January 14, 2019 10:21AM

Elizabeth Warren’s Claim About Minimum Wage

In a recent speech, Senator and presidential candidate Elizabeth Warren made this claim:

When I was a kid, a minimum‐​wage job in America would support a family of three …It would pay the mortgage, it would keep the utilities on; it would put food on the table. Today, a minimum‐​wage job in America will not keep a momma and a baby out of poverty. Think about that difference.

Warren’s factual claim is accurate: the federal minimum wage, times 52 weeks, times 40 hours, would have yielded an amount above the poverty line for a household with 1 adult and 1 child in the early 1960s, but not today.

But several factors suggest her larger point is exaggerated or wrong.

First, the official poverty level does not mean the same thing now as in the 1960s. In particular, the poverty level is indexed to the Consumer Price Index, which almost certainly overstates true inflation by about 0.5–1.5 percent per year. This bias matters significantly when accumulated over 50 plus years. Consider that people in poverty now often have indoor plumbing, modern medical care, cell phones, access to the internet, and so on. Being at the poverty level is much less bad than during Warren’s childhood.

Second, households at or below the poverty level are now eligible for two significant government transfers that did not exist in Warren’s early childhood: the Earned Income Tax Credit and, for children in all states and their parents in many (although not Warren’s childhood residence, Oklahoma), Medicaid. Thus Warren’s calculation is incomplete. Medicaid access, in particular, is a huge improvement for many poor households relative to the early 1960s.