More than 100 House Democrats introduced a bill Thursday to raise the minimum wage. Rep. George Miller’s proposed legislation would raise the minimum wage to $9.80 over three years, 85 cents per year, then link it to inflation, so that raising it wouldn’t have to be a giant political fight every few years. Tipped workers, who haven’t seen their $2.13 minimum wage increased since 1991, would get 85 cent raises until the tipped minimum was 70 percent of the full minimum wage.
If you work at the current minimum wage for 40 hours a week, 52 weeks a year, with no time off at all, the $15,080 you earn puts you $50 below the poverty threshold for a family of two. That—and the fact that many minimum wage employers keep workers at part-time levels—is why so many working people are forced to rely on the Supplemental Nutrition Assistance Program and Medicaid and other aid programs. It shouldn’t be controversial to say that if you work, you shouldn’t be poor. But to today’s Republican Party, that counts as a radical statement.
Okay, here’s the thing about the minimum wage: raising it causes inflation to increase, because inflation is directly tied to how much money the general populace has (aka the money supply). When the money supply increases, inflation increases; this is why inflation is generally inversely linked with unemployment (except in cases of stagflation but that’s a very rare occurrence; the only time it has happened in American history is the Carter presidency). As more people are employed, they have more money, and so inflation increases. If you raise the minimum wage, more people will have more money, yes, but inflation will increase, devaluing that money. And if you link the minimum wage to inflation, it is quite possible that inflation could spiral out of control. Here’s what I mean.
Minimum wage goes to $9.80. Because of this, inflation increases, since the money supply has increased. So, minimum wage increases. So, the money supply increases, leading inflation to increase. So, minimum wage increases. So, inflation increases. So, minimum wage increases, so inflation increases, so minimum wage increases, and pretty soon we end up having to take wheelbarrows full of cash to the store to buy a loaf of bread. We would be making more money, but we wouldn’t be able to do as much with it. Economics 101.
Okay, here’s the thing, the purchasing power of one making minimum wage is 30% lower today than it was in 1968.
The minimum wage was $1.60 an hour in 1968, that’s roughly $10 an hour in 2012 dollars.
Inflation has outpaced minimum wage, so inflation happened anyway, and the result has been that the minimum wage is actually lower now than it was in 1968.