# Signature Assignment

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 2010 data.  You have this data on the excel data sheet:

1. Minimum wage/Nominal minimum wage (NMW)
2. Consumer Price Index (CPI) Use CPI-U for Urban Consumer, annual average
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)

1. You must calculate this one. 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). % chg PP represents annual percent change in purchasing power.

Formula 2: % chg PP from 2009 to 2010:

= (RMW in 2010–RMW in 2009)/RMW in 2009) 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 from 2009 to 2010:

= (CPI2010 – CPI2009/ CPI2009 x 100;

= (CPIY2011 – CPI2010)/ CPI2010 x 100;

= __________________, an (increase or decrease) in inflation from 2009 to 2010

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:    INC1 for 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 2009 INC1PCTRH2 = 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 of 4 (RH4).

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

RH4 = _______________

Formula 8: INC1PCTRH4 = INC1/RH4.

For 2009 INC1PCTRH4 = ____________, 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. Title of graph should be Annual Income 1 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. Graph 3.  INC2PCTRH2 and INC2PCTRH4 on the same graph. Title of graph of graph should be Annual Income 2 as Percentage of Poverty Level Income Threshold.

References/Data 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 Family above 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 family above 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 power of 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 income 1 earned 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 income 2 earned 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 workers expressed as percentage of poverty level income for household of 2.

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

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