NCPA - National Center for Policy Analysis

Minimum Wage Fell In Real Terms

July 19, 2001

Over the past 20 years, the concept of a minimum wage has become tarnished. Established during the New Deal, the minimum wage was once viewed by both political parties as an instrument of economic justice. Now it is seen by much of official Washington as an impediment to market operations.

The growing disdain for the minimum wage -- which now stands at $5.15 an hour -- is demonstrated by how policy-makers have treated it.

  • From 1950 through 1982, the minimum wage was allowed to fall below 45 percent of the average hourly wage in the U.S. in only four separate years.
  • But since 1982, the minimum has never reached 45 percent -- and it currently stands at 36 percent of that benchmark.
  • Even using a conservative measure of inflation, the minimum throughout the 1960s and 1970s was consistently worth more than $5.50 an hour -- and frequently more than $6 -- in today's terms.
  • After 1980, its value plummeted -- sinking to less than $4.50 as President Reagan left office.

In 1980, more than 9 percent of hourly employees earned the equivalent of exactly $5.15 an hour. Today, only about 1 percent does.

More than 11 million workers -- or about 15 percent of the hourly labor force -- earn from $5.15 to $6.64. Eighty percent of those earners are white and 51 percent of them are less than 25 years of age.

Source: Rick Wartzman, "How Minimum Wage Lost Its Status as a Tool of Social Progress," Wall Street Journal, July 19, 2001.

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