Minimum wage and a regular citizen can create this

by Noni Mousa

Hmmm. $13 per hour minimum wage? I am CERTAIN that those dollars wouldn’t go into savings — instead they would go into paying bills and buying stuff, probably more pricey stuff than dollar store gimcrackery.

Certainly it appears to be hard on employers. But I wonder how much of this is a problem built up over the past 30 years, with unsustainable wages now structured into business models. Suppose John Doe Jr. never left home, but lived comfortably in the basement with his wife and family (it’s a big basement), then his “business model” would not include rent. When the widow Doe died and the will left the estate to her cats, John would be in for a shock.

My minimum wage job in 1972 in Minneapolis paid $2.65 per hour. The Federal Reserve site provides a handy calculator for CPI over time (here

I plugged in the numbers, and this is what I got:

If in (year)1972
I bought goods or services for $2.65,

then in (year) 2008
the same goods or services would cost $ 13.67

So minimum wage today is less than half of what it was in the early 70s, in terms of dollar value.

This might mean that in 1974 I was wildly overpaid. That is not my recollection. But apparently many others had it worse.

Here are Federal statutory minimum wage rates since 1955 (

Here’s a few data points from that chart:

Year stat MW Constant $2008

1972 $1.60 $6.01
1977 $2.30 $5.95
1982 $3.35 $5.78
1987 $3.35* $4.63
1992 $4.25 $4.75
1997 $5.15 $5.03
2002 $5.15* $4.49
2007 $5.85 $4.41

(*) I find it interesting to note that there were two very long stretches of time, from 1981 to 1989, and then from 1997 to 2006, where minimum-wage wages remained flat, first at $3.35 (falling in value from $5.78 to $4.24 over that time) and then at $5.15 (falling in value from $5.03 to $4.04 over that time).

I charted the federal figures this morning and it presents an interesting picture. The minimum wage was put in place in 1955. It rose in a very jagged manner from 1955 to 1968, reaching a peak in $1996 of $7.01 per hour. then it fell to about six dollars an hour, remaining there through most of the 70s. From 1980 to about 1990 the statutory rate was held steady, and inflation pushed the minimum wage into the $4-$5 an hour range, where it has remained ever since.

comparing this line of minimum wage buying power to the other line showing the statutory rate shows something else — around 1980, the pattern of statutory changes changed dramatically. From 1955 to 1980, minimum wages were raised every couple of years, yielding a gradual rising line, with one plateau corresponding to the fall which followed the $7.01 peak — a peak which has never been remotely approached since then.

But beginning in 1980, the statutory minimum wage adjustments assumed a pattern of plateaus, each one lasting five to 10 years. After about 1985, the buying value of the minimum wage zigzags between four and five dollars an hour — strangely, the five dollar mark after about 1985 looks exactly like a ceiling, and a four dollar mark like a floor.

One more point — the buying value of the US statutory minimum wage hit its absolute lowest point in 2006.

Noni is a regular person who has reseached this for a post, which means it is entirely possible for any citizen. (rdan)