- Cafe Hayek - https://cafehayek.com -

The Real Value of the National Minimum Wage In the U.S. Is Nowhere Close to Being Historically Low

Tweet [1]

Here’s a letter to the New York Times:

In his applause-worthy critique of Donald Trump’s economics, Steven Rattner commits some errors, the most notable of which is his suggestion that the minimum wage should be raised because it “is well below historical levels, after adjustment for inflation” (“Trump’s Economic Muddle [2],” August 14).

First, the main economic case against the minimum wage is that it prices some, and perhaps many, low-skilled workers out of jobs.  If this case is correct – and there’s much economic logic and evidence to support it [3] – then the minimum-wage’s current level relative to its historical levels is irrelevant.

Second, as shown by this chart from the Pew Research Center [4] (using data from the Bureau of Labor Statistics), it’s untrue that the real value of today’s minimum wage “is well below historical levels.”

Adjusted for inflation, today’s minimum wage is higher than it has been for about two-thirds of its history.  Save for the years of the recent Great Recession (hardly years for which we would want an especially high minimum wage!), one must go back to the early 1980s before encountering a time when the real value of the minimum wage was as high as is the real value of the minimum wage today.  And while it’s true that for most (although not all) of the 15-or-so-year period between the mid 1960s and the early 1980s the real value of the national minimum wage was higher than is the real value of today’s minimum wage, at no time from 1938 – the year of its enactment – until the mid-1960s was the real value of the minimum wage as high as it is today.  Indeed, for the bulk of the minimum-wage’s first two and a half decades, including the often-heralded high-growth 1950s, the real value of the minimum wage was lower than today’s value by a significant amount.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030