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[IWS] CRS: INFLATION AND THE REAL MINIMUM WAGE: A FACT SHEET [21 June 2013]
IWS Documented News Service
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
Congressional Research Service (CRS)
Inflation and the Real Minimum Wage: A Fact Sheet
Craig K. Elwell, Specialist in Macroeconomic Policy
June 21, 2013
[full-text, 4 pages]
The Fair Labor Standards Act (FLSA) of 1938 established the hourly minimum wage rate at
25 cents for covered workers.1 Since then, it has been raised 22 separate times, in part to
keep up with rising prices. Most recently, in July 2009, it was increased to $7.25 an hour.
Because there have been some extended periods between these adjustments while inflation
generally has increased, the real value (purchasing power) of the minimum wage has decreased
substantially over time.
The peak value of the minimum wage in real terms was reached in 1968. To equal the purchasing
power of the minimum wage in 1968 ($10.70), the current minimum wage’s real value ($7.90)
would have to be $2.80 (or 26%) higher. Although the nominal value of the minimum wage was
increased by $5.65 (from $1.60 to $7.25) between 1968 and 2009, these legislated adjustments
did not enable the minimum wage to keep pace with the increase in consumer prices, so the real
minimum wage fell.
Table 1. The Statutory Minimum Wage, Hourly Earnings, and Inflation
(real values expressed in May 2013 dollars)
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