The minimum wage serves as a critical benchmark for ensuring a basic standard of living and reducing income inequality. However, its failure to keep pace with inflation has widened the gap between the cost of living and the income of millions of Americans. According to Stocklytics, the current minimum wage of $7.50 per hour has the lowest purchasing power since 1945.
Edith Reads, a financial analyst at Stocklytics, said, "The value of the minimum wage in America has diminished due to congressional inaction. The problems lie in the lack of legislative action to adjust the wage floor for inflation and changing economic realities.
Minimum wage continues to fall
America has experienced the longest period without an increase in the federal minimum wage. In 2023, the federal minimum wage was 40% lower than it was in 1970, when it was just $1.6. This disparity has led a dozen states, cities, and the District of Columbia to adjust their minimum wages to 15% per hour. However, more than 25 states have passed laws prohibiting local governments from raising the minimum wage.
The Raise the Wage Act of 2021 proposes to raise the national minimum wage to $15 by 2025. Enactment of this legislation would be a major victory for more than 30 million workers in the United States.
The potential impact of this Act is profound, particularly for marginalized communities, with approximately 31% of Black workers and 26% of Hispanic workers set to benefit from the wage increase. Such an increase will have immense results, such as lifting 3.7 million people out of poverty.
How to move forward
The minimum wage needs to be addressed in every way possible. The government should enact pro-worker policies that take into account their concerns. At the same time, the private sector must also ensure that it sets meaningful minimum wages for its employees. One critical step the government should take is to increase the minimum wage to reflect the current cost of living. Enacting the proposed 15 percent will provide much-needed relief to low-wage workers and, in the process, spur economic growth.
In addition, policymakers could work on legislation to index the minimum wage to inflation, ensuring that it keeps pace with the rising cost of living. Such a proactive approach would ensure that workers' purchasing power is not affected by inflation.
Source: Stocklytics.
