How Liberals Manipulate Data About the Minimum Wage

Does the U.S.-Canadian speed gap bother you? Americans can drive no faster than 65 on Massachusetts highways. Meanwhile Canadian motorists zip along at speeds of up to 100. Congress should close this inequitable speed gap!

This argument sounds ridiculous, because it is. Canadians measure speed in kilometers per hour, not miles per hour. Moreover, many states have higher speed limits than Massachusetts. Any comparison that doesn’t account for such differences means little.

Yet many liberals do exactly that when arguing the minimum wage has not kept pace with productivity growth. They use one metric to adjust productivity for inflation and another to adjust the minimum wage, while ignoring workers who have experienced faster pay growth. This produces highly misleading comparisons.

Consider the chart below, produced by the left-wing Economic Policy Institute (EPI). The EPI argues that the minimum wage has lost purchasing power since 1968. Their figure juxtaposes the inflation-adjusted federal minimum wage with projected changes had it increased at the same rate as (1) average hourly earnings of production and non-supervisory (i.e. hourly) workers, or (2) economy-wide productivity. EPI argues this demonstrates the need for Congress to raise the minimum wage.

This chart is highly misleading, but for reasons invisible to most readers. EPI used different metrics to measure and adjust their pay and benefit figures for inflation. This creates completely spurious differences—just like comparing speeds calculated in kilometers and miles per hour. The EPI used the Consumer Price Index Research Series (CPI) to adjust the minimum wage and average hourly earnings for inflation. It used the Implicit Price Deflator (IPD) to adjust productivity for inflation. For methodological reasons (that I have written about elsewhere), the CPI consistently reports more inflation than the IPD.

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