Paper on Federal Minimum Wage

Paper on Federal Minimum Wage

Since 1950 the Federal Minimum wage has steadily increased. Using the

CPI, we can compare the current year’s dollar to that of 1950 and 2014. Utilizing this information we can look at the real cost of inflation.

In the graph above we are comparing the federal minimum wage for a given year, compared to 1950 FMW adjusted for CPI to the current year. In order to calculate the 1950 FMW adjusted for CPI to the current year (column 4, table 1) we take the current years CPI divide it by 1950’s CPI and then multiply it by the federal minimum wage of 1950. To calculate the Current FMW adjusted to 2014 $ (column 5, table 1) take the current year’s federal minimum wage and multiply it by 2014’s CPI divided by the current year’s CPI.

In 1960 the federal minimum wage rose above the 1950 FMW adjusted for CPI to current year. Around 1984 though, federal minimum wage dropped below the 1950 FMW adjusted for CPI to current year. Federal Minimum wage and 1950 FMW adjusted for CPI adjusted to current year remained relatively close until around the year 2000 when federal minimum wage dropped drastically below 1950 FMW adjusted for CPI to current year. We can compare the buying power of 1950’s minimum wage to that of the current year. Between 2000 and 2008, the buying power of 1950’s minimum wage adjusted to the current year was greater than the federal minimum wage.

Using the 2014’s CPI we can adjust a past year’s minimum wage to reflect what it would be in 2014. In the graph above, federal minimum wage remains well below the adjusted FMW to 2014 dollars until the gap begins to close around 2007. Using 2014’s CPI, a person would earn well over the federal minimum wage for any given year.

In the graph above we are comparing FMW adjusted using the CPI of 1950, to the FMW using the CPI of 1968. The 1968 adjusted FMW is well above that of the 1950 adjusted FMW. The adjusted FMW using 1950’s CPI is a better reflection of the actual minimum wage of a current year.

In 2007 the CPI jumped to 207.3 from 201.6 in 2006, which is a pretty substantial increase. Looking at table 1 the adjusted FMW for 1950 is $6.45 and the adjusted FMW for 2014 is $6.67 using the CPI of 2007. The actual federal minimum wage in 2007 was $5.85. Looking at both of the adjusted FMW (1950 and 2014), I believe that the federal minimum wage was too low, and should have been increased more.

In 2008 the FMW increased to $6.55 from $5.85 in 2007. The FMW increased by almost 12% from 2007 to 2008. In 2009 the FMW increased to $7.25 from $6.55 in 2008. This represents an almost 11% increase from 2008 to 2009. But, in 2009 the CPI decreased to 214.5 from 215.3, which represents