The minimum wage has a much larger role now than it did three years ago, in large part because of the legislated increase in the minimum wage from $5.15 to $7.25 an hour. For example, comparing the 2010 data with the 2007 data, one finds the following:Of course he's hinting that the 'right answer' is that raising the minimum wage was a bad idea in a time of rapidly falling demand.
- The percentage of all hourly-paid workers paid at or below the minimum wage rose from 2.3 to 6.0 percent.
- The percentage of part-time workers paid at or below the minimum wage rose from 5 to 14 percent.
Question for class discussion: In light of what is occurring with the overall economy during this period, how would you evaluate the policy change regarding the minimum wage?
- The percentage of teenage workers paid at or below the minimum wage rose from 7 to 25 percent.
Mankiw forgets to mention the timing of the increases: it was already $6.55 in July 2008 two months before the financial meltdown, so post-meltdown only 70 cents was added to raise it to $7.25 in July 2009. As well, a bit of historical perspective might help students too in thinking about whether the minimum wage is unreasonably high.
I found this nice summary at a webpage at Oregon State University: