Bloomberg News

Minimum Wage in U.S. Fails to Beat Inflation: Chart of the Day

December 28, 2011

(GRAPHIC: COD_MINIMUM_WAGE_122811. CHART OF THE DAY. Size: 3C X 4in. (146.0 mm X 101.6 mm) Available now.)

Dec. 28 (Bloomberg) -- Workers in the U.S. earning the minimum wage are worse off now than they were four decades ago.

The CHART OF THE DAY shows that after adjusting for inflation, the federal minimum wage dropped 20 percent from 1967 to 2010, even as the nominal figure climbed to $7.25 an hour from $1.40, a 418 percent gain.

The decline would have been worse if not for increases that took place from 2008 through 2010 in how much employers were legally obligated to pay. Combined with more stable consumer prices, those adjustments helped trim the reduction in earnings from 41 percent at the end of 2007, following a decade of no change in minimum pay.

“Hardship is increasing for lower-income levels, and the minimum wage reflects those at the lower end of the payroll spectrum,” said Ellen Zentner, a senior economist at Nomura Securities International Inc. in New York. “With those meager wages in place, it makes it hard to imagine families doing with even less.”

A jobless rate that has exceeded 8 percent since February 2009, the longest stretch of such levels of unemployment since monthly records began in 1948, is one reason why workers have little leeway to press for higher wages. Adding in part-time workers who would prefer full-time jobs, and discouraged workers who would take a job if one were available, pushes the rate up to 15.6 percent as of November.

The loss of better-paying manufacturing jobs in the last three decades and the growth of service industries may be another reason why wages have failed to keep up with inflation, Zentner said.

Eighteen states and the District of Columbia have minimum wages above the federal level of $7.25 an hour, which is just over $15,000 per year for a full-time worker. Eight states -- Arizona, Colorado, Florida, Montana, Ohio, Oregon, Vermont and Washington -- will increase their minimum wage by between 28 cents and 37 cents an hour on Jan. 1, according to the National Employment Law Project, a non-partisan, not-for-profit organization that conducts research on unemployment.

--Editors: Carlos Torres, Christopher Wellisz

-0- Dec/28/2011 22:28 GMT

To contact the reporters on this story: Bob Willis in Washington at bwillis@bloomberg.net; Ilan Kolet in Ottawa at ikolet@bloomberg.net

To contact the editors responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net; Alex Tanzi at atanzi@bloomberg.net


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