Inflation and the Real Minimum Wage:
A Fact Sheet
Craig K. Elwell
Specialist in Macroeconomic Policy
Linda Levine
Specialist in Labor Economics
February 26, 2013
Congressional Research Service
7-5700
www.crs.gov
R42973
CRS Report for Congress
Pr
epared for Members and Committees of Congress

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Inflation and the Real Minimum Wage: A Fact Sheet

he Fair Labor Standards Act (FLSA) of 1938 established the hourly minimum wage rate at
25 cents for covered workers.1 Since then, it has been raised 22 separate times, in part to
Tkeep up with rising prices. Most recently, in July 2009, it was increased to $7.25 an hour.
Because there have been some extended periods between these adjustments while inflation
generally has increased, the real value (purchasing power) of the minimum wage has decreased
substantially over time.
The Real Minimum Wage
The minimum wage is not indexed to the price level. It has been legislatively increased from time
to time to make up for the loss in its real value caused by inflation. In nominal (current dollar)
terms, the minimum wage has risen steadily from 25 cents to $7.25 an hour, where it has
remained since its effective date of July 2009. As the legislated adjustments to the minimum wage
standard have occurred at irregular intervals—sometimes increasing annually, other times not for
several years—while prices have generally risen each year, the purchasing power (real or constant
dollar value) of the minimum wage has varied considerably since its enactment.
For each time the minimum wage was changed, Table 1 presents its nominal and real value. The
inflation adjustments to the minimum wage are made using the Consumer Price Index for Urban
Wage Earners and Clerical Workers (CPI-W). Real values of the minimum wage are expressed in
terms of January 2013 dollars, the latest month for which the index is available at the time of the
fact sheet’s preparation. Data on average hourly earnings in nominal and constant (January 2013)
dollars are displayed for comparison purposes. The last column of the table shows levels of the
CPI-W since the inception of the federal minimum wage. The U.S. Bureau of Labor Statistics
calculates the earnings series2 and the CPI-W.3
The peak value of the minimum wage in real terms was reached in 1968. To equal the purchasing
power of the minimum wage in 1968 ($10.57), the current minimum wage’s real value ($7.80)
would have to be $2.77 (or 26%) higher. Although the nominal value of the minimum wage was
increased by $5.65 (from $1.60 to $7.25) between 1968 and 2009, these legislated adjustments
did not enable the minimum wage to keep pace with the increase in consumer prices, so the real
minimum wage fell.
In addition to comparing the rate of increase in the minimum wage with prices, the level of the
minimum wage also has been compared with the average hourly earnings of most workers in the
private nonfarm economy—which also peaked in 1968 at 54% (see footnote a in the table). In no
other year did the minimum wage exceed half of average hourly earnings. The legislated
adjustments that occurred after 1968 resulted in the minimum wage ranging from 34% to 47% of
average hourly earnings.

1 For the minimum wage’s legislative history and other information on the labor standard, see CRS Report R42713, The
Fair Labor Standards Act (FLSA): An Overview, by Gerald Mayer and David H. Bradley.
2 The earnings series are available at http://stats.bls.gov/ces/home.htm#tables.
3 The CPI is available at http://stats.bls.gov/cpi/data.htm.
Congressional Research Service
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Inflation and the Real Minimum Wage: A Fact Sheet

Table 1. The Statutory Minimum Wage, Hourly Earnings, and Inflation
(real values expressed in January 2013 dol ars)
Average
Average
Minimum
Hourly
Hourly
Wage as a
Statutory
Statutory
Earnings in
Earnings in
Percentage
Minimum
Minimum
the Private
the Private
of Average
CPI-W
Effective
Wage
Wage
Sectora
Sectora
Hourly
(1982-
Date
(Nominal $)
(Real $)
(Nominal $)
(Real $)
Earnings
1984=100)
Oct. 1938
$0.25
$4.02
n.a.
n.a.

14.1
Oct. 1939
0.30
4.82
n.a.
n.a.

14.1
Oct. 1945
0.40
4.98
n.a.
n.a.

18.2
Jan. 1950
0.75
7.17
n.a.
n.a.

23.7
Mar. 1956
1.00
8.39
n.a.
n.a.

27.0
Sept. 1961
1.15
8.63
n.a.
n.a.

30.2
Sept. 1963
1.25
9.16
n.a.
n.a.

30.9
Feb.
1967
1.40 9.58 2.81 19.23 50% 33.1
Feb.
1968
1.60 10.57 2.95 19.48 54
34.3
May 1974
2.00
9.28
4.39
20.38
46
48.8
Jan. 1975
2.10
9.08
4.61
19.93
46
52.4
Jan. 1976
2.30
9.30
4.91
19.86
47
56.0
Jan. 1978
2.65
9.56
5.68
20.49
47
62.8
Jan. 1979
2.90
9.56
6.16
20.31
47
68.7
Jan. 1980
3.10
8.97
6.61
19.12
47
78.3
Jan. 1981
3.35
8.67
7.22
18.69
46
87.5
Apr.
1990
3.80 6.76 10.15 18.06 37 127.3
Apr.
1991
4.25 7.22 10.47 17.79 41 133.3
Oct.
1996
4.75 6.92 12.18 17.74 39 155.5
Sept.
1997
5.15 7.37 12.64 18.09 41 158.3
July
2007
5.85 6.51 17.45 19.40 34 203.700
July
2008
6.55 6.86 18.02 18.87 36 216.304
July
2009
7.25 7.80 18.52 19.93 39 210.526
Jan. 2013b
20.06
20.06

226.520
Source: Minimum wage levels in nominal dollars from the U.S. Department of Labor. Nominal earnings and the
CPI from the U.S. Bureau of Labor Statistics. Real minimum wage and earnings levels calculated by CRS.
Note: n.a.=not available.
a. The not seasonal y adjusted earnings data cover production and nonsupervisory employees in the private
sector of the nonfarm economy who in recent years have made up about 82% of al private nonfarm
employees. Earnings data for all private sector employees in the nonfarm economy were not calculated until
2006.
b. Latest earnings and price data available at the time of the fact sheet’s preparation.

Congressional Research Service
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Inflation and the Real Minimum Wage: A Fact Sheet

Author Contact Information

Craig K. Elwell
Linda Levine
Specialist in Macroeconomic Policy
Specialist in Labor Economics
celwell@crs.loc.gov, 7-7757
llevine@crs.loc.gov, 7-7756

Acknowledgments
Adapted from an earlier fact sheet prepared by Brian Cashell.

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