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Minimum Wage Review

(February 11, 2008) We do love numbers and charts. A blogger named Nickel over at has put together an historic review of the mimum wage. The comparison of projected annual incomes vs. the federal poverty level caught our eye:

The Federal Minimum Wage: Looking Back Over Time
The federal minimum wage was first enacted under Franklin Roosevelt in 1938. At that time, the minimum acceptable pay rate was set at $0.25/hour, though it's increased gradually over the years. In fact, just yesterday the federal minimum wage increased by $0.70, from $5.85/hour to $6.55/hour. As it turns out, however, just over half of all states were unaffected by this change since they already have state minimum wages in excess of the federal level.

While this increase in the minimum wage was a welcome change to some, other have argued that it's not enough, and still others have argued that the government shouldn't be setting the price of labor in the first place. Given the controversy, I thought that it would be interesting to look at minimum wage levels over the years to see how much things have really changed.

What follows is a graph of the federal minimum wage from 1938-2008, expressed both in terms of actual dollars and inflation-adjusted 2008 dollars*.

Chart by  

As you can see, while the minimum wage has increased just over 26-fold since its inception, actual buying power has fluctuated considerably over time. The real-world value of the minimum wage (expressed in 2008 dollars) peaked at $10.06/hour in 1968, and has been gradually tailing off in the years since then. That being said, it's still hasn't reached the levels seen back in the 1930s and 1940s.

As an aside, you can really see the insidious effects of inflation right around 1980, when actual wages were increasing every year, yet buying power was falling at the same time.

Another interesting way to look at these data is in the context of projected annual incomes vs. the federal poverty level. What follows is a graph of the annual income of an individual working full-time (2080 hours/year), again expressed in 2008 dollars. The dashed line reflects the 2008 poverty level for a family of three (e.g., a single parent with two kids).

Chart by

As you can see, the full-time income of a minimum wage worker eclipsed the current poverty level back in the early 1960s and hung on until the late 1970s, at which time it went into a prolonged slide.

So ... There you have it. A brief history of the minimum wage. As always, please feel free to share you thoughts on these data, or the minimum wage in general, in the comments section.

*Inflation adjustments were done using this CPI calculator.

Colleen Gildea

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