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Inflation has been the talk of the town recently with the annual Consumer Price Index (CPI) recently hitting a 40-year high of 9.1%. However, for financially squeezed families, rising prices are only one half the story.
As the cost of everything from fuel to food increases, the value of the dollar decreases. That means workers are seeing the purchasing power of their paychecks shrink. In fact, the value of the federal minimum wage is now at its lowest point since 1956, according to an analysis by the Economic Policy Institute (EPI).
“When you have a general rise in the inflation level, it erodes the value of money,” says Peter C. Earle, economist with the American Institute for Economic Research.
At the same time, a more mobile workforce and continuing labor shortages could help counteract the effects of inflation, and might actually boost wages for some low-income occupations.
The federal minimum wage was last increased in 2009, when it rose to its current level of $7.25 per hour. When adjusted for inflation, the high-water mark for minimum wage occurred in 1968, when it was the equivalent of about $12 per hour in today’s dollars.
In the 1960s, increases in the minimum wage were an outgrowth of the civil rights movement, according to Ben Zipperer, an economist with the EPI. At that...
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