# This is a study on minimum wage and poverty thresholds. I have included the procedure for one year, 2009, below.

## Question:

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:

- Minimum wage/Nominal minimum wage (NMW)
- Consumer Price Index (CPI) Use CPI-U for Urban Consumer, annual average
- Poverty level income threshold for a household of 2 (H2)
- Poverty level income threshold for a household of 4 (H4)

(NMW, H2 and H4 are nominal variables)

- 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:

= (CPI_{2010} – CPI_{2009}/ CPI_{2009} x 100;

= (CPIY_{2011} – CPI_{2010})/ CPI_{2010} 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 = _______________

Year | NMW | CPI-U | H2 | H4 | CPI/100 | RMW | % chg pp | inflation rate | INC1 | rh2 | INC1PCTRH2 | INC1PCTR4 | rh4 | INC2PCTRH2 | INC2PCTRH4 | ||

1968 | 1.6 | 34.8 | 2262 | 3553 | |||||||||||||

1970 | 1.6 | 38.8 | 2525 | 3968 | |||||||||||||

1972 | 1.6 | 41.8 | 2724 | 4275 | |||||||||||||

1976 | 2.3 | 56.9 | 3711 | 5815 | |||||||||||||

1979 | 2.9 | 72.6 | 4725 | 7412 | |||||||||||||

1980 | 3.1 | 82.4 | 5363 | 8414 | |||||||||||||

1981 | 3.35 | 90.9 | 5917 | 9287 | |||||||||||||

1988 | 3.35 | 118.3 | 7704 | 12092 | |||||||||||||

1991 | 3.8 | 136.2 | 8865 | 13924 | |||||||||||||

1992 | 4.25 | 140.3 | 9137 | 14335 | |||||||||||||

1994 | 4.25 | 148.2 | 9661 | 15141 | |||||||||||||

1996 | 4.25 | 156.9 | 10233 | 16036 | |||||||||||||

1997 | 4.75 | 160.5 | 10473 | 16400 | |||||||||||||

1998 | 5.15 | 163 | 10634 | 16660 | |||||||||||||

2000 | 5.15 | 172.2 | 11239 | 17603 | |||||||||||||

2001 | 5.15 | 177.1 | 11569 | 18104 | |||||||||||||

2002 | 5.15 | 179.9 | 11756 | 18392 | |||||||||||||

2003 | 5.15 | 184 | 12015 | 18810 | |||||||||||||

2004 | 5.15 | 188.9 | 12334 | 19307 | |||||||||||||

2005 | 5.15 | 195.3 | 12755 | 19971 | |||||||||||||

2006 | 5.15 | 201.6 | 13167 | 20614 | |||||||||||||

2007 | 5.15 | 207.3 | 13540 | 21203 | |||||||||||||

2008 | 5.85 | 215.3 | 14051 | 22025 | |||||||||||||

2009 | 6.55 | 214.5 | 13991 | 21954 | |||||||||||||

2010 | 7.25 | 218.1 | 14218 | 22314 | |||||||||||||

2011 | 7.25 | 224.9 | 14657 | 23021 | |||||||||||||

2012 | 7.25 | 229.6 | 14937 | 23492 | |||||||||||||

2013 | 7.25 | 233 | 15156 | 23836 |

**Related Book For**

## Statistics for Business and Economics

ISBN: 978-0321826237

12th edition

Authors: James T. McClave, P. George Benson, Terry T Sincich

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