#MinWage and Employment


Considering other income support measures, I don’t think that any disemployment effects of the minimum wage are “worth it”, but that is the right debate to be having. Unfortunately we are having the wrong one, so lets focus on #minwage here. At $9 an hour, that would put the minimum wage at roughly 45% of the average wage. Here is historical perspective:

According to offical reports from the UK, 45% is beginning to enter the territory where disemployment effects get large, so I decided to take a look at the US to see if that held. In a rough cut, yes:

As you will notice, this captures the very slight negative effect the minimum wage has on employment (consistent with the literature), and shows that employment effects become more pronounced as you reach 50% of the average economy-wide wage. So, no surprises here.

Soruces were the Department of Labor and FRED.

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