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WASHINGTON – There is more to the dwindling purchasing power of today’s federal minimum wage of $7.25 an hour* than simply not keeping up with inflation. It is also not keeping up with productivity growth. Until 1968, the minimum wage rose in step with productivity growth (and inflation too), then stalled. Today, the yawning gap between the two is dramatic. If the minimum wage kept pace with productivity growth since 1968 it would be over $24 an hour today, as shown here.
Graph-If the minimum wage kept up with productivity it would be $24 an hour today
If we want workers at the bottom to share in the overall improvement in society’s living standards, the minimum wage should rise with productivity, as well as inflation. In today’s CEPR Blog, Senior Economist Dean Baker points to what caused that yawning gap between the two. But, spoiler alert, it was not the fault of workers; it was the fault of policies designed to effectively devalue workers’ skills.

*The Federal minimum wage of $7.25 per hour has not increased since July 2009. However, some states and localities have raised their own minimums.