Entering the Last Week of 2013-Q1

Did you know that we're in the final week of the first quarter of 2013?

It's true, at least where the dividend futures contract for 2013-Q1 is concerned. That contract is set to expire on 15 March 2013, which for us marks the day that a new dividend futures contract, for 2014-Q1 should come into existence shortly thereafter, which will allow us to see an extra three months further into the future!

And here you thought the first quarter of 2013 would really end on 31 March 2013! (For reference, futures contracts typically expire on the third Friday of the month ending the quarter in question, which just happens to be super early this quarter considering how the days fell this month.)

Until then, not much in our outlook has changed, as the market is continuing to behave pretty much as we've expected:

As you can see in our chart, the expiration of the futures contract for 2012-Q4 on 20 December 2012 marked the timing of the most recent shift in investor focus. In that case, investors shifted their focus to the more distant future quarter of 2013-Q2, when they had been much more atypically and nearsightedly focused on the then current fourth quarter of 2012.

It will be interesting to see which alternate future path stock prices might take. If they stick with 2013-Q2, the current rally will start to stall out. If they focus on 2013-Q3, stock prices will fall around 20% on average from their present level. If they focus on 2013-Q4, then the dive will be deeper, with stock prices plunging around 50% on average from their current level.

The new wild card is the expected future for 2014-Q1, which we won't see until next week at the earliest.

As for the old wild card, we had an interesting thought - what if investors are really focused on 2013-Q3 right now and the only reason stock prices are this elevated is because of the Fed's latest quantitative easing program?

In that case, we would expect to see a lot more volatility in stock prices given the artificial nature of that kind of support. And while we've seen some volatility in very recent weeks, until the Italian election fiasco, the market was mostly characterized by a lack of it.

Instead, what we've seen is more consistent with investors focusing on the expected dividends to be paid out in 2013-Q2 in setting stock prices, with the kind of volatility that we associate with the market's typical level of noise. In fact, aside from the market's reaction to the Italian election fiasco and the tax avoidance-inspired activity announced in recent weeks as an outcome of the fiscal cliff tax deal back on 3 January 2013, it's been a pretty boring quarter.

Which as investors, is something we appreciate!

The Demand Curve for the U.S. Minimum Wage

How much will President Obama's 2013 State of the Union proposal to increase the federal minimum wage to $9.00 per hour affect the teens and young adults who make up roughly half of all those who earn the minimum wage or less in the United States?

We've been dancing around that question as we've been considering the recent history of minimum wage increases in recent weeks, but today, we're finally going to answer it!

Or rather, you are, because we've built a tool that you can use to do the math for yourself! Here, you just need to enter either President Obama's or your own proposed minimum wage (ideally in terms of constant 2011 U.S. dollars), and our tool will do the rest!

Minimum Wage Data
Input Data	Values
Proposed Minimum Wage [U.S. Dollars per Hour]

Approximate Quantity of Americans Age 15-24 with Incomes
Calculated Results	Values
... After Minimum Wage Increase

For those of you accessing this tool through a site that republishes the RSS feed for our posts, click here to access the original functioning version of the tool above!

Using President Obama's proposed minimum wage of $9.00 per hour, we estimate that the number of 15-24 year old Americans with incomes would decline by over 1.8 million from 2011's figure of 26,014,000 to the 24,192,580 figure estimated by our tool above, assuming no major shifts of the demand curve for American teens and young adults.

Here's how we get to that figure. We built a demand curve for the minimum wage using the income data that the U.S. Census Bureau has collected and reported in an easy-to-use digital format for each year from 1994 to 2011 (until this September, this will be the most recent year for which this data is available.)

In doing that, we considered the timing of when changes in the U.S. federal minimum wage occurred in the years they were implemented, and weighted them accordingly.

And then, we considered the situation where a number of states have set their minimum wage levels above the federal minimum wage. Since the minimum wage that applies in those states is the greater of the federal or state minimum wage level, we then took into account the percentage of the U.S. population that might be affected by that difference, and weighted the effective national minimum wage level by the affected state populations exposed to higher minimum wage levels as well.

Our last step was to then adjust the resulting effective national minimum wage level for inflation, with the results recorded in terms of constant 2011 U.S. dollars.

The results of that hour's worth of work on our part is presented in the chart below, in which we visualize the demand curve for the U.S. minimum wage.

We next identified the years that coincide with the Dot-Com Bubble, which ran from April 1997 through June 2003, since the effect of the bubble first caused the demand curve for Age 15-24 Americans to shift to the right during the inflation phase of the bubble (April 1997 to August 2000) before shifting back to the left during the deflation phase of the bubble (August 2000 to June 2003) and ending up roughly where it started.

Having identified the years that were affected by the dynamics of the Dot-Com Bubble's inflation and deflation phases, we then excluded the data for these years from the linear regression analysis of the remaining data, as they are clearly the result of an atypical situation for the U.S. economy. Here, we assume that the demand curve follows a mostly linear path for the prices and quantities involved outside the years affected by the Dot-Com Bubble.

And that's how we created the demand curve for teens and young adults based on the empirical evidence we've documented below!

Now, some of our economically-minded readers might wander if using the minimum wage per hour is the right "price" to use in our chart.

It is, and here's why. Since we're spanning the years of 1994 through 2011 in our analysis, we considered the changes that have been recorded with respect to the distribution of the total money income earned by Age 15-24 individuals over that time. We adjusted the 1994 distribution of income for this age group to be in terms of constant 2011 U.S. dollars, then determined the net change in the number of individuals at a number of income increments between 2011 and 1994. The results of that exercise are presented graphically below:

From 1994 through 2011, the most recent year for which the data is currently available at this writing, the U.S. Census Bureau reports that there has been a net decrease of 1,012,000 teens and young adults with incomes. As you can see in our chart above, virtually all of the negative change in the number of Americans Age 15-24 with incomes has occurred at annual incomes that fall below $15,000.

At the current U.S. federal minimum wage of $7.25 per hour, the annual income earned by an individual earning that wage today while working full-time (40 hours per week), year-round (52 weeks) is $15,080. That means that virtually *all* of the decline in the number of Americans Age 15-24 with incomes from 1994 to 2011 have occurred at the income levels that were the most directly impacted by minimum wage increases over that time.

Recall also that after adjusting for the effect of inflation, the total amount of income earned by American teens and young adults in 1994 and in 2011 is virtually identical. Increasing the minimum wage does not increase the amount of money available to pay wages and salaries, so it provides no benefit to the nation's GDP.

In effect, what this empirical data demonstrates is that increases in a price floor like the minimum wage simply locks out those who find themselves falling below the floor from the job market, without doing much to really benefit those who are at or above that threshold.

Maybe a good question to ask right now is just why President Obama hates American teens and young adults so much?...

On a closing note, using the President's proposed minimum wage level of $9.00 per hour and the quantity of 24,192,580 teens and young adults estimated in our tool above in our economic deadweight loss analysis tool puts the approximate deadweight loss to the U.S. economy with respect to 1994 at just over $5.6 million per hour in terms of 2011 U.S. dollars. And that doesn't even begin to reflect the increased costs to U.S. families and taxpayers who will be additionally burdened to support this portion of the U.S. population.

Data Sources

Southern Regional Education Board. Population and Demographics. Age Distribution of the Population - Total Population. [Excel Spreadsheet]. June 2012. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Detailed Person Income (P60 Package). Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 1994, Work Experience in 1994 and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Detailed Person Income (P60 Package). Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 1995, Work Experience in 1995 and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Detailed Person Income (P60 Package). Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 1996, Work Experience in 1996 and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Detailed Person Income (P60 Package). Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 1997, Work Experience in 1997 and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Detailed Person Income (P60 Package). Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 1998, Work Experience in 1998 and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Detailed Person Income (P60 Package). Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 1999, Work Experience in 1999, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Detailed Person Income (P60 Package). Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2000, Work Experience in 2000, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Detailed Person Income (P60 Package). Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2001, Work Experience in 2001, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Annual Social and Economic (ASEC) Supplement. Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2002, Work Experience in 2002, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Annual Social and Economic (ASEC) Supplement. Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2003, Work Experience in 2003, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Annual Social and Economic (ASEC) Supplement. Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2004, Work Experience in 2004, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Annual Social and Economic (ASEC) Supplement. Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2005, Work Experience in 2005, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Annual Social and Economic (ASEC) Supplement. Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2006, Work Experience in 2006, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Annual Social and Economic (ASEC) Supplement. Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2007, Work Experience in 2007, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Annual Social and Economic (ASEC) Supplement. Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2008, Work Experience in 2008, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Annual Social and Economic (ASEC) Supplement. Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2009, Work Experience in 2009, Race, Hispanic Origin and Sex. Both Sexes, All Races. [HTML Document]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Annual Social and Economic (ASEC) Supplement. Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2010 (Based on Census 2010 Population Controls), Work Experience in 2010 (Base on Census 2010 Population Controls), Race, Hispanic Origin and Sex. Both Sexes, All Races. [Excel Spreadsheet]. Accessed 6 March 2013.

U.S. Census Bureau. Current Population Survey. Annual Social and Economic (ASEC) Supplement. Table PINC-01 - Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2011, Work Experience in 2011, Race, Hispanic Origin and Sex. Both Sexes, All Races. [Excel Spreadsheet]. Accessed 6 March 2013.

U.S. Department of Labor. Bureau of Labor Statistics (BLS). Current Price Index - All Urban Consumers. Not Seasonally Adjusted. [HTML Document]. Accessed 6 March 2013.

U.S. Department of Labor. Wage and Hour Division (WHD). Changes in Basic Minimum Wages in Non-Farm Employment Under State Law: Selected Years 1968 to 2013. [HTML document]. Accessed 6 March 2013.

U.S. Department of Labor. Wage and Hour Division (WHD). History of Federal Minimum Wage Rates Under the Fair Labor Standards Act, 1938-2009. [HTML Document]. Accessed 6 March 2013.

Visualizing the Minimum Wages in the U.S.

There is more than one minimum wage in the United States.

In 2013, no fewer than 19 states and the District of Columbia have set their statutory minimum wages to be higher than that set by the U.S. federal government. In these states, the higher minimum wage set by the state rules the jobs scene for employees and employers.

For the other 31 states, whose legislatures might have set lower minimum wage levels or who even have no minimum wage level set by state law, except for some pretty limited circumstances, the U.S. federal minimum wage rules.

Our chart below visualizes how today's "higher-than-federal" minimum wage mandating states have changed their minimum wages over time, from 1994 through this point in 2013:

What that all means is that the effective minimum wage across the entire United States is somewhat higher than that set by the U.S. federal government. To find out what that really is, which would be necessary for any serious analysis of the impact of anything other than the timing of a minimum wage increase on the entire U.S. economy, we would need to take into account the minimum wages of states with higher minimum wages by weighting the average minimum wage in the U.S. by state population.

Which is something we might need to set some time aside to do one of these days!

Reference

U.S. Department of Labor. Wage and Hour Division. Changes in Basic Minimum Wages in Non-Farm Employment Under State Law: Selected Years 1968 to 2013. [HTML document]. Accessed 6 March 2013.

Hauser's Law at Work Today

Hauser's law is one of the more unique phenomenons in economics. Here, no matter what level the topmost income tax rates in the United States have been set, the amount of money that the U.S. federal government actually collects in taxes as a percentage share of GDP is fairly constant.

The reason why it works that way is because the people who earn the most money in the United States are able to avoid paying higher taxes by changing both how and when they might claim their income.

We have a prime example of that process happening today, which we observe in the number of publicly-traded companies announcing dividend increases, which set a new record in February 2013. That new record of 298 companies announcing dividend increases comes just one month after the old record of 263 dividend increases in a single month was recorded.

alt="Number of Public U.S. Companies Increasing (Blue) or Decreasing (Red) Their Dividends, January 2004 through February 2013" style="display: block; width: 600px; margin: 10px auto; text-align: center; "/>

In normal circumstances, these new records would indicate the potential for booming economic growth in 2013. However, in this case, something else is going on, as these new records are being set right after the all-time record of 93 dividend cuts announced in a single month was just set in December 2012 at the same time the all-time record of 483 extra or special dividend payments in a single month was set.

The single thing driving all this unusual record-setting activity for U.S. dividend-paying companies is the so-called "fiscal cliff" crisis.

Here, America's highest income earners first sought to avoid the risk of having to pay nearly triple the level of taxes on their dividend income by pulling ahead dividend payments from 2013 to the fourth quarter of 2012 instead, where they would only be taxed at a 15% rate.

Since these companies primarily pulled the money to pay those dividends from the funds that were already being set aside to pay dividends in 2013, the desire to avoid the risk of being exposed to those higher taxes that would be taking effect in 2013 is responsible for the record number of special dividends and dividend cuts that took place in December 2012.

But then, President Obama and the U.S. Congress came to a deal that resolved the uncertainty for the risk of higher tax rates upon the nation's highest income earners. The tax rates were increased, but also locked in.

In the deal, the maximum income tax rate on ordinary income was boosted to 39.6% for taxpayers with adjusted gross incomes greater than $400,000/$450,000 (single/married filing jointly), which combines with the new 3.8% "Obamacare" surtax on investment income that also took effect on 1 January 2013 for taxpayers with adjusted gross incomes greater than $200,000/$250,000 (single/married filing jointly), giving them a combined federal tax rate on their ordinary income of 43.4%.

At the same time, the tax rate for both ordinary dividend and long-term capital gains from investments was set at 20%, which when combined with the "Obamacare" tax of 3.8% on such investment income for high income earners, bringing the combined federal tax rate on capital gains and dividends to 23.8%.

Important notes: These tax rates applied *after* companies have paid their federal corporate income taxes on the income used to pay dividends, which for most companies works out to be around 12% of their net income after deductions and exemptions, but on paper is 35% and can be as high as 39%. Also, the 3.8% "Obamacare" tax is most often identified as a "Medicare surtax on investment income", but none of the money collected from it is specifically reserved to pay for the U.S. Medicare program - all of it goes straight into the general fund of the U.S. Treasury instead.

With the tax rates for 2013 and beyond now set, at least at present, high income earning individuals at these publicly-traded companies have a choice - they can take their income in the form of either salary or dividends. As we can see in the sheer number of companies announcing dividend increases, they are choosing to take their personal income in the form of dividends instead of salary because they come out ahead in doing so.

And then, there's the little matter of President Obama's new desire to eliminate their access to the most common income tax deductions, which he had previously rejected any consideration of as part of the fiscal cliff tax deal in favor of imposing higher tax rates on high income earners.

Here, by taking a larger share of their incomes in the form of dividends instead of salary or wages, high income earners can sidestep the President's new drive to impose an even higher tax burden upon them by limiting their access to common tax deductions, thereby limiting the amount of any additional tax collections the federal government might have. Those kinds of deductions would only apply to so-called "ordinary" income.

And that, in a nutshell, is Hauser's Law in action, which we're seeing today in the form of an explosion of dividend increases, even as the number of dividend cuts being announced continues to be consistent with recessionary levels of economic growth.

Chart Data Source

Standard and Poor. Monthly Dividend Action Report. [Excel spreadsheet]. As last updated 28 February 2013.

U.S. Dividends: Recessionary Conditions Continue in February 2013

Where does the condition of the U.S. economy now stand as measured by the number of companies acting to cut their dividends each month?

As reported by Standard & Poor, the total number of publicly-traded companies acting to cut their dividends fell to 21 in February 2013 from the 44 that was recorded in January 2013. Both figures are down from the record number of 93 companies that acted to cut their dividends in December 2012. We've updated our chart tracking the number of U.S. companies cutting dividends below:

Here, we consider recessionary conditions to exist in the U.S. economy whenever there are more than 10 companies from the more than 6,000 publicly-traded companies in the United States announcing such actions in a given month.

That doesn't however mean that the U.S. economy is in a full recession. We would instead describe the condition as being at least consistent with the U.S. economy going through a microrecession, which is characterized by slow rates of growth or by contractionary conditions that are either too limited in scope, duration or severity to qualify as a recession as defined by the National Bureau of Economic Research (NBER).

That contractionary forces are currently present and active in the U.S. economy is confirmed by the number of S&P 500 level companies announcing dividend cuts in February 2013, which we first noted last week.

Since the S&P 500 represents the 500 largest and most well market-capitalized publicly-traded companies in the United States, seeing more than three of these companies acting to slash their dividend payments to investors in a single month is consistent with a level of economic contraction that the NBER might likely qualify as a recession.

On the whole, we think its still too early to declare that the U.S. economy is in recession, however we would not be surprised if the NBER were to make such a determination that includes the month of February 2013 some 12 to 18 months from now.

There's a lot more going on with dividends than we've indicated in this post, which we'll take on in a special post on 6 March 2013 (when this link will work!)

Previously on Political Calculations

• Dividends, Recessions and Records


• S&P 500: Dividend Cuts Hit Recessionary Levels in February 2013

Data Sources

Standard and Poor. Monthly Dividend Action Report. [Excel spreadsheet]. As last updated 28 February 2013.

Standard and Poor. S&P 500 Dividend Rate Change. [Excel Spreadsheet]. Accessed 3 March 2013.

The S&P 500 After the Italian Election Fiasco Noise Event

Following the U.S. stock market's reaction and recovery to the political fiasco in Italy last week (fiasco being Italian slang for "election"), we thought it might be fun to add just a little more information to our chart showing how the change in the growth rate of stock prices closely tracks the expected change in the growth rates of dividends per share at specific points of time in the future. So, for this edition of our chart, we're showing the daily change in the growth rate of stock prices (as the dotted blue line):

As you might expect, the daily stock price acceleration line is more volatile than the 20-day moving average stock price acceleration line, which tends to more closely track the change in the growth rate of dividends expected in future quarters.

In the dotted blue line, you can see the sudden dip created by the market's reaction to the noise event that is the Italian election fiasco, which really began on 20 February 2013 (free, but registration required for access to the FT article), but which really punctuated itself on Monday, 25 February 2013.

Playing "what if", we asked the question: "What if investors continue to focus on 2013-Q2 in setting today's stock prices and the change in the expected growth rate of dividends for that quarter stays constant with where it is today. How much would the value of the S&P 500 have to change on average per trading day to converge with that level by 21 March 2013 - the last day we have shown on our chart?"

We came up with an average increase of 2.75 points per trading day.

And so we continue to find that the rally in stock prices has some additional room to run before it runs out. At least, in the absence of additional noise events or a sudden shift in investor focus to a different quarter in the future, or the sudden announcement of a major change in the dividend policies of one or more of the S&P 500's heavy hitters.

The Deadweight Loss of Minimum Wage Hikes

Has boosting the U.S. minimum wage from $4.25 per hour in 1994 to today's $7.25 per hour helped or hurt the U.S. economy?

To answer this question, we'll be tapping the U.S. Census Bureau's data on the incomes earned by 15 to 24 year old Americans in 1994 and 2011 (which until this September represents the most recent year for which this data is available). Specifically, we'll be considering the size of the Age 15-24 population, the number of 15-24 year olds with incomes and, of course, the federal minimum wage that applied in each of those years.

Because we're spanning so much time, we'll also need to account for the effects of inflation on the effective level of the U.S. minimum wage. Our first chart, which we created for a previous post on the topic, shows the original and inflation-adjusted levels of the U.S. federal minimum wage for both 1994 and 2011 in terms of constant 2011 U.S. dollars:

Our next chart illustrates the change in the number of 15 to 24 year olds who were either counted as having incomes, or having no income, in both 1994 and 2011:

This data provides enough information for us to construct a supply and demand diagram that will allow us to estimate if any deadweight loss occurred in the U.S. economy as a result of the change in the U.S. minimum wage from 1994 to 2011:

A deadweight loss is said to occur whenever economic activity that might otherwise have occurred is prevented from occurring because of policies that interfere with the natural functioning of a market economy. In this case, the policy in question is whether the minimum wage has been set too high, which then prevents people from being able to accept work at wages below the level set by the federal government, except under some very limited conditions permitted by the government.

It's time to run the numbers and see what shakes out!

Minimum Wage, Population and Income Earning Data
Input Data	Old	New
Minimum Wage per Hour [Constant U.S. Dollars]
Population Size
Number of Population with Income

Potential Surplus of Non-Income Earners and Deadweight Loss
Calculated Results	Values
Change in Number of People Without Incomes
Deadweight Loss per Hour [U.S. Dollars]

Using our tool's default values, our tool estimates that the deadweight loss to the U.S. economy as a result of the increase in the U.S. federal minimum wage from $4.25 per hour in 1994 to $7.25 per hour in 2011 is $485,430 per hour (in terms of constant 2011 U.S. dollars).

Americans between the ages of 15 and 24 worked an average of 19.2 hours per week in 2011. Multiplied over a 52 week year puts the estimated deadweight loss of the minimum wage from $4.25 per hour in 1994 to $7.25 per hour in 2011 at $483,391,573.

In other words, if not for the increase in the minimum wage, the U.S. economy would be nearly half a billion dollars bigger today.

And then, there's the little matter of the 6,092,685 increase in the number of teens and young adults from 1994 to 2011 who have no income.

Here, we measured the "surplus" of teens and young adults without income as being the difference between the number of 15-24 year olds with incomes in 2011 and the number of teens and young adults in 2011 who might have income if only the same percentage of those Age 15-24 that had incomes in 1994 also did in 2011. This makes our estimate of the surplus of 15-24 without incomes in 2011 fall on the conservative side, as the actual size of the increase in the non-income earning Age 15-24 population from 1994 to 2011 was 7,835,000.

This increase in the number of teens and young adults without incomes also has burdens, which are imposed upon their families and increasingly upon taxpayers in the form of the welfare and higher education programs that are proving to be poor substitutes for real world job experience.

If you doubt that, just consider the large percentage of college graduates today who are only being hired into jobs that don't require the degrees they got, and for which the U.S. government is borrowing money to provide them with grants and student loans. And that's not even considering the cost of the food stamps and other welfare programs needed to feed, clothe, house and otherwise care for them.

All of which could be reduced if only they could earn just a little bit of income on their own to offset the increased burden of caring for them that is being imposed upon others.

Finally, our analysis in this post provides enough information for us to quantify the likely impact of President Obama's proposed increase of the U.S. federal minimum wage to $9.00 per hour upon teens and young adults. We'll be presenting that analysis soon!...

Previously on Political Calculations

• Triangulating the Deadweight Loss of Cash for Clunkers - This is the tool where we introduced the math that's under the hood of this tool!


• Teens, Young Adults and President Obama's Minimum Wage - This is the analysis where we introduced the data used in this tool, which represents the U.S. Census Bureau's oldest and most recently reported age-related income data published in a digital data-friendly format!


• The Age Demographics of Minimum Wage Earners - This visual study explains why we focus so much on teens and young adults where the minimum wage is concerned - Americans between the ages of 15 and 24 account for roughly half of all people who earn the federal minimum wage or less!

Data Sources

U.S. Census Bureau. Current Population Reports. Consumer Income. Series P60-189. Table: PINC-01. Selected Characteristics of Persons 15 Years and Over,By Total Money Income in 1994, Work Experience in 1994 and Sex (Numbers in thousands). September 1995.

U.S. Census Bureau. Current Population Survey. 2012 Annual Social and Economic Supplement. Table: PINC-01.Selected Characteristics of People 15 Years Old and Over, by Total Money Income in 2011, Work Experience in 2011, Race, Hispanic Origin, and Sex, Total Work Experience, Both Sexes, All Races. [Excel Spreadsheet]. September 2012.

Sahr, Robert. Inflation Conversion Factors for Years 1774 to Estimated 2022. [PDF Document].