The minimum wage is worth less today than in 1968

Protesters call for higher minimum wage

WASHINGTON, D.C. - Restaurant workers in more than 100 cities nationwide participated in strikes and protests Thursday, demanding a higher minimum wage. The term “minimum wage” may conjure images of teenagers flipping burgers or delivering pizzas for pocket change, but in today’s economy, that’s no longer the reality.

The average minimum wage-earner is 35 years old. More than half work full-time and more than a quarter have children. The federal minimum wage today is $7.25 an hour, though it’s higher in some cities and states.

But when adjusted for inflation, the minimum wage in 2014 is actually $3.62 lower than it was at its high point in 1968. In 2014 dollars, the 1968 minimum wage was worth $10.87.  Not only was the adjusted minimum wage higher then, goods and services were also cheaper.

For example, in 1974, an hour of minimum-wage work earned workers enough to buy four gallons of gas. Forty years later, minimum wage-earners can buy just two gallons of gas with an hour of wages.

That means it’s more difficult for workers who earn minimum wage today, particularly those with families, to make ends meet.

(Click on graphic to see larger version.)

Graphic: Elizabeth Scheltens, Scripps News

 

In January, President Obama asked Congress to pass legislation that would raise the federal minimum wage to $10.10 an hour in his 2014 State of the Union address. A few months later, Senate Republicans voted against a bill which would have raised the minimum wage and peghed additional increases to inflation.

A majority of Americans, 73 percent according to a Pew Research poll, support raising the federal minimum wage to $10.10. The poll also found a significant split among Republicans on the issue. Among Republicans who agree with the Tea Party, 65 percent oppose raising the minimum wage, but among those who do not support the Tea Party, 65 percent are in favor of the increase.

David Cooper, a labor economist at the Economic Policy Institute, said there are a lot of members of Congress with close ties to CEOs who do not want to see a wage increase, even though the public supports it.

“It’s a question of translating public will into congressional action,” Cooper said.

In an Op-Ed published last March in the Los Angeles Times, Kevin Hassett and Michael Strain of the American Enterprise Institute wrote that raising the minimum wage would make it more expensive for businesses to hire young workers, and wouldn’t do much to alleviate poverty since “many people who live in poverty do not work.”

But Cooper cites research from economists at U.C. Berkeley that shows the opposite—in the fast food industry alone, U.S. taxpayers are spending 7 billion a year on public benefits like food stamps for workers who don’t earn enough to make ends meet.

Other critics of the increase, like James Sherk at the Heritage Foundation, argue that it would lead to significantly higher prices, particularly in the fast-food industry.

Cooper says that when businesses face higher costs, they can adjust in a number of different ways. Researchers at the Center for Economic and Policy Research found when the minimum wage has increased, the result was lower turnover among employees, lower wages for higher-earning workers, and price increases in the 1-3 percent range. 

Some companies are moving ahead with higher minimum wages even without a federal law in place. Gap, Trader Joe’s, QuickTrip and Costco all pay their workers $9 or more, and some even offer paid vacation, health insurance and other benefits. 

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