Minimum wage fails to keep pace with productivity

This Friday, the federal minimum wage will increase from $6.55 to $7.25, the third and final step in the minimum wage increase Congress authorized in 2007.  With this final step, an estimated 4.5 million of America’s lowest-paid workers will receive a raise, but this increase still leaves the real value of the minimum wage lower than it was 30 years ago.  

Since that time, minimum wage workers have achieved higher levels of education, one of the best measurable indicators of productivity. In 1979, 57.5 percent of workers who earned the minimum wage completed high school. That number swelled to about 72 percent in 2008.  

This growth in education levels for minimum wage workers suggests that the minimum wage is failing to keep pace with workers’ capacity to produce goods and services. Higher productivity — the capacity to produce more per hour worked — should allow these workers to earn higher wages.  In fact, we see the opposite. Friday’s minimum wage increase is one important step toward restoring wage growth so that it matches productivity growth.

For more information on the minimum wage, read EPI’s newly updated Minimum Wage Issue Guide.