Thursday, February 18, 2010

Isn't it tautological?

A recent post of mine over on the Blog at Mises.org:









Isn't it tautological?
Jim Fedako

Bob Herbert rattles off unemployment stats in order to paint a picture to his liking. In doing so, he uses data from The Center for Labor Market Studies at Northeastern University in Boston. The Center "divided American households into 10 groups based on their annual household income." Herbert then expresses shock that the unemployment rate for households with incomes below $12,499 was 20.6 percent.[1]

Given that the federal minimum wage averaged $6.87 in 2009 (or $13,740 per 2000 hour work year), it can be assumed that those earning less than $12,499 experienced at least some period of unemployment in 2009.[2]

When you think about it, isn't the $12,499 group simply a proxy for unemployment or periods of unemployment? Isn't a high rate of unemployment in that group tautological?

Missing from his article is any mention of a minimum wage: the real unemployer (to coin a phrase).


Notes:

1. I used his stat that excludes the underemployed for fairer comparison.

2. Some states have minimum wages above the federal minimum. Also, It may be that the income data are from 2008 (it's not mentioned in the article), but that only changes things a bit (the average federal minimum wage was less). Still, the $12,499 level serves as a proxy for unemployment.

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