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Data: BLS via RSM US; Chart: Axios Visuals 

The federal minimum wage is now just 28% of average hourly earnings. That's just half its level in 1968, when the ratio was 54%.

Why it matters: The federal minimum is so low — well below the living wage in all states — that it has at this point lost most of its power as an anchoring mechanism.

How it works: Employers like to pay the minimum wage not only because it's the lowest wage they can get away with, but also because it's a wage that the government is explicitly telling them is acceptable.

  • $7.25 per hour is so low, however, as to be incompatible with dignified hiring. Fewer than 2% of workers now earn the minimum wage or less.
  • That's how a new consensus has arrived that $15 is, as Joe Brusuelas and Tuan Nguyen of RSM put it, "the de-facto minimum wage."

By the numbers: $15 per hour is higher, in real terms, than the actual minimum wage has ever been. But at 58% of average hourly earnings, it's a perfectly reasonable baseline.

The bottom line: As David Card showed, higher wages don't need to mean less employment.

  • As Brusuelas and Nguyen write, while higher wages do tend to cause marginal price inflation, "it’s hard to argue that bringing working families above the poverty level would damage the economy."

Go deeper

D.C. organizers start petition for tipped minimum wage

Photo: Chelsea Cirruzzo/Axios

Campaigners to raise tipped minimum wage began collecting signatures yesterday for a similar ballot initiative that voters approved in 2018 — only to be overruled by council members.

Details: Initiative 82 aims to gradually raise the minimum wage of tipped workers to full parity with minimum wage in D.C.

Rent prices increased sharply in September

Source: FRED (Index: 1982-1984=100); Chart: Axios Visuals

A new red flag showed up in Wednesday’s Consumer Price Index: The amount that Americans pay for shelter rose sharply in September.

Why it matters: Rent is a big-ticket item — it’s the single largest monthly expense for many people. And when rent rises, it tends to be somewhat sticky.

Felix Salmon, author of Capital
Oct 14, 2021 - Economy & Business

A Nobel for experimental economics

David Card. Photo illustration: Annelise Capossela. Photo of David Card: Jonathan Nackstrand/AFP,  UC Berkeley via Getty Images

David Card, Joshua Angrist and Guido Imbens won the economics Nobel this week, not so much for what they discovered but for how they discovered it.

Why it matters: While fellow laureates Esther Duflo, Abhijit Banerjee, and Michael Kremer are famous for designing experiments to quantify the effects of economic interventions, this year's winners try to find natural experiments that shed light on whether economic theory is actually true.