Minimum Wage: Gene Epstein misdirects Tom Woods listeners

[merkelstan]

In his latest interview with Tom Woods on the minimum wage here https://tomwoods.com/ep-1864-gene-epstein-on-more-bad-arguments-for-the-minimum-wage Gene Epstein opposes a minimum wage hike with faulty accounting to imply there is no problem.

Epstein claims that 1.1 percent of workers work at or below the federal minimum wage in 2021 versus 7.9 percent in 1979 and acts as if this is a drop-dead argument that they are better off. If Tom Woods were a moderately competent economist, he'd have asked if Epstein's conclusion really follows from his data, given what Austrian Economists know about inflation.

Let's compare Federal Minimum Wage between 1979 and 2021:
FMW 1979: $2.90
FMW 2021: $7.25

Per BLS CPI data, the CPI-adjusted FMW in 2021 (Jan-Jan) would be $11.11. A 53% increase. Epstein crowing over fewer FMW workers as a sign of 'capitalism's success' is already rendered meaningless in that light.

Further, a good Misesean knows that the CPI isn't inflationl; inflation is the increase in the money supply by fiat. Knowing this, let's compare the increase in the money supply versus the increase in the 'piece of the pie' that the low-wage earner gets.

FMW 1979-2021: $7.25/$2.90 = 250%
CPI-FMW 1979-2021: $11.11/$2.90 = 383%
M2 Money Supply: $19368T/1379T = 1404%
-----------------------------------------------------------------
Minimum wage by True Inflation: $40.72

Remember all that newly printed money is the stuff that's either sitting in someone's account or sloshing around the economy. If there hadn't occurred a massive shift in income and wealth we'd expect a 14x increase in the money supply to be reflected in the form of a $41 minimum wage.

But it's not. This is evidence of redistribution to the rich.

Then there's the reported earnings. If as Epstein claims only 1.1% of workers earn the minimum wage or less ($14,500/year) that would translate to 1.9 million out of the 169 million wage earners reported by the Social Security administration's most recent data.

https://www.ssa.gov/cgi-bin/netcomp.cgi?year=2019

But how many wage earners report under $15,000 per annum? Hmm 44 million. Not 1.9 million. 44 million. That's 23 times higher than the number Epstein suggests.

Now, let's compare median net worth, shall we?

median net worth 1979: $75,143
median net worth 2020: $121,411
median net worth 2020: $1,055,008, if the moneyprinting had been equitable

For the median US citizen's net worth to track the creation of M2 money it would have to be $1,055,008 in 2020.

Given that excess income above necessary expenditure increases greater than 1:1 over raw income, the average middle-of-the-road american's net wealth could be FAR over a million dollars, if all that newly printed money hadn't mostly gone to the parasite class, Mister Epstein.

Epsteins 'there's no scam, nothing to see here kids!' position can be easily smashed with hard Austrian facts.
...just not by Tom Woods.

Yes, the minimum wage doesn't solve the problems, but Epstein pretends there isn't a problem.

A picture helps tell the story: http://0x0.st/-bi_.webp

 

[merkelstan]

To make the rubble bounce, let's reconsider Epstein's "1.1 percent of workers make the minimum wage or less".

What matters to the worker is not the nominal payrate but it's that yearly income derived from it that puts 'food on the family'.

If what Epstein is selling reflected reality, only 1.1% (1.9 million) of workers would have a yearly income below CPI-adjusted minimum wage of $22,220 per year.

But the reality is 54,628,280 workers reported under $20k/year in 2019. Interpolated to $22,220, that's an additional 4.67 million workers for a total of 59.3 million workers.

That's 35% of the American workers with yearly incomes at or below what CPI-adjusted 1979 minimum wage would yield for fulltime work.

But Austrian Economists know that CPI isn't True Inflation. A True Inflation corrected 1979 minum wage would net $81,440 per year income. What percentage of US workers earn less than $81,440 per year?

That's 141,846,976 out of the 169,328,746 filing income for taxation.

That's 83.77% of the USA workforce reporting yearly income at or below true inflation corrected 1979 minimum wage at fulltime work.


Kinda puts Epstein in a new light doesn't it.
​

 

[Invisible Man]

Yes, the minimum wage doesn't solve the problems, but Epstein pretends there isn't a problem.

What problem exists that Epstein pretends isn't there?

Unless you mean the problem that we still have any minimum wage at all.

 

[Invisible Man]

Then there's the reported earnings. If as Epstein claims only 1.1% of workers earn the minimum wage or less ($14,500/year) that would translate to 1.9 million out of the 169 million wage earners reported by the Social Security administration's most recent data.

https://www.ssa.gov/cgi-bin/netcomp.cgi?year=2019

But how many wage earners report under $15,000 per annum? Hmm 44 million. Not 1.9 million. 44 million. That's 23 times higher than the number Epstein suggests.

This is fallacious.

The minimum wage isn't a minimum annual wage, it's a minimum hourly wage. I don't know what the actual numbers are, or if Epstein states them accurately or not. But it could well be that only 1.1% of the nation's workers are making minimum wage, while at the same time 23% of them make less than 15k/year, if most of those people earning under 15k/year are part-time workers (which I suspect is the case).

 

[Swordsmyth]

This is fallacious.

The minimum wage isn't a minimum annual wage, it's a minimum hourly wage. I don't know what the actual numbers are, or if Epstein states them accurately or not. But it could well be that only 1.1% of the nation's workers are making minimum wage, while at the same time 23% of them make less than 15k/year, if most of those people earning under 15k/year are part-time workers (which I suspect is the case).

If that many people can only get part time jobs that in itself is a major problem and is further evidence of the massive theft that has taken place through inflation, offshoring and excessive importation of labor through legal and illegal immigration.

 

[Invisible Man]

If that many people can only get part time jobs that in itself is a major problem and is further evidence of the massive theft that has taken place through inflation, offshoring and excessive importation of labor through legal and illegal immigration.

Possibly. But that's a leap too. A lot of people who work part-time only want to work part-time. Not everyone out there earning money is trying to live off just that. In a lot of households there's one main bread winner who pays the bills and a spouse and kids who have part-time jobs they use to get extra money.

And to the extent that your point is true (and it is to an extent), it goes against the point of the OP (assuming I am reading it right). If people want to work full-time but are only able to get part-time jobs working minimum wage, then part of the reason for that is because of the minimum wage both exists and is too high. If they were allowed to offer their labor at a lower rate, which some would choose to do if they could, then they would be able to work more hours and bring home more money annually.

 

[merkelstan]

This is fallacious.

The minimum wage isn't a minimum annual wage, it's a minimum hourly wage. I don't know what the actual numbers are

"The average worker worked 1,868 hours in 2007, an increase of 181 hours from the 1979 work year of 1,687 hours"
https://www.epi.org/publication/ib348-trends-us-work-hours-wages-1979-2007/

1,868 hours * 40.72 dollars/hour = $76064.96 dollars per year.

What percentage of americans earned less than $70k/year?
https://www.ssa.gov/cgi-bin/netcomp.cgi?year=2019

137626359 / 169328746 = 0.81 = 81%

But we're interested in number of workers less than $76065 per year, so we can get a close approximation by linearly interpolating the workers between $70000/yr and $79999/yr. How close is $76065 to $79999?

$6065 / $9999 = 0.6065

The number of workers between $70,000 and $79,999 is 3,375,949, so we want the portion of those below the 76065 cutoff:

0.6065 * 3375959 = 2047519 workers

Adding 2047519 to 137626359 gets us 139673878 workers below $76,065/yr

Dividing the number of workers below $76,065/yr income by the total number of workers gives us the percent of workers earning below $76,065 per year:

(139673878 / 169328746) = 0.8249 = 82.49%

Now you know THE NUMBERS. See how easy that is?

This gives us the numbers by actual hours worked, as per your wishes, but that doesn't change the point, now does it?

82.49% of US workers earned less than the inflation-adjusted 1979 minimum wage, working the average measured number of hours per year.

So was my 83.77% or Epstein's 1.1% closer to the right number, by your standard?

Take the difference between correct number and original estimate, and divide by original estimate:
Epstein...: (82.49-1.1)/1.1 = 7399% off the mark
Merkelstan: (83.77-82.49)/83.77 = 1.5% off the mark

[EDIT] Latest 2013 numbers from the .xls were 1836 hours worked/yr, yielding a $74,761/yr equivalent minimum wage.


[EDIT2] I'm NOT ARGUING FOR A MANDATED MINIMUM WAGE. I'm showing how vast the amount of printed money is that's not going into the pockets of workers... including the middle class. I am doing this by showing how most workers are not getting the purchasing power (relative to the purchasing power that's been printed) that even the lowest paid fulltime employees did in 1979.

The same point can be made with median income instead of minimum wage.

According to https://dqydj.com/individual-income-by-year/ Median (household?) income in 1979 was $32,500
According to https://www.multpl.com/us-median-income/table/by-year it was 16,461.02

Adjust for M2 Inflation to 2020 and you get a 2020 median income of $456,300, or $231,112 . That's what we'd see if this moneyprinting wasn't a scam against all of us. The difference between what has been printed and what lands on your paycheck is more than your paycheck, in either case.

That's why we say End the Fed. That's a big part of Ron Paul's message. And that is what Epstein was covering-up with his happytalk on the Tom Woods interview.

 

[Invisible Man]

Now you know THE NUMBERS. See how easy that is?

You lost me there. None of those numbers have anything to do with what you said about minimum wage workers.

So was my 83% or Epstein's 1.1% closer to the right number, by your standard?

Epstein...: (82.49-1.1)/1.1 = 7399% off the mark
Merkelstan: (83-82.49)/82.49 = 0.6% off the mark

The numbers you provided don't support this conclusion.

Because here's where you committed the fallacy:

82.49% of US workers earned less than the inflation-adjusted 1979 minimum wage, working the average measured number of hours per year.

You can't just assume that the workers who earned less than $15k/year were working the average number of hours per year. In fact, it's a safe bet that the average number of hours worked per year by those making under 15k was a whole lot lower than the average number of hours worked per year by those earning more. Given the numbers you provided, Epstein's 1.1% claim may well be true.

Granted, it may not be--I don't know. But if it's not, then that remains unproven by anything you've shared here.

 

[Invisible Man]

FWIW, according to the Bureau of Labor Statistics, 1.5 percent of the labor force in 2020 earned the minimum wage or less. (I doubt that we have better statistics for 2021 than 2020--So if Epstein really said he was referring to 2021, he could have been using something different.)

However, that 1.5 percent was coincidentally 1.1 million workers. So it may be that Epstein mixed those up. At any rate, he was pretty close.

https://www.bls.gov/opub/reports/mi..., 73.3 million workers,wage of $7.25 per hour.

 

[Krugminator2]

Nothing about the original post is correct.

The minimum wage stat is wrong. "The percentage of hourly paid workers earning the prevailing federal minimum wage or less declined from 2.7 percent in 2016 to 2.3 percent in 2017"

M2 isn't the measure of inflation. Even if M2 perfectly correlated increased inflation, they wouldn't grow at the same pace. You have productivity growth and population growth. So M2 will always be a bigger number than inflation assuming an inflationary environment like the last 70 years.

Incomes and net worths will never be equitable. Has little to nothing to do with money printing or who gets it first. People who save and invest compound money over time and end up with outlier dollar amounts. Most people don't delay gratification and save.


As I have posted numerous times with links the median income earner is far better off since 1980. Inflation is overstated not understated.

 

[merkelstan]

However epstein is misleading. My explanation stands.

 

[Invisible Man]

However epstein is misleading. My explanation stands.

How is he misleading?

Since nothing you've posted in this thread so far indicates anything misleading about what you quoted him saying, do you have some other reason?

Or do you just mean because he said 1.1 percent instead of 1.5 percent?

 

[Invisible Man]

As I have posted numerous times with links the median income earner is far better off since 1980. Inflation is overstated not understated.

Another way to look at the same question, instead of using CPI or money supply is to compare how much people today can buy from the amount they earn in a given number of hours of work versus in years past. By that measure, people earn far more per hour today than in previous decades.

Here's a good Reason TV episode about that.

 

[Krugminator2]

Another way to look at the same question, instead of using CPI or money supply is to compare how much people today can buy from the amount they earn in a given number of hours of work versus in years past. By that measure, people earn far more per hour today than in previous decades.

Here's a good Reason TV episode about that.

Wow. That's the first time I've seen that. Great video.

I am still trying to figure out why he thinks wages should rise faster than his definition of inflation and productivity. The population is 50% larger today than in 1979.

 

[merkelstan]

The compounded productivity gains under a non-inflationary regime would mean we have 10x more purchasing power than we do now.

The population growth argument is fair to bring up but again, looking at the numbers:

US Pop 1979 225.06 million.
US Pop 2021 330.66 million
Ratio: 330.66/225.06 = 147.6%
M2 Money Supply: $19368T/1379T = 1404%

True Inflation is 9.5x the growth in population. Cheerleaders of the central bank regime will go to hell.

 

[oyarde]

Where I grew up In 1982 if you had a job making about twice min wage or just slightly less you could pay your rent on less than you made in a week at a 44 hr week, in 2021 you cannot make rent on twice min wage at a 44 hr week . For poor people I would imagine these numbers of rent , utilities ,groceries , liability auto ins etc are what matters . I dont personally believe there is a benefit to minimum wage and I do believe there are gross negatives if you raise it now but I'm not sure if people were better off then or now because I think it depends on what you look at . Things you really need like housing , auto , phone , utilities and food were probably a better deal then where crap you dont need like TV's are probably a better deal now .

 

[merkelstan]

I dont personally believe there is a benefit to minimum wage....

Nobody here has argued FOR a minimum wage by law. What we are discussing is the where all that printed money went, and it's not going to workers. As I've tried to show. Of course the demons trolling here will never acknowledge it...

 

[oyarde]

Nobody here has argued FOR a minimum wage by law. What we are discussing is the where all that printed money went, and it's not going to workers. As I've tried to show. Of course the demons trolling here will never acknowledge it...

No it is not going to go to workers . With Crypto Curr at 2 trillion and the stock markets where they are it is evident a lot is going there .

 

[Krugminator2]

Nobody here has argued FOR a minimum wage by law. What we are discussing is the where all that printed money went, and it's not going to workers. As I've tried to show. Of course the demons trolling here will never acknowledge it...

Literally zero economists including the most hard core Rothtardians would agree with your analysis about wealth or the minimum wage. Not one. On the entire planet.

There isn't even a point in trying to go further into your analysis. The median wage wouldn't be the equivalent of $450k. When you get a ridiculous number like that you should assume what you did was wrong.

Here is the reality as has been shown numerous times. CPI overstates inflation over the long run.

 

[Swordsmyth]

Where I grew up In 1982 if you had a job making about twice min wage or just slightly less you could pay your rent on less than you made in a week at a 44 hr week, in 2021 you cannot make rent on twice min wage at a 44 hr week . For poor people I would imagine these numbers of rent , utilities ,groceries , liability auto ins etc are what matters . I dont personally believe there is a benefit to minimum wage and I do believe there are gross negatives if you raise it now but I'm not sure if people were better off then or now because I think it depends on what you look at . Things you really need like housing , auto , phone , utilities and food were probably a better deal then where crap you dont need like TV's are probably a better deal now .

The rich are better off and the middle class and poor are dying.
Neofuedalism is rapidly approaching and cash register libertarians cheer it on.