How Scientifically Objective Is Robert Reich? (on the minimum wage)

From Don Boudreaux of Cafe Hayek.

"Judge for yourself if Robert Reich, in this video promoting a 107% increase in the national minimum wage in the U.S., presents an unbiased interpretation of the data.  (Other problems – oodles of them – swarm throughout Reich’s video.  But let’s ignore these other problems for now.)

About 45 seconds into this video Reich begins his comparison of the real value of today’s minimum hourly wage ($7.25) to the inflation-adjusted value of the minimum wage in 1968.  In 1968 the minimum wage was $1.60; according to Reich’s inflation adjustment, this nominal value in 1968 is the equivalent of $10.52 today.  Because $10.52 is significantly higher than today’s minimum wage of $7.25, we’re supposed to conclude that some great injustice is being visited upon today’s minimum-wage workers.

But as the graph below reveals, Reich’s selection of 1968 as the year to use for a comparison of the real value of today’s minimum with that of some presumed past golden era is almost certainly not random.



This graph – taken from this September 2014 study issued by the Pew Research Center – shows the nominal (green line) and inflation-adjusted (yellow line; in 2013 dollars) values of the national minimum wage in the U.S. dating back to the modern American minimum-wage’s origin in 1938.  1968 happens to be the year in which the inflation-adjusted value of this minimum wage was highest.

Indeed, eyeballing the chart shows that, save for the years of the recent Great Recession (hardly a time when one would wish for especially high minimum wages!), one has to go back to the early 1980s before encountering a time when the real value of the minimum wage was as high as is the real value of today’s minimum wage.  While it’s true that for most (although not all) of the 15-or-so-year period between the mid 1960s and the early 1980s the real value of the national minimum wage was generally higher than is the real value of today’s minimum wage, this value was seldom anywhere near the high magnitude that Reich’s comparison of today’s real-minimum-wage value with that of the real value of 1968 would lead you to believe.

And consistently from the early 1960s back to 1938 – the year of the national minimum-wage’s unfortunate (and decidedly non-immaculate) conception – the real values of minimum wages were quite below that of the real value of today’s minimum wage.  Even during the 1950s – a decade celebrated nostalgically by many as a glorious one, economically, for ordinary Americans – the real value of the minimum wage was well below that of the real value of the minimum wage today.  Go figure."