This post is a continuation from Part I. If you wish to read the first post, click here.
There are several columns in this report as follows:
Analysis
Data and Methodology
Two data points were gathered from 1938 to 2021; Federal minimum wage and inflation rate (Consumer Price Index). The analysis was rather simple -- using the CPI rate and impute the minimum rate over time. The outcome? To determine an imputed minimum wage rate over time as a comparison to the current hourly rate.
For simplicity, the analysis was shown from 1960. To learn more, click these terms (CPI and How To Calculate CPI).
The analysis (in PDF form) can be viewed clicking here. You are welcome to cite or discuss this analysis by mentioning/crediting the author.
Analysis Columns
- Year
- Minimum Wage: It is assumed to have been effective as of the beginning of the year. Wage Table
- Inflation Rate (CPI): Per the U.S. Bureau of Labor Statistics (BLS). Note: Some years were less than zero (deflation). CPI Table
- Inflation Rate Amount: The minimum wage increase per the CPI for that year. The calculation was based on the assumption that the minimum wage and CPI began in January. In 1975, based on $2.10 and 9.10%, the imputed increase of 19 cents.
- Adjusted Minimum Wage: The sum of the minimum wage and the inflation amount.
- Adjustment w/No Decrease: In those years that had negative CPI, the adjustment amount was calculated as zero. The remaining positive CPI adjustment amounts calculated as normal.
- Adjusted Minimum Wage: The sum using the second variation of adjustment.
- Adjustment w/No Decrease and 125%: For all postiive CPIs, the adjustment was increased by 25%. For example, in 1975, the normal CPI adjustment was 19 cents with the 25% increase calculating 24 cents.
- Adjusted Minimum Wage: Computed as previous.
Analysis Outcomes
For each of three variations of minimum wage analysis, the 2021 hourly wage (with an estimated inflation rate per the Fed table above) would be $9.10; a $1.85 discrepency from the actual minimum wage.
The two other variations would result in $9.13 and $11.16; an increase of $1.88 and $3.91.
So What Does This Mean
We have heard the term "living wage" so often. What is a "living wage"? Is it really what wage is meant to live a life in a livable/safe home, food, utilities and clothes.
According to the Forbes article, BLS calculates CPI inflation by taking the average weighted cost of a basket of goods in a given month and dividing it by the same basket from the previous month using a survey of 24,000 Americans. This survey data is used to create a "market basket" of items for goods and services that may change over time although it has been said that the "basket" is fairly consistent over time.
Does it count the "extra" indulgences that may or may not be part of a "living" wage? Tables, technology products, more expensive transportation vehicles, expensive four-digit cell phones, etc.?
Personal Story About Living Wage
Forgive me for the story and reminiscing ...
My parents were working class individuals. I remember vividly hearing my mom discuss the union wage negotiations and fighting for nickels and dimes an hour in the 1970s. Look at 1970 -- 1973 (before inflation began), it is nickels and dimes. My parents were paying a mortgage, insurance, property taxes, living expenses (utlities, maintenance, food, etc).
They did not have a new car until the late-1980s buying used cars from their relatives. And they did not buy the 1980s version of a SUV. We lived fine, but never (ever!) above our means. Their only debt was their home. I remember clearly that their credit cards were only used in emergency while traveling and needed a repair. And as they were older, they would only charge items (dining, furniture, etc.) that they could pay in cash; paying off the credit card balance every month.
My first time on traveling outside of New England? In 1975 we took a vacation to visit relatives in Orlando and visited Disneyworld (on a plane no less!). Bless them for what they taught me!
Moving Forward
There are many political, socialtal and cultural options to move forward. This analysis focused on an objective approach. Apolitical and very simple.
Now for moving forward ...
Change Today
Using the Federal Government's calculation of CPI, the mimimum wage should be 9.13 in 2021. Agreed! But has Congress completed this analysis or one of their own? The Federal minimum wage has not changed since 2009. It is about time by the objective data and 12 years. And remember, there are state minimum wage laws as well. According to Federal law, where an employee is subject to both the state and federal minimum wage laws, the employee is entitled to the higher minimum wage rate.
Market-Based Approach
Let the market decide. It is clear that some will say that the market cannot regulate this appropriately. Maybe not. However, clearly, the current employment (or unemploment) environment has "forced" several retail, dining, grocery and other businesses to raise their hourly wages above the Federal guidelines without any intervention from Congress. For good or bad ... whether it be inflation, labor costs, profit, business sustainability, etc. ... it is what it is.
Changing Lives, Lifestyle and Restraint
How did people move from the minimum wage jobs? Simple ... hard work and an education/trade.
- To aspire for the better lifestyle through sacrifices in education or learning a trade.
- To save money before buying "big-ticket" items.
- To prioritize the family's needs vs. wants; everthing is not a need.
- To buy vehicles or a home that you could afford, not to show off to your neighbors.
- To teach your children financial responsibility.
No one, including me is suggesting people cannot live. Have fun. Enjoy a good life. But life, success and financial freedom is a process of very simple ideals. Maybe those ideals have been lost. I hope not!
