Economic Snapshot | Budget, Taxes, and Public Investment

The rise and fall of the minimum wage

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Snapshot for May 12, 1999

The rise and fall of the minimum wage

Discussion in Congress is again underway over whether to increase the federal minimum wage from its current level of $5.15 to $6.15 by September 2000. The data confirms that the proposed increase will ensure that those at the low end of the wage scale and those moving from welfare to work will receive a measure of the economic security enjoyed by other groups in the current recovery.

The figure below shows the inflation-adjusted minimum wage from 1955-2000 (projected). The figure clearly illustrates the sharp decline in the minimum wage over the 1980s, when Congress failed to adjust the wage floor for nine years. Even with the recent increases in the 1990s, the inflation-adjusted minimum is 19% below its 1979 peak of $6.29.

The dotted line at the end of the figure shows the impact of the new proposal. Without another increase, the real value of the minimum wage would fall to $4.90 (1998 dollars) by the year 2000 (according to inflation projections by the Congressional Budget Office). The proposed increase would restore the wage floor to slightly above its 1983 level, still leaving it 13% below the rate in 1979. (For more information about this proposal and the arguments against it, see EPI’s Issue Brief, The Next Step: The New Minimum Wage Proposal and the Old Opposition.)

Figure 1

Sources: Bernstein, Jared. The Next Step: The new minimum wage proposal and the old opposition. EPI Issue Brief #130. April 1999.

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