Indeed, if the federal minimum wage had kept up with worker productivity since 1968, the inflation-adjusted minimum pay would be $24 per hour. Working people should share in the wealth they help generate, and our wages should rise as we become more productive, according to the labor movement.
In 2022, how would the minimum wage be adjusted for inflation?
President Biden stated at his State of the Union address that bringing inflation under control was a primary goal, and he told businesses, “Not your wages, but your costs.” However, many firms across the country have not responded to current health or economic problems by decreasing salaries. And, in certain regions of the country, salaries are only going higher by law, as many municipal minimum wage legislation increase their rates in response to changes in the consumer price index (CPI). We present a projection of what businesses can expect during these difficult economic times, not an economic prognosis, so they can budget appropriately in the coming months and prepare for near-term (July 1) and future (January 1, 2023) necessary wage rate increases.
Running a business has been anything but simple during COVID-19. We’ve all heard about the “Great Resignation” and how it led to “wageflation” ( “According to Forbes, “a sudden, unexpected, and instantaneous surge in pay based on unique market conditions”). With the addition of inflation, some businesses may find themselves in an even more vulnerable position. Although the mid-year minimum wage increases (July 1, 2022) are still four months away, some jurisdictions have already announced their rates; the differences are notable and demonstrate the impact rising inflation can have on wages in jurisdictions that adjust their minimum wage in response to changes in the CPI.
The minimum wage in both the City of Santa Fe and the County of Santa Fe was CPI-adjusted from $12.32 to $12.95 per hour on March 1, 2022, an increase of just over 5%. The minimum wage in the District of Columbia will increase from $15.20 to $16.10 per hour on July 1, 2022, representing a nearly 6% increase. The greatest stated increase to date belongs to the City of Los Angeles, California, where the yearly adjusted minimum wage will rise from $15.00 to $16.04 per hour on July 1, 2022, a nearly 7% increase.
Factors that may impact why minimum wage CPI adjustments varies from one location to another range from the apparent to the obscure, and include, for example:
- The minimum pay rate prior to the change. The higher the existing minimum wage, the more likely there is to be a raise “Sticker Shock” is a rate that has been changed.
- The adjustment’s lookback period, as well as inflation throughout that time. There is a gap between the end of the lookback period and the start of the adjusted wage rate, but depending on how much time passes between these dates and how inflation performs in the interim, the rate bump could exceed inflation at the time the rate goes into effect or throughout the year it is in effect; of course, during the pre-adjustment period, the opposite could be true, with other items like food and consumer goods prices rising while the adjusted wage rate remains in effect; of course, during the pre-adjustment
- Whether CPI-U (Consumers) or CPI-W (Workers) is used in the adjustment (Workers). These are various inflation rates, which helps to explain why two cities with the same pre-adjustment minimum wage may have different adjusted rates.
- The adjustment’s working area. To be competitive, a smaller city can go beyond its borders and apply the CPI index to a much larger metropolis further away.
- Whether or not the law sets a limit on the annual rise. This could happen in general or by employing a different rate of inflation than the actual rate of inflation “whichever is less” standard (i.e., the rate of inflation or X percent, whichever is less).
Numerous further municipal mid-year rate adjustments will occur throughout California on July 1, 2022, so businesses should plan for a potential “wagequake” across the state. However, tremors may not be limited to the West Coast, as municipal minimum wage rates in the Midwest (Illinois) and the Mid-Atlantic (Maryland) will also alter. While concerns about near-term wage changes are primarily local, firms across the country should prepare for the potential that inflation does not moderate sufficiently through 2022, resulting in state-level rate increases on January 1, 2023. (or December 31, 2022, in New York). This could effect both exempt and non-exempt employees if it happens. States frequently add a multiplier to the minimum wage to determine the minimum salary required for the executive, administrative, or professional exemption to apply; a state-law inside sales exemption could face a similar minimum wage multiplication scenario. In addition, the state may annually increase the exemption’s minimum hourly rate for specified hourly professionals (or medical in California).
Although we don’t have a crystal ball to look into the future, we may forecast that things will become more difficult, just like wage and hour regulations.
What would the minimum wage be if productivity was included in?
The federal minimum wage in the United States has stayed unchanged at $7.25 per hour for the past 12 years, the longest period since it was established in 1938. Another telling statistic shows how the minimum wage, which was enacted by Congress after the Great Depression to ensure that Americans were adequately compensated for their labor, has fallen behind the times.
Even while workers have become more productive, helping to boost corporate earnings, the stock market, and CEO remuneration to new highs, their pay has remained steady or even decreased when inflation is taken into account. According to one economist, if the minimum wage had kept pace with increases in productivity over the last 50 years, it would be roughly $26 an hour today, or more than $50,000 in yearly income.
In a recent blog post, Dean Baker, senior economist at the left-leaning Center for Economic and Policy Research, said, “That may sound rather ridiculous, but that’s roughly what the minimum wage would be now if it had kept pace with productivity growth since its value peaked in 1968.”
In 2021, how would the minimum wage be increased for inflation?
Consumer prices rose 5.3 percent in August compared to the previous year, causing some anxiety as the economy recovers from the pandemic. Food prices at home increased by 3%, while food prices away from home (i.e. restaurants) increased by 4.7 percent, according to the Bureau of Labor Statistics’ latest release this week. Rents and energy prices both increased by roughly 9%.
One point of worry for employers and employees in the United States is that activists frequently exploit inflation data to support their campaign for a $15 minimum wage, or even a higher salary of $23 per hour, despite the fact that study shows such steep rises will destroy millions of jobs.
Remember, if we kept up with inflation, the minimum wage would be $23/hr right now. $15 is a good middle ground. #RaiseTheWagehttps://t.co/44l6Rqln0F
Despite the fact that inflation has risen dramatically in the last year, the so-called “The Fight for $15” is still not based on a consumer price index. If the 2009 federal minimum wage increase to $7.25 per hour were indexed to climb with inflation, it would equal $9.22 today, according to Bureau of Labor Statistics data up to August 2021.
If the minimum wage were to be adjusted to the level in 1990, it would be $7.17 now. No matter how you slice it, these data don’t even come close to, let alone support, the $23 hourly rate proposed by the union-backed One Fair Wage.
Indeed, the $15 minimum wage goal that several states and municipalities have already enacted has no precedence in history. An organizing director for the Service Employees International Union’s Fight for $15 campaign joked about the absence of genuine analysis informing their main policy goal at one meeting, saying: “We decided that $10 was too low and $20 was too much, so we settled on $15.”
Unfortunately, these draconian minimum wage targets, which lack economic justification, will wreak havoc on firms and employees as they try to recover from the pandemic. According to the impartial Congressional Budget Office, the Raise the Wage Act of 2021, which proposes a $15 minimum wage nationwide, may cost the country up to 2.7 million jobs. According to economists from Miami and Trinity Universities’ industry and state-level analyses, the hospitality and restaurant industries would bear the brunt of these effects. Increases above the $15 minimum wage would have an even bigger negative impact on employer costs, and could result in the loss of many more employment.
Why should the minimum wage not be increased?
Since 2009, the federal minimum wage of $7.25 per hour has remained unchanged. Increasing it would increase most low-wage employees’ earnings and family income, pulling some families out of povertybut it would also cause other low-wage workers to lose their jobs, and their family income would fall.
The Budgetary Consequences of the Raise the Wage Act of 2021 (S. 53), which CBO evaluated in The Budgetary Effects of the Raise the Wage Act of 2021, allows users to study the effects of policies that would raise the federal minimum wage. Users can also build their own policy options to see how different ways to increasing the minimum wage would influence earnings, employment, family income, and poverty.
Is the United Kingdom’s minimum wage linked to inflation?
Since their inception in the United Kingdom, the national minimum and living wages have risen every year. However, this does not imply that they have kept up with rising living costs.
Chancellor Rishi Sunak announced an increase in the national living and minimum wages in his Autumn Budget, declaring that the higher rates “guarantee we’re making work pay and maintains us on track to reach our commitment to abolish low pay by the end of this Parliament.”
Every country in the globe has its own system for determining the minimum wage, as well as the amounts that should be paid to different age groups.
Some countries have a minimum pay per hour, whereas others have a minimum wage per working day, week, or month. Many countries still do not have any kind of minimum wage at all.
In general, the national minimum wage in this country rises by roughly 4% per year, in accordance with inflation rates. If the minimum wage does not keep pace with inflation, people will grow poorer despite earning the same amount of money.
Naturally, different countries have varying living costs, inflation rates, and average wages. But, in the broader scheme of things, how does the United Kingdom fare? And who has the world’s highest minimum wage?
In Canada, has the minimum wage kept up with inflation?
Correction: The original item on January 21, 2020 stated that the hourly wage was $24. On March 16, 2022, a spreadsheet error was discovered and repaired. The data in this page have been revised throughout. For a complete explanation, see Dean Baker’s post.
Until 1968, the minimum wage not only kept pace with inflation, but it also grew in lockstep with productivity. The argument is simple: we anticipate that salaries will rise in lockstep with productivity growth. The minimum wage should rise in tandem with productivity in order for low-paid workers to benefit from the overall improvement in society’s living standards.
It’s crucial to understand the difference between inflation and productivity. If the minimum wage advances in lockstep with inflation, we can be sure that minimum wage people will be able to buy the same quantity of goods and services over time, insulating them from rising prices. If it rises with productivity, however, it means that minimum wage earners will be able to buy more goods and services over time as employees are able to generate more products and services per hour.
While the national minimum wage rose nearly in lockstep with productivity growth from 1938 to 1968, it has not kept up with inflation in the more than five decades since then. If the minimum wage had risen in lockstep with productivity growth since 1968, it would now be about $21.50 an hour, as illustrated in the graph below.
What would be the minimum wage adjusted for inflation in Canada in 2021?
“In no Ontario municipality does $15 an hour give a livable wage,” the Star editorial board noted in November, with some firms, employees, and advocates claiming the increase is years late and won’t do anything to offset the province’s ever-increasing expenses of doing business.
According to the site’s definition, the living wage is computed based on the needs of a family of four with two parents working full-time throughout the year.
Cost of living: According to a Policy Alternatives research released the same year, the living wage in Charlottetown, PEI in 2020 was $19.30 per hour.
Cost of living: According to the McGill Tribune, campaigners have been lobbying the province to raise the minimum wage to $18 to help with living expenses. Increasing living costs, according to a coalition of anti-poverty advocates, might force employees deeper into poverty.
According to a research by the CRHA, an association that represents human resources professionals, Quebec will see record wage increases this year. According to the report, employers in Quebec might offer employees compensation rises of 2.9 percent on average in 2022, the greatest gain in a decade.
Minimum wage: $11.81 (as of October 1, 2021), with annual inflationary adjustments on October 1st.
Cost of living: Once New Brunswick raises its minimum pay in April, Saskatchewan will have the lowest minimum salary in the country.
According to a report released in March by the Regina Anti-Poverty Ministry, one out of every four Regina children is currently living in poverty.
Minimum wage: $15.20 (as of April 1, 2021), plus an annual inflation adjustment on April 1st.
Cost of living: According to a 2019 assessment by the Yukon Anti Poverty Coalition, Whitehorse’s living wage was $19.07 per hour, owing to increases in the cost of living, child care, and transportation.
Will I be given a raise if the minimum wage rises?
Raising the minimum wage means that employers and employees in the United States are legally obligated to increase the hourly compensation of their minimum-wage employees—and only their minimum-wage employees. If you currently earn more than the minimum wage, your employer is not compelled to give you a raise.
While it won’t be required, it’s expected that many organizations will raise pay rates for their other employees as well. Here are some of the reasons for this:
- They’ll want to be able to distinguish between different skill levels: Let’s imagine you’re currently employed in a semi-skilled employment that pays $15 per hour. You hold a technical degree and have worked in the field for several years. If the minimum wage is increased to $15 per hour, you will be paid the same as a high school student who works part-time for the same employer. Most businesses understand that this isn’t fair to you, and that various jobs deserve varied pay scales.
- They’ll want to keep employee morale high: Employers are also aware that compensation disparities can have a negative impact on employee morale. Employee satisfaction is heavily influenced by pay and benefits, and organizations realize that if remuneration becomes a source of dissatisfaction for employees, motivation, dedication, and passion will decrease.
- They will seek to increase employee retention because happier employees stay longer. According to study, a 10% rise in base wage corresponds to a 1.5 percent increase in the likelihood of a worker staying with their current job.
Despite the fact that raising the federal minimum wage would result in a trickle-down effect of greater labor costs across their entire organization, a majority of employers surveyed by the National Employment Law Project were in favor of doing so. In fact, a minimum wage increase was backed by 61 percent of small company owners.