Periodically, some politician decides that we need a shiny new minimum wage. Yes, their proposals always move in the same direction: higher. The latest charlatan is California Rep. Ro Khanna.[1] He teamed up with Rep. Della Ramirez[2] to introduce the “Living Wage for All” act. Parenthetically, Democrats are very bad at creating names for their bills that have good acronyms. LWfA? LWA? Unpronounceable.
 Ro Khanna |
 Delia Ramirez |
Regardless, they’ve learned some math. More’s the pity.
Ryan Bourne
Mr. Bourne is the latest to contribute to the minimum wage literature. He works at the Cato Institute where he holds the R. Evan Scharf Chair for the Public Understanding of Economics.
Mr. Bourne has been posting on X for a while. He now owns and operates “The War on Prices,” a blog every economist should subscribe to. At least check it out.
He observes,[3]
That $25 per hour marketing is somewhat misleading, though. Their Living Wage for All Act would primarily set the minimum wage at two-thirds national median hourly earnings, subject to a phase-in cap not to exceed $25 by 2031.
See what I mean about learning math? An actual formula for adjusting the minimum wage! What could be better?
How about no minimum wage at all? More from Ryan:
[T]he Living Wage for All Act would raise minimum wages as high as 95 percent of local median wages in America’s most impacted MSAs. They wouldn’t be lifted up, so much as priced out.
Here’s Ryan’s estimate of what that means for the actual minimum wage:[4]
Figure 1 Living Wage for All Act would peg the federal minimum wage to two-thirds the national median. (click for larger image)
Remember, this is the minimum wage.
Those numbers should scare anyone who knows even the most basic economics. Inflationary? Maybe. At best, the cost increase would cause a series of one-time increases in the CPI as the higher cost rippled through the chain of production.[5]
Bourne then proposes an effective minimum wage (EMW) measure. He and Nathan Miller wrote “The $7.25 Minimum Wage Myth”.[6]
Understanding the evolution of the minimum wage that workers live under requires tracking changes across all these jurisdictions. This briefing paper attempts to do just that. It calculates the working-age, population-weighted effective minimum wage (EMW) and reports it as a national average EMW on January 1 and July 1 of each year since 2000, accounting for laws in the 30 states that have set the wage floor above $7.25 and the 74 substate localities that had higher local ordinances still. We also calculate metropolitan statistical area (MSA) EMWs from 2010 to 2025 and report MSA minimum wage bites (i.e., the minimum wage as a proportion of the median hourly wage) over time.[7]
That’s pretty good. I’ve long wondered if anyone was going to try to sort out the various state, county, city, and township wage regulations. This is a very good first try.
Once you have a measure, you should apply it. Bourne and Miller do just that, comparing the effective minimum wage with the CPI:
Figure 2 EMW since 2000 (click for larger image)
Also, the EMW has grown faster than the CPI since 2000.
Figure 3 EMW vs CPI (click for larger image)
Finally, the real Federal minimum wage (using BLS data) has fallen from $9.93 to $7.25 since 2000. But the real EMW has risen from $10.25 to $12.13. That’s … very different.
Figure 4 The Real Minimum Wage vs the EMW (click for larter image)
Conclusion
I’ve written about the minimum wage many times before (here and here and here). Mr. Bourne’s contributions advance the research significantly. Welcome to the party, pal. (Apologies to John McClane.)[7]
- D-CA 7th district ↑
- D-IL, 12th district ↑
- Bourne, Ryan and Nathan Miller, “Ro Khanna’s $25 Minimum Wage Bill.” Available at https://ryanbourne.substack.com/p/ro-khannas-25-minimum-wage-bill. Accessed July 11, 2026. ↑
- Bourne and Miller, $25 Minimum Wage, op. cit. ↑
- I’ve implicitly assumed businesses are not rational when it comes to pricing their products. If they were, they would raise price immediately to cover the anticipated increase in costs, then adjust them as the actual cost increases came in. I’ve assumed the equivalent of adaptive price increasing. See the literature on inflation expectations for a review. ↑
- CATO Institute, Briefing Paper No. 200, June 24, 2026. Available at https://www.cato.org/briefing-paper/725-minimum-wage-myth. Accessed June 11, 2026. ↑
For those interested in details of their methodology, here’s how they describe it (footnote links removed):
“This analysis tracks federal, state, and local changes to minimum wage ordinances (MWOs) in 131 relevant geographies over the 26-year period from January 1, 2000, to January 1, 2026 (Table A1, Appendix). Geographies include:
48 states with standard minimum wage laws;
3 geographies under Oregon’s tiered minimum wage law;
5 geographies under New York’s tiered minimum wage law;
Washington, DC;
61 cities with MWOs; and
13 counties with MWOs.
We report each geography’s mandated minimum—the greatest of any relevant city, county, state, or federal wage floor—as snapshots from January 1 and July 1 of each year, as these dates are when most MWO changes take effect. All inflation adjustments peg dollars to their January 2026 purchasing power using the Consumer Price Index (CPI).
We construct the same geographies’ populations using incorporated and census-designated places from the 2000 census and five-year estimates from the American Community Survey (ACS) for 2010–2024. Then, we weight each MWO by the working-age (16–64 years old) population living under it to calculate national and MSA-level averages of minimum wage levels.
Our analysis focuses on the typical minimum wage potential workers and employers can expect in each geography. To that end, we exclude from the analysis sector-specific minimum wages, those that apply only to city or state government employees, provisions offering longer phase-ins or exemptions for small businesses/youth employees or those requiring higher wages from “macro” employers,18 and carve-outs for tipped workers.”
7. Willis, Bruce, “Die Hard” (1988). Gordon Company/Silver Pictures for Twentieth Century Fox. John McTiernan, Director.↑
