13 February 2013

No, I Did Not Watch the State of the Union

I just don't like listening to him, so I read the official transcript.

Rather unsurprisingly, he wants to throw mama from the train put forward "entitlement reform", and he is patting himself on the back about the successes Obamacare (time will tell, but I doubt it), and killing bin Laden.

He also waxes eloquent over lowering the deficit, because austerity has worked so well where it has been tried. (Not)

He also proposed infrastructure repair, but that's not going to go anywhere.

I think that the most substantive proposal he made was to raise the minimum wage to $9.00/hour in stages through 2015.

As compared to his promise from the 2008 campaign, raising the minimum wage to $9.50 by 2011, this barely keeps up with inflation.

At least he is proposing an automatic inflation adjustment.

The real problem is that the minimum wage has plummeted relative to median and mean wages over the past 40 years

Source of data.

Based on this chart, it would appear that the minimum wage needs to increase by about 20% immediately to hit the trend (mid to upper 40% range), but the reality is that boosting the minimum wage has a big effect on boosting the lower half of the wage scale, so it probably needs to go up by about 40% to return to trend in the longer term.

Note also how the lines for median (50th percentile) and mean (average) have diverged.  This is an artifact of the increasingly inequality in our society.

I call this the "Bill Gates walked into the room, so we are now all millionaires" effect.  It makes the mean and the median diverge.

Setting the minimum wage to slowly, and automatically, converge to 45% of the minimum wage over the next half decade or so would serve to do a lot to reverse the income inequality .


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