Unexpectedly Intriguing!
08 March 2013
How much will President Obama's 2013 State of the Union proposal to increase the federal minimum wage to \$9.00 per hour affect the teens and young adults who make up roughly half of all those who earn the minimum wage or less in the United States?

We've been dancing around that question as we've been considering the recent history of minimum wage increases in recent weeks, but today, we're finally going to answer it!

Or rather, you are, because we've built a tool that you can use to do the math for yourself! Here, you just need to enter either President Obama's or your own proposed minimum wage (ideally in terms of constant 2011 U.S. dollars), and our tool will do the rest!

Minimum Wage Data
Input Data Values
Proposed Minimum Wage [U.S. Dollars per Hour]

Approximate Quantity of Americans Age 15-24 with Incomes
Calculated Results Values
... After Minimum Wage Increase

For those of you accessing this tool through a site that republishes the RSS feed for our posts, click here to access the original functioning version of the tool above!

Using President Obama's proposed minimum wage of \$9.00 per hour, we estimate that the number of 15-24 year old Americans with incomes would decline by over 1.8 million from 2011's figure of 26,014,000 to the 24,192,580 figure estimated by our tool above, assuming no major shifts of the demand curve for American teens and young adults.

Here's how we get to that figure. We built a demand curve for the minimum wage using the income data that the U.S. Census Bureau has collected and reported in an easy-to-use digital format for each year from 1994 to 2011 (until this September, this will be the most recent year for which this data is available.)

In doing that, we considered the timing of when changes in the U.S. federal minimum wage occurred in the years they were implemented, and weighted them accordingly.

And then, we considered the situation where a number of states have set their minimum wage levels above the federal minimum wage. Since the minimum wage that applies in those states is the greater of the federal or state minimum wage level, we then took into account the percentage of the U.S. population that might be affected by that difference, and weighted the effective national minimum wage level by the affected state populations exposed to higher minimum wage levels as well.

Our last step was to then adjust the resulting effective national minimum wage level for inflation, with the results recorded in terms of constant 2011 U.S. dollars.

The results of that hour's worth of work on our part is presented in the chart below, in which we visualize the demand curve for the U.S. minimum wage.

We next identified the years that coincide with the Dot-Com Bubble, which ran from April 1997 through June 2003, since the effect of the bubble first caused the demand curve for Age 15-24 Americans to shift to the right during the inflation phase of the bubble (April 1997 to August 2000) before shifting back to the left during the deflation phase of the bubble (August 2000 to June 2003) and ending up roughly where it started.

Having identified the years that were affected by the dynamics of the Dot-Com Bubble's inflation and deflation phases, we then excluded the data for these years from the linear regression analysis of the remaining data, as they are clearly the result of an atypical situation for the U.S. economy. Here, we assume that the demand curve follows a mostly linear path for the prices and quantities involved outside the years affected by the Dot-Com Bubble.

And that's how we created the demand curve for teens and young adults based on the empirical evidence we've documented below!

Now, some of our economically-minded readers might wander if using the minimum wage per hour is the right "price" to use in our chart.

It is, and here's why. Since we're spanning the years of 1994 through 2011 in our analysis, we considered the changes that have been recorded with respect to the distribution of the total money income earned by Age 15-24 individuals over that time. We adjusted the 1994 distribution of income for this age group to be in terms of constant 2011 U.S. dollars, then determined the net change in the number of individuals at a number of income increments between 2011 and 1994. The results of that exercise are presented graphically below:

From 1994 through 2011, the most recent year for which the data is currently available at this writing, the U.S. Census Bureau reports that there has been a net decrease of 1,012,000 teens and young adults with incomes. As you can see in our chart above, virtually all of the negative change in the number of Americans Age 15-24 with incomes has occurred at annual incomes that fall below \$15,000.

At the current U.S. federal minimum wage of \$7.25 per hour, the annual income earned by an individual earning that wage today while working full-time (40 hours per week), year-round (52 weeks) is \$15,080. That means that virtually *all* of the decline in the number of Americans Age 15-24 with incomes from 1994 to 2011 have occurred at the income levels that were the most directly impacted by minimum wage increases over that time.

Recall also that after adjusting for the effect of inflation, the total amount of income earned by American teens and young adults in 1994 and in 2011 is virtually identical. Increasing the minimum wage does not increase the amount of money available to pay wages and salaries, so it provides no benefit to the nation's GDP.

In effect, what this empirical data demonstrates is that increases in a price floor like the minimum wage simply locks out those who find themselves falling below the floor from the job market, without doing much to really benefit those who are at or above that threshold.

Maybe a good question to ask right now is just why President Obama hates American teens and young adults so much?...

On a closing note, using the President's proposed minimum wage level of \$9.00 per hour and the quantity of 24,192,580 teens and young adults estimated in our tool above in our economic deadweight loss analysis tool puts the approximate deadweight loss to the U.S. economy with respect to 1994 at just over \$5.6 million per hour in terms of 2011 U.S. dollars. And that doesn't even begin to reflect the increased costs to U.S. families and taxpayers who will be additionally burdened to support this portion of the U.S. population.

### Data Sources

Southern Regional Education Board. Population and Demographics. Age Distribution of the Population - Total Population. [Excel Spreadsheet]. June 2012. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Detailed Person Income (P60 Package). Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 1994, Work Experience in 1994 and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Detailed Person Income (P60 Package). Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 1995, Work Experience in 1995 and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Detailed Person Income (P60 Package). Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 1996, Work Experience in 1996 and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Detailed Person Income (P60 Package). Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 1997, Work Experience in 1997 and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Detailed Person Income (P60 Package). Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 1998, Work Experience in 1998 and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Detailed Person Income (P60 Package). Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 1999, Work Experience in 1999, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Detailed Person Income (P60 Package). Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2000, Work Experience in 2000, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Detailed Person Income (P60 Package). Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2001, Work Experience in 2001, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Annual Social and Economic (ASEC) Supplement. Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2002, Work Experience in 2002, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Annual Social and Economic (ASEC) Supplement. Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2003, Work Experience in 2003, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Annual Social and Economic (ASEC) Supplement. Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2004, Work Experience in 2004, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Annual Social and Economic (ASEC) Supplement. Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2005, Work Experience in 2005, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Annual Social and Economic (ASEC) Supplement. Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2006, Work Experience in 2006, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Annual Social and Economic (ASEC) Supplement. Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2007, Work Experience in 2007, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Annual Social and Economic (ASEC) Supplement. Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2008, Work Experience in 2008, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Annual Social and Economic (ASEC) Supplement. Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2009, Work Experience in 2009, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Annual Social and Economic (ASEC) Supplement. Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2010 (Based on Census 2010 Population Controls), Work Experience in 2010 (Base on Census 2010 Population Controls), Race, Hispanic Origin and Sex. Both Sexes, All Races. [Excel Spreadsheet]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Annual Social and Economic (ASEC) Supplement. Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2011, Work Experience in 2011, Race, Hispanic Origin and Sex. Both Sexes, All Races. [Excel Spreadsheet]. Accessed 6 March 2013.

U.S. Department of Labor. Bureau of Labor Statistics (BLS). Current Price Index - All Urban Consumers. Not Seasonally Adjusted. [HTML Document]. Accessed 6 March 2013.

U.S. Department of Labor. Wage and Hour Division (WHD). Changes in Basic Minimum Wages in Non-Farm Employment Under State Law: Selected Years 1968 to 2013. [HTML document]. Accessed 6 March 2013.

U.S. Department of Labor. Wage and Hour Division (WHD). History of Federal Minimum Wage Rates Under the Fair Labor Standards Act, 1938-2009. [HTML Document]. Accessed 6 March 2013.

Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:

ironman at politicalcalculations

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