The low wage economy

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The minimum wage reached its (inflation-adjusted) historic high in 1968, when it was raised from $1.40 to $1.60 per hour.  Adjusted for inflation using the BLS online inflation calculator that would come to $10.55 per hour in 2012 dollars. That $10.55 figure is the focus of a nationwide campaign organized by the National Employment Law Project (NELP).  In today’s political climate it would certainly be a major accomplishment to achieve a $10.55 minimum wage. 

But $10.55 is still far too low. Using 1968 as our benchmark for the minimum wage implies that low-wage Americans today should be making just as much as low-wage Americans were making 44 years ago.  That benchmark is — frankly — ridiculous. Can you imagine Americans of 1968 settling for a minimum wage standard of living that had been set based on 1924 standards?  What about 1880 standards?  At some point we should expect low-wage workers to start living better than they used to.  Don’t low-wage Americans deserve to live in the 21st century, not the mid-20th?

A better way to update the minimum wage is to benchmark it to personal income growth in the economy as a whole. Per capita real personal income excluding current transfer receipts — that is, the personal income earned in the economy, excluding Social Security and other government programs, adjusted for inflation — has grown by 100.6% since 1968. In other words, the NELP has it too low — by half.  If our standard for minimum wages had kept pace with overall income growth in the American economy, it would now be $21.16 per hour.

The Minimum Wage Is Stuck at $7.25; It Should Be $21.16 -- or Higher