Wage hike activists have argued that the current federal minimum wage has fallen to its lowest purchasing power in decades because it has not been increased since 2009. However, inflation data show this claim is misleading. Instead, economists find raising minimum wages will have serious negative consequences for workers and families.
The current federal minimum wage is higher than if the minimum wage had been adjusted for inflation all along.
If the original federal minimum wage had been adjusted for inflation since it was enacted in 1938, it would equal roughly $5.94 today. The current federal minimum wage of $7.25 is approximately 22% higher than that inflation-adjusted value.
This reflects the fact that the federal minimum wage growth since its inception has already outpaced inflation.
Steep minimum wage proposals aren’t based on economic data.
There’s no economic precedent for a $15 or higher wage. Even organizers for the “Fight for $15” campaign have acknowledged that the movement’s chosen wage target was essentially random, not derived from a precise economic calculation.
During an organizing meeting, a director with the SEIU’’s Fight for $15 campaign acknowledged the lack of a precise economic basis for the movement’s signature wage target, saying “Ten dollars was too low, twenty dollars was too high, so we landed at fifteen.”
A majority of economists oppose large federal minimum wage increases, citing concerns about their economic consequences.
In an EPI survey of 166 American economists, three-fourths opposed proposals to raise the federal minimum wage to $15 or higher, citing concerns that such increases would produce economic consequences. Economists report minimum wage hikes up to $15 or higher will result in reduced employment opportunities, especially for young and lower-skilled workers, and higher costs for small businesses making it harder to operate. The nonpartisan Congressional Budget Office estimated that the last attempt to raise the federal minimum wage to $15 per hour could cost as many as 2.7 million jobs.
Almost 60% of surveyed economists also agreed that a $15 minimum wage would increase the cost of living, with even greater concern for higher wage proposals. Research also supports these concerns, with decades of economic studies finding that every $1 increase in the minimum wage is associated with consumer price increases averaging about 5.5%.
Conclusion
The narrative that the federal minimum wage has been eroded by inflation is not based on actual inflation data. The current federal minimum wage currently exceeds what the original 1938 minimum wage would be if it had kept pace with inflation.