Question

in 2014 approximately 2% of hourly rate workers were being paid at the federal minimum wage level. Would federal legislation to increase the minimum wage have a greater effect on the mean or the median income of all workers? Explain

Answer 1

The median is the 50 percentile mark of all the wages paid out. We are given that minimum wages are being levied to the top 2% of all workers.In such a case, increasing the minimum wage will have no effect at all on the median. Reason being, we are only concerned with the half-way mark, which shall not get affected. The change is occuring only to the top 2 percentile of wages, which in no way affects the median. In fact, even if 49.99% of workers were being paid at the federal minimum wage level and the legislation was brought in, the median would not have changed.

Hence, it is quite evident that the federal legislation would only affect the mean income of all workers. We are not concerned with its numerical value, but all we know is that the legislation would definitely increase the mean income, however small that may be, but shall not affect the median at all.