State of Working America preview: The declining value of minimum
wage
November 17, 2010
The minimum wage is not worth nearly as much as it was decades ago. The
Figure, from EPIfs forthcoming State of Working
America Web site, shows the inflation-adjusted value of the minimum wage
since 1960, in 2009 dollars. When adjusted for inflation, the minimum wage was
worth $8.54 per hour in 1968, compared to the current minimum wage of $7.25 per
hour. Based on a typical, 2,000-hour work year, the 1968 inflation-adjusted
minimum wage would equate to an annual salary of $17,080 per year, versus
$14,500 for todayfs minimum wage. (The Figure shows a 2009 minimum wage of $6.84
because the minimum wage was increased in the middle of that year.)
Although each legislated increase in the minimum wage has served to increase
its value, the Figure shows these increases have generally been
short-lived, with inflation naturally eroding its purchasing power over time. As
a result, the current value of the minimum wage is well below its historic peak
in the late 1960s. EPIfs 2009 paper Fix
It and Forget It notes that increasing the minimum wage
stimulates the economy by giving workers more spending power. It proposes
amending the minimum wage law to guarantee a consistent wage standard that will
ensure that it keeps up with inflation and overall wage growth.
EPIfs latest edition of The State of Working America will be
published online in January.
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