The Problem Between Inflation and Minimum Wage

By Olivia Pocat

Inflation has caused prices to go up in the United States since the beginning of the monetary system. Dispersed economic recessions have contributed to an increase in the value of money, but a persistent pattern has been abundantly clear: the value of money has dropped. Since 2000, the value of a dollar has dropped by 38%, causing prices to increase and salaries to change. Although the minimum wage has risen, it still doesn’t compare to the rise in inflation present today. Minimum wage workers 10 years ago were earning 17% more money compared to inflation than they were earning in 2019. The average value of federal minimum wage has been the lowest it’s been in ages. According to the Economic Policy Institute, the peak value of minimum wage compared to inflation was in 1968. 29 US states have not seen an increase in the value of their minimum wage from 2010 through 2018. Another study from the Center for Economic Research and Policy Research (CEPR), says that if minimum wage has kept up with inflation since 1968, the federal minimum wage would be $24 (as of 2020). The minimum wage should be raised, but it can’t immediately be raised to $24. This would have an outstanding negative impact on the economy. However, states have slowly raised their minimum wage and increased people’s salaries with no measurable negative impact. In 2022, the average increase to the minimum wage was $0.51. Although this is an increase, it doesn’t compare to what the minimum wage should be. An argument persists over whether the raise of minimum wage leads to an increase in inflation. Investopedia highlights that economists have had an ongoing debate over this topic, evidence pointing to inflation not increasing after the raise of minimum wage. This article also highlights how fast-food workers have been pushing for a minimum wage of $15 for the food industry, which would allow many workers to make a more livable salary. Due to the price of inflation, the minimum wage currently present does not satisfy a livable salary, which evidently shows a clear problem between minimum wage and inflation.