Real Federal Minimum Wage
Federal minimum wage adjusted for inflation (2023 dollars)
“The minimum wage lost its value after 1971 when inflation eroded purchasing power.”
The real minimum wage peaked in 1968 at $13.28 (in 2023 dollars) and has declined 46% since then. The cause is not inflation alone — it is Congress's repeated failure to raise the nominal minimum wage. From 2009 to 2024, the $7.25 minimum was not adjusted at all, the longest freeze in its history.
Perspectives
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Congressional inaction, amplified by inflation, eroded the minimum wage
The real minimum wage has fallen because it is not indexed to inflation and Congress has failed to raise it regularly. Both the lack of indexing and the inflation that erodes value are contributing factors.
If the US had stayed on the gold standard, inflation would have been lower, partially preserving the minimum wage's value. But gold standard or not, the fundamental problem is that the minimum wage requires an act of Congress to change, making it vulnerable to political gridlock.
Causal Factors
Congressional inaction
40%The minimum wage is not indexed to inflation. Congress must vote to raise it, and political opposition has prevented increases since 2009 — the longest freeze in history.
Inflation erosion
25%Without automatic adjustment, inflation steadily reduces the real value between legislative increases. Cumulative inflation since 2009 has reduced purchasing power by ~30%.
Political opposition & lobbying
15%Business lobbies (National Restaurant Association, Chamber of Commerce) have consistently opposed increases, arguing they destroy jobs — a claim with limited empirical support.
State-level minimum wages filling the gap
10%30 states and DC have set minimums above $7.25, reducing pressure for federal action. ~60% of minimum wage workers earn above the federal minimum.
Shift to tipped & gig economy
10%The tipped minimum ($2.13/hr since 1991) and gig worker classification have created categories of workers effectively below the minimum.
Data Source
Key Events
Minimum wage created
Fair Labor Standards Act establishes $0.25/hr minimum wage
Peak purchasing power
At $1.60/hr, the minimum wage reaches its highest real value ever: $13.28 in 2023 dollars
Reagan era begins
No minimum wage increase for 9 years (1981-1990), longest gap at that time
Last increase
Minimum wage raised to $7.25/hr, where it has remained for 15+ years
Record-long freeze
Longest period without a federal minimum wage increase in history