Will Annual Income of Minimum Wage Workers Support a Family above the Poverty Level Income Threshold?

This is a study on minimum wage and poverty thresholds.  I have included the procedure for one year, 2009, below.  You will calculate all variables for all years 1968 – 2013.  You will have three graphs.  Check the attached excel data sheet to see what info. you already have.  You will need to calculate a few variables for each year.  Use the excel data sheet to do quick and easy cut and paste formulas.  If you need help, or are hyperventilating now, just drop me a line or come by the office.     JB

Step 1. Start off by using the 2009 and 2008data.  You have this data on the excel data sheet:

1. Minimum wage/Nominal minimum wage (NMW)
2. Consumer Price Index (CPI) or CPI-U
3. Poverty level income threshold for a household of 2 (H2)
4. Poverty level income threshold for a household of 4(H4)

(NMW, H2 and H4 are nominal variables)

100. You must calculate thisone. CPI in hundredths = CPI/100. Divide all nominal values by CPI in hundredths to convert nominal values to real values.

Step 2. Convert nominal minimum wage (NMW) to real minimum wage (RMW).

Minimum wage (NMW) from data source in 2009 = $______, the CPI for 2009 = ______

Formula 1:  RMW= NMW/CPI in hundredths

_____________for 2009

Step 3. Calculate yearly percent change in RMW (PP). %chgPP represents annual percent change in purchasing power.

Formula 2: %chgPP for 2009:

= (RMW in 2009–RMW in 2008)/RMW in 2008) x 100, = _____________________; an(increase or decrease) in purchasing power.

Step 4. Calculate the yearly percentage change in the CPI (INFLT). INFLT represents annual percent change in inflation.

Formula 3: INFLT for 2009:

= (CPI₂₀₀₉– CPI₂₀₀₈)/ CPI₂₀₀₈ x 100;

= __________________, an (increase or decrease) in inflation for 2009

This will go on year 2009.

Step 5. Graph 1. For every year, graph %chg in PP and Inflation (INFLT) on the same graph. Title of graph should be Trend in Purchasing Power and Inflation for Selected Years

Step 6. Calculate real annual income 1(INC1): RMW x 40 hours per week x 50 weeks per year.

Formula 4:INC1for 2009 = ______________, H2 =________ , this is a nominal value

Formula 5:   Convert to real value (RH2) = h2/CPI (2009) in hundredths = _______________

Step 7. INC1PCTRH2 =INC1 expressed as a percent of the poverty level income threshold for a household of 2 (RH2).

Formula 6:   For 2009INC1PCTRH2 = INC1/RH2 =_____, a number > 1 means above the poverty level income threshold for a household of 2.

Step 8.INC1PCTRH4 =INC1 expressed as a percent of the poverty level income threshold for a household of4(RH4).

Formula 7:    RH4 = H4/CPI (2009) in hundredths

RH4 = _______________

Formula 8: INC1PCTRH4=INC1/RH4.

For 2009INC1PCTRH4 = ____________, a number <1 means below the poverty level income threshold for a household of 4.

Step 9. Graph 2. INC1PCTRH2 and INC1PCTRH4 on the same graph.Titleof graphshould be Annual Income1 as a Percentage of the Poverty Level Income Threshold.

Step 10. What if you doubled the income numbers to represent two people working in the household?

Formula 9:  Or, (INC1*2)/RH2  =___________, a number >1 means above the poverty level income threshold for a household of 2.  Call this INC2PCTRH2.

Step 11.  Again, what if you doubled the income numbers to represent two people working in the household?

Formula 10:  Or, (INC1*2)/RH4  =___________, a number >1 means above the poverty level income threshold for a household of 4.  Call this INC2PCTRH4

Step 12. Graph3.  INC2PCTRH2 and INC2PCTRH4 on the same graph. Title of graph of graph shouldbe Annual Income2 as Percentage of Poverty Level Income Threshold.

The data you are using comes from the following sources:

1. dol.gov/whd/state/stateMinWageHis.htm
2. The minimum wage can be found in reference #1 above at, U.S Dept. of Labor, Wage and Hour Division.
3. This data source includes minimum wage at the Federal Level and individual state level.
4. socialsecurity.gov/policy/docs/statcomps/supplement/2014/
5. Use Table 3.E1 to get the Poverty Level Income Thresholds. See data source #2 above.
6. Also you can get the CPI-U, annual averages at this data source.
7. statistics@ssa.gov
8. http://data.bls.gov/pdg/querytool.Isp?survey=cu
9. bls.gov
10. http://oregonstate.edu/instruct/anth484/minwage.html

 

 

 

Step 13. Organize your results using the following format

Title: Will Annual Income of Minimum Wage Workers Support a Familyabove the Poverty Level Income Threshold?

Introduction – the introduction should include a brief discussion of the legislation that established the federal minimum wage, the year that it was established, and the major reasons for establishing the legislation. Cite your source.

Also, briefly explain what the poverty thresholds are and where they come from.https://aspe.hhs.gov/history-poverty-thresholds

The general objective of your research is to determine if minimum wage worker’s annual income will support a familyabove the poverty level income threshold. The specific objectives are:

1. For every year, 1968 to 2013, determine if the minimum wage has kept up with inflation. In other words, talk about graph 1. Specify if the purchasing powerof the minimum wage kept up with the increase in inflation during the study period. Are there years when purchasing power kept up with inflation or exceeded the inflation rate?  At least four sentences.
2. Determine if annual income1earned working 40 hours per week, 50 weeks per year, would support a family above the poverty level income threshold for a household of 2 and a household of 4. In other words, talk about graph 2. In your explanation, talk about which years the minimum wage income is above the threshold for 2 and 4 person families, and also discuss which years the minimum wage income is below the poverty threshold. Can you offer any explanation for this? At least four sentences.
3. Determine if annual income2earned by two workers working 40 hours per week, 50 weeks per year x 2, would support a family above the poverty level income threshold for a household of 2 and a household of 4. In other words, talk about graph 3. In your explanation, talk about which years the “double” minimum wage income is above the threshold for 2 and 4 person families, and also discuss which years the “double” minimum wage income is below the poverty threshold. Can you offer any explanation for this? At least four sentences.

Summary –include key findings about the purchasing power of the minimum wage and the ability of minimum wage workers to support a family above the poverty threshold income level.  At least four sentences.

PP = Purchasing Power                                    Nominal = stated in today’s dollars

INFLT= Inflation                                                 Real = purchasing power stated in a base year’s dollars

INC1PCTRH2 = Income 1 expressed as percentage of poverty level income for household of 2.

INC1PCTRH4 = Income 1 expressed as percentage of poverty level income for household of 4.

INC2PCTRH2 =Income of two workersexpressed as percentage of poverty level income for household of2.

INC2PCTRH4 = Income of two workers expressed as percentage of poverty level income for household of 4.