The Minimum Wage Is Stuck at $7.25; It Should Be $21.16 — or Higher

America’s minimum wage was raised to $7.25 per hour on July 24, 2009.  It’s still there.  Unlike almost all other federal benchmarks, the minimum wage is not updated for inflation.

The minimum wage reached its (inflation-adjusted) historic high in 1968, when it was raised from $1.40 to $1.60 per hour.  Adjusted for inflation using the BLS online inflation calculator that would come to $10.55 per hour in 2012 dollars.

That $10.55 figure is the focus of a nationwide campaign organized by the National Employment Law Project (NELP).  In today’s political climate it would certainly be a major accomplishment to achieve a $10.55 minimum wage.  But $10.55 is still far too low.

Using 1968 as our benchmark for the minimum wage implies that low-wage Americans today should be making just as much as low-wage Americans were making 44 years ago.  That benchmark is — frankly — ridiculous.

Can you imagine Americans of 1968 settling for a minimum wage standard of living that had been set based on 1924 standards?  What about 1880 standards?  At some point we should expect low-wage workers to start living better than they used to.  Don’t low-wage Americans deserve to live in the 21st century, not the mid-20th?

A better way to update the minimum wage is to benchmark it to personal income growth in the economy as a whole.

Per capita real personal income excluding current transfer receipts — that is, the personal income earned in the economy, excluding Social Security and other government programs, adjusted for inflation — has grown by 100.6% since 1968.

In other words, the NELP has it too low — by half.  If our standard for minimum wages had kept pace with overall income growth in the American economy, it would now be $21.16 per hour.

Yes, had the US income distribution and US standards of decency remained exactly what it was in 1968, the minimum wage would now be $21.16 per hour.

I grew up on the idea that America stood for progress, continual progress toward a better society.  Even a $21.16 minimum wage wouldn’t represent progress.  It would mean socially standing still, just with better technology and higher productivity levels.  Progress would mean a minimum wage in excess of $21.16 per hour.

Of course, a minimum wage in the mid-20s is politically inconceivable.  But it is technically, economically, and socially realistic.  The only reason we can’t have it is the greed of those at the top and the intransigence of those at the near-top.  The only reason we can’t have it is that we don’t want it.

We are not the Americans of 1968.