One of today’s most highly contested issues is the raising of the federal minimum wage. Many states and individual cities have already raised their minimum wage to rates exceeding the federal minimum, which is currently set at $7.25 an hour. The federal minimum wage has not been raised since 2009, and many argue against raising it further, citing the economic costs of doing so. The arguments against minimum wage are linked under Con 1 and Con 2 at the bottom of this post, as I chose to use this post to outline the math in support of raising the minimum wage on the grounds that its set value today has not kept up with the original value in terms of buying power and its feasibility as a minimum wage.
When one looks at money over time, inflation is not the only factor to take into account. Many things factor into how currencies change over time and can change the purchasing power of a dollar or any other currency, which is how much is required to pay for a certain service, buy a certain good, or maintain a certain standard of living. This purchasing power calculator shows how the minimum wage in 1938 compares to the equivalent purchasing power today if you input 1938 and 2014 for the years and $0.25 for the dollar amount. When one takes into account how the costs of commodities and other necessary aspects of life have risen, it is apparent that the minimum wage has not kept up. I will look at the cost of college tuition and rent in this post.
The cost of college tuition alone has skyrocketed in the past thirty years. The average cost of a public four year college has gone up by as much as 34% in a five-year period. In 2014 dollars, tuition has experienced an increase of 225% from $2,810 in 1984-85 to $9,139 in 2014-15. The minimum wage in 1984 was $3.35, and assuming 16 weeks in a semester and two semesters, one would have to work 23 hours a week to cover the cost of tuition. This a lot to work as a full-time student, but not as bad as the 40 hours a week needed in 2014. Keep in mind that this estimate is based solely on tuition, and not on room and board, books, or other expenses. In today’s world, college is fundamental to getting competitive jobs, and though scholarships, financial aid, and student loans are available, the fact remains that the price of college tuition has far surpassed the minimum wage, which is what most college students earn.
In Tennessee, the median cost of rent in 1940, two years after the establishment of a minimum wage, was $15 a month. Since the minimum wage was established at $0.25, one would have to work 60 hours a month just to pay for rent. In 2000, Tennessee’s median rent cost was $505, and the minimum wage $5.15 an hour. This means that one would have to work for 98 hours a month to pay for their rent. These numbers do not take into account income taxes or the hours needed to pay for everything else a person needs to support themselves (and others in most cases). All rents are taken from the US Census Bureau.
All past minimum wages are calculated using CNN’s Minimum Wage Since 1938 graph
History of the Minimum Wage was my basis for the history of the minimum wage in the US.