Restoring the value of the minimum wage can be an effective way to reward work and help low wage workers support themselves and their families. Adjusted for inflation, the minimum wage was $10.86 an hour in 1968. Today it is just over $8.00 an hour. That means that while a full time minimum wage worker made over $21,000 a year in 1968, such a worker makes only $16,000 today.
Each proposal would increase the minimum in two or three steps to $10.50 or $11. To understand how close each proposal comes to restoring the value of the minimum wage, it is important to account for the effects of inflation. If costs are rising by 2 percent a year, then $10 next year will buy about the same amount of goods and services as can be bought for $9.80 this year. In other words, $10 next year will be worth about $9.80 in today's dollars -- because costs go up each year.
Using CBO inflation projections, we find that an $11 wage in 2016 would be worth $10.43 in today's dollars, and a $10.50 wage in that year would be worth $10.07 in today's dollars. If the minimum wage is not adjusted for inflation each year after the final step of an increase, then the value will decline each year the cost of living rises.
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