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Why the minimum wage should be indexed to inflation

Minnesota Budget Bites
MinnPost photo by Briana Bierschbach
Increasing the minimum wage to $9.50 would increase the wages of an estimated 357,000 Minnesotans by $472 million. Indexing the minimum wage to inflation would ensure that these hardworking Minnesotans can make ends meet.

One of the most compelling reasons why there is so much momentum to increase the minimum wage is that it hasn’t been keeping up with the cost of living.

At both the state and federal levels, the minimum wage has lost much of its buying power, even as the cost of basic necessities like food, rent and gas have grown. If the federal minimum wage had the same buying power as in 1968, it would be substantially higher today – estimates range between $9.55 and $10.75 an hour, depending on how inflation is calculated.

Minnesota should join the 11 states that ensure that their minimum wages keep up with the cost of living by allowing them to increase each year with inflation – what’s known as ‘indexing.’

Increasing the minimum wage to $9.50 would increase the wages of an estimated 357,000 Minnesotans by $472 million. Indexing the minimum wage to inflation would ensure that these hardworking Minnesotans can make ends meet.

Indexing also provides predictability for employers and workers. The indexing proposal currently under debate would limit the annual increase to no more than 2.5 percent per year.

Those who work hard should be able to support their families and make ends meet. Increasing the minimum wage for large employers to $9.50 is a good step. But without indexing, low-wage workers will soon see their wages erode.

This post was written by Caitlin Biegler and originally published on Minnesota Budget Bites.

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Comments (5)

Absolutely

It would eliminate the need for re-calibrations in the future unless we decide to raise the base minimum wage again or switch to a living wage standard.

Tying the minimum wage to inflation

makes as much sense as tying the price of bread to inflation. It only perpetuates the cycle.

What happens when we have DEflation? (which is certainly possible) Does the minimum wage go down?

Deflation?

And how often has THAT happened in the United States in recent history?

Doesn't matter

it's still possible so it's a valid hypothetical.

Agreed

That's a completely valid hypothetical. There has been no major deflation in the US since the 30's, but I think there was some very minor deflation in the 80s and in 2008-2009?

I would assume (and you know what they say about that) that it would indeed drop, although if the language stated that it was ONLY indexed to inflation, and NOT indexed to deflation, that could be a loophole to NOT allow it to drop, period... though I would ALSO assume that any deflation would be so minor as to only register a cent or two before it went back up.