This week marks the eighth anniversary of the last time the federal minimum wage was raised, from $6.55 to $7.25 on July 24, 2009. Since then, the purchasing power of the federal minimum wage has fallen by 12.5 percent as inflation has slowly eroded its value. However, this decline in the buying power of the minimum wage over the past eight years is not even half the overall decline in the minimum wage’s value since the late 1960s. As the figure below shows, at its high point in 1968, the federal minimum wage was equal to $9.90 in today’s dollars. That means that workers at the minimum wage today are paid roughly 27 percent less than their counterparts almost 50 years ago.
Measuring the minimum wage against changes in prices is only one way to think of where it could be today. Given growth in the economy and improvements in labor productivity over the past half century, the minimum wage could have been raised to a point considerably higher than its 1968 inflation-adjusted value. As the middle line in the figure shows, if the minimum wage had been raised since 1968 at the same growth rate as average wages of typical U.S. workers, it would be $11.62 today. (We measure wages here by changes in average hourly earnings of nonsupervisory production workers, a group that comprises roughly 80 percent of all U.S. workers and excludes highly-paid supervisors and executives.)
Chosen excerpts by Job Market Monitor. Read the whole story at Another year of congressional inaction has further eroded the federal minimum wage | Economic Policy Institute