High inflation leads federal minimum wage to reach lowest value since 1956, report finds

Personal finance

An activist holds a placard demanding a $15 an hour minimum wage and tips for restaurant workers during a rally to call for additional relief for restaurants in Washington, D.C., on Feb. 8, 2022.
Mandel Ngan | AFP | Getty Images

Record high inflation has pushed the value of the federal minimum wage down to the lowest level in 66 years, according to a new analysis from the Economic Policy Institute.

That minimum federal hourly rate of $7.25 per hour is worth less than any time since February 1956, according to the Washington, D.C., think tank.

The federal minimum wage in 1956 was 75 cents, equivalent to $7.19 in June 2022 dollars.

The analysis is based on consumer price index data for June, in which the inflation rate came in hotter than expected. The index, which measures the change in prices over time for consumer goods and services, soared 9.1% from the year-earlier period.

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The $7.25 federal minimum wage has not changed since July 2009 — the longest time without a new federal minimum wage increase since Congress established it in 1938, according to the institute.

As the cost of living goes up, raising the minimum wage is one way Congress can help workers. However, recent efforts stalled when they were deemed ineligible for inclusion in coronavirus relief legislation.

“The minimum wage is one of the key policy tools in the U.S. to raise people’s earnings at the bottom of the wage distribution,” said Ben Zipperer, economist at the Economic Policy Institute.

Declining earning power

A restaurant worker at a May 26, 2021 “Wage Strike” demonstration organized by One Fair Wage in Washington, D.C.
Anna Moneymaker | Getty Images News | Getty Images

A worker earning the minimum wage today makes 27.4% less than those in July 2009, adjusted for inflation, according to the findings, or 40.2% less than in February 1968.

That date marked the historical high point for the minimum wage due to changes enacted by Congress that made it so more industries, particularly those that typically employed Black workers, were covered by the minimum pay rate.

“The higher minimum wage at that time was a huge victory of the civil rights movement,” Zipperer said.

The value of the minimum wage has since diminished due to congressional inaction, he added.

Specific features of the current federal minimum wage have also contributed to its loss in value.

The minimum wage is not indexed to inflation, which means it does not increase every year. Had Congress addressed that in 2009, the minimum wage would be closer to $10 an hour today, Zipperer said.

Moreover, the federal tipped minimum wage, which applies to restaurant and other workers, has been $2.13 per hour for more than 30 years.

Efforts to raise the minimum wage have happened at the state and local levels. Connecticut, Nevada and Oregon, as well as Washington, D.C., boosted minimum wages this month. Ballot initiatives to raise minimum wages typically always pass due to the popularity of the move, according to Zipperer.

Meanwhile, companies like Amazon, Target and Walmart have also stepped up and established higher minimum pay rates for employees.

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