Tags: Minimum Wage | minimum wage | real value | changed

How Has the Real Value of the Minimum Wage Changed Since Its Introduction?

By    |   Monday, 06 Apr 2015 03:39 PM

The federal minimum wage went into effect in 1938 at 25 cents an hour, but the figure is almost meaningless given the changes and inflationary periods over time. The rate stands at $7.25 an hour with proposals of increasing it to $9 or $10. Some states have higher rates and may raise it according to inflation and cost of living increases.

The federal minimum wage has never been adjusted for inflation, but how much its real value has changed depends on observers and researchers. According to Think Progress, the minimum wage would be more than $10 an hour, about the rate that's being proposed, if it kept up with inflation since the 1960s.

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The minimum wage would be at $10.56 if it had kept up with inflation since 1968 and that increasing it to $9 an hour would restore it to an inflation-adjusted value to meet the 1981 figure, according to the White House. The minimum wage has lost about 30 percent of its value in recent decades, CNN reported.

When the federal minimum wage was increased from $5.15 to $7.25 in 2009, it reached its highest value in real terms since 1981, according to the Economic Policy Institute. But it was still 7.8 percent less than it's 1967 value in 2011 dollars.

The declining value of the minimum wage in real terms has contributed to wage stagnation and wage inequality between people in the top income levels and those at middle or lower-income levels, according to the Economic Policy Institute. Raising the federal minimum wage to appropriate levels to reverse the trend of a lower value minimum wage is what some propose.

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The real value of the 2009 minimum wage hike decreased by eight percent by 2013, according to Business Insider. They estimate, the 1960 minimum wage of $1 was equal to $8 in 2013 dollars. The purchasing power peaked at $10.74 an hour in 1968 and has been declining ever since, reports Business Insider. Some states index their minimum wage to adjust for inflation, and some recommend the federal government do the same.

A family of four would require about $11 an hour for a full-time worker in 2011 to stay out of poverty, according to The Huffington Post, which also reported that the minimum wage would be $21.72 an hour if it had kept up with inflation for the past 50 years.

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The federal minimum wage went into effect in 1938 at 25 cents an hour, but the figure is almost meaningless given the changes and inflationary periods over time.
minimum wage, real value, changed
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2015-39-06
Monday, 06 Apr 2015 03:39 PM
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