This week people protested their low wages all across the U. S. They tried to ban together so that they might earn more money in order to provide for their families. The debate about raising minimum wage is a heated one. People on both sides make arguments on how it will completely alter the economy and their ability to provide for themselves and their families. Many business owners do not want minimum wage to be increased for fear it will eat away at their ability to keep their businesses running. Common arguments are that increased wages only increase cost which will then have to be passed on to consumers. Workers argue that they cannot survive working full time at minimum wage. Taking a look at some historical data might prove to give us some perspective on the issue. Has minimum wage stayed in pace with inflation?
The government seems to rely on the Consumer Price Index when looking at inflation. This is not exactly a great number to go off of. As previously mentioned technology has changed our lives and made great impacts on the food industry and clothing industry. Does the CPI take into account new or altered expenses that have become more necessary than they were in years past? It seems the median wage has kept up with the cost of living but the CPI has not. Now it might seem that we should be leading more comfortable lives because we earning more money and technology has made jobs easier however middle class is always middle class. People earning near the median income are not living more comfortable lives than they were 60 years ago when compared to the people making different income amounts. When we compare the middle class of 1950 to 2010 they are different, clearly. When comparing low paid workers so higher paid workers in the same time frame, they obviously have different levels of comfort. It is not fair to compare someone earning low wages in 1950 to 2010 and say they have a better quality of life now just because technology has made work easier. It is the difference in the quality of lives for low wage earners verses top earners back in 1950 compared to the difference in the quality of life of low wage earners verses top earners today. Other comparisons are not looking at truly comparable data. Charts and graphs and can show you data but you must make your own opinion on the matter. Hopefully people are forming informed opinions rather than emotional ones.
The real median income according to the U. S. census has risen faster than the consumer price index. This would lead one to believe that America as a whole should be far better off than we were in 1950. Americans should have more disposable income. Income has not risen at a consistent rate. A rate of 4.5% since 1950 brings it to an amount close to today’s median income. The CPI rate average since 1950 is about 3.5%. The 1% difference seems small but over time adds up to a great difference.
Comparing the minimum wage as it has changed with inflation shows some interesting data. The California minimum wage has risen slightly above the consumer price index since 1950. If minimum wage rose at a comparable rate to the U. S. median income, somewhere around 4.5%, it would be much higher than today’s. Congress seems to be looking at the CPI when making changes to the minimum wage. Is this consistent so that those making minimum wage today are able to live as comfortably as people were back in 1950? This is hard to say just based off of numbers. The whole culture of America has changed significantly. People live very different lives today then 60 years ago. Technology has made major impacts. Solely looking at numbers however we can see some trends.
Comparing the bottom earners to the middle earners, there has been little consistency over the last 45 years. It is clear that we are not closing the gap between the poor and the middle class though. From the point where the chart begins in 1967 we are at similar places however at almost every point in between the gap has been smaller.
Top vs Bottom
Those with incomes in the top 5th of the U. S. are making above the average American. Those with income in the bottom 5th are making much less than the total U. S. median income. This is constant. So the question is, has the income gap between the top 5th and bottom 5th remained constant? The answer is quite clear in the chart above. Those earning the least are earning less and less each year in comparison to the top earners.