Federal Minimum Wage at $7.25/Hour – Chart of the Day
In case you forgot, today, July 24, 2009, the Federal minimum wage goes up to $7.25/hour from last year’s $6.55/hour.
Following is a plot of historical Federal minimum wages from 1939 to 2009 (the blue line). In 1939, the minimum wage was only 30 cents. The next adjustment didn’t come until 1945 when the minimum wage was increased to 40 cents. Since then the government has changed the minimum wage regularly, especially between 1968 and 1981, when the wage was increased almost annually. The longest gap was between 1997 and 2007. In 2007, the rate went up to $5.85/hour from $5.15/hour in 1997.
Also shown in the following plots are two inflation adjusted minimum wages (the inflation data is from Bureau of Labor Statistics): The red line is based the 1939 wage and the green line is based on the 1968 wage. As you can see, if the minimum wage is adjusted based the wage of 1939 (30 cents), then the actual wage is much higher than the inflation adjusted one (the wage would be $4.64 in 2009). However, if the wage is adjusted based on the 1968 wage ($1.15), then the inflation adjusted wage actually matches the real wage pretty well.
While the increase in Federal minimum wage will help millions of workers who earn minimum wages from their jobs, there are quite some debates on whether such an increase comes at the right time or not and whether it will help or hurt the economy. Supporters of the increase say that as many people are struggling to meet ends need in this deep recession, the increase will help millions to pay their bills and the wage raise will boost consumption thus help the economy. For people who say the increase comes at a really bad time, the argument is since many business owners have already been hit badly by the financial crisis and economic downturn, the increase in minimum wage can only put more burden on businesses which may reduce work hours or fire workers to lower cost, eventually hurting those people it intends to protect and the economy as well.
So what do you think? Does the increase in minimum wage come at a good time? Will it help or hurt the economy that has lost millions of jobs since the recession began?
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