65.51 in 2017 (the most recent year for data by that source). Using that metric and inflation rates produced a figure of $26.03 for 2017 — not beyond.

That December 2021 tweet referenced January 2020 figures from CEPR and Baker, and that estimate was revised upward to $26 in 2021. A footnote with information on Baker’s calculations was broken in December 2021, making it difficult to replicate the calculation independently. Our attempts to reproduce that math led to figures of $22.68 or $26.03 in 2017, but without the underlying numbers used, we could not fully validate the claim.