Figure A depicts the minimum wage’s true (inflation-adjusted) value from its inception. Ten years ago, workers receiving the federal minimum wage of $7.25 were paid the inflation-adjusted equivalent of $8.70 per hour in today’s money. To put it another way, workers earning the federal minimum wage now are paid 17% less than they would have been ten years ago.
Based on inflation, what should the minimum wage be?
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.
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 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 increasing the minimum wage lead to inflation?
As inflation reaches historic highs, lawmakers and analysts are debating the causes, which include pandemic-related shocks as well as government-imposed limitations and swings in consumer demand.
One New York Times writer remarked this week on Twitter that recent media headlines about inflation are “all hype.” “Policies like the $15 minimum wage” are blamed by “wealthy people.” Instead of being justified in her concern over fast rising prices for everyday items, she claims the recent coverage is “hysteria,” implying that inflation benefits lower-income people since “inflation helps borrowers, and that’s what the fuss is about…not milk prices.”
Minimum wage increases in the past have been shown to induce price increases, which disproportionately affect lower to middle-income persons who spend a bigger amount of their wages on inflation-affected commodities like groceries.
The snowball effect between minimum wage hikes, such as the $15 per hour now in place in numerous states and localities and proposed at the federal level this year, and price increases is documented in a report by Heritage Foundation fellow James Sherk. A $15 federal minimum wage, for example, represents a 107 percent increase over the current federal minimum pay of $7.25 per hour. Employers must adjust their business models to accommodate for the increased labor expenditure when governments enforce substantial minimum wage increases. In many circumstances, this necessitates firms raising consumer pricing to compensate for the higher cost of providing their goods or services. Sherk claims that this hurts minimum wage workers and lower-income consumers the most, because the costs of the products they buy have climbed as well, lowering their newly boosted salaries’ purchasing power.
According to one analysis of the existing minimum wage research, which mostly contains data on price effects from the United States, a 10% rise in the minimum wage raises prices by up to 0.3 percent.
According to one of the studies evaluated by the American Enterprise Institute, the same price boost might produce price rises of up to 2.7 percent in the southern United States, where living costs and earnings are much lower. Recent study also suggests that increased minimum wages have a greater inflationary impact on employers of minimum wage earners. A research by the Federal Reserve Bank of Chicago and the United States Department of Agriculture indicated that raising the minimum wage more than doubled the price increase effect in fast-food restaurants, and much higher in lower-wage areas.
In addition, a Stanford University economist looked at the impact of price hikes by income level and discovered that while “Minimum wage workers come from a wide range of socioeconomic backgrounds, and raising the minimum wage has the greatest impact on the poorest 20% of households.
Minimum wages encourage firms to raise prices to cover some of the additional pay bill, according to this analysis of previous findings. However, this comes at a price employers must be careful not to raise prices too much, as this will generate price-sensitive client demand. Employers are unable to raise prices if they believe that doing so will reduce demand and result in decreased revenues, which will not be sufficient to fund increases in employee wages. Employers are obliged to adjust costs in other ways if this happens, such as lowering other employee benefits, reducing scheduled hours, or laying off staff entirely.
Sherk claims that the price hike effect of rising minimum wages is combined with large job loss effects, implying that minimum wage people are more likely to lose their jobs or have their hours decreased as their cost of living rises. As a result, he believes that increasing minimum wages is an unproductive approach to provide benefits to low-wage workers due to inflationary and job-killing impacts.
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?
What has been the rate of inflation since 2009?
$1’s value from 2009 through 2022 In terms of purchasing power, $1 in 2009 is comparable to around $1.32 now, a $0.32 rise in 13 years. Between 2009 and present, the dollar saw an average annual inflation rate of 2.17 percent, resulting in a 32.25 percent price increase.
How do you figure out inflation adjusted earnings?
For instance, if your current annual income is $50,000 and the 12-month inflation rate is 2%, your adjusted salary would be $51,000 (50,000 1.02 = 51,000), resulting in a $1,000 CPI rise ($51,000 $50,000 = $1,000).
British Columbia $15.65 per hour effective June 1st, 2022
Beginning June 1, 2022, the minimum wage in British Columbia will be $15.65 per hour. This represents a $0.45 increase and a 2.9 percent increase in the minimum wage since 2021, when it was $15.20 per hour. British Columbia became the third province or territory in Canada to have a $15.00 minimum wage. The provincial government has vowed to tie the minimum wage in British Columbia to inflation, and the most recent hike reflects that commitment. British Columbia has now eliminated the alternative minimum wage for certain job types for a full year, and the new minimum pay applies to all workers in the province.
Alberta $15.00 per hour
Alberta’s minimum wage will reach $15.00 per hour in 2022. Since the latest rise in 2018, when Alberta became the first province to legislate a $15.00 per hour minimum wage, this rate has stayed steady. Alberta is also keeping the alternative minimum wage for students under the age of 18 at $13.00 per hour, subject to specific conditions. Real estate brokers, certain salespersons, non-profit counsellors, and other occupations are excluded from the province’s minimum wage requirements.
Saskatchewan $11.81 per hour
Saskatchewan’s minimum wage will be $11.81 per hour in 2022. While there is no official alternative minimum wage in Saskatchewan, certain work roles, such as farm and ranch laborers, certain care providers, babysitters, and others, are not required to be paid at this rate. Saskatchewan’s minimum wage was last increased in October 2021, rising 3.14 percent from $11.45 per hour. Even with this recent rise, Saskatchewan’s minimum wage in 2022 will be the lowest of any Canadian province or territory. The province’s minimum wage is linked to the previous year’s Consumer Price Index, with revisions set to take effect in October. This indicates that Saskatchewan’s minimum wage could increase in October 2022, albeit no formal announcements have been made.
Manitoba $11.95 per hour
Manitoba’s minimum wage will be $11.95 per hour in 2022. It was recently raised in October of 2021, with a 0.4 percent increase from $11.90. Domestic workers who work less than 12 hours per week and people enrolled in a recognized provincial or federal training program are exempt from minimum wage regulations. Despite being the first province in the country to establish a minimum wage, the minimum salary in 2022 is the second lowest in any Canadian province or territory.
Ontario $15.00 per hour
Ontario’s minimum wage will be $15.00 per hour in 2022. This rate took effect on January 1, 2022, and boosted the minimum wage by 4.52 percent above the previous rate of $14.35 per hour, which had been in place since October 20, 2021. Liquor servers’ alternative minimum pay was also deleted, raising their hourly wage by 19.5 percent from the previous $12.55. Later, as part of a bigger attempt to support individuals now working remotely, the provincial government adopted further legislation to apply the $15.00 minimum wage to persons working through gig-based applications. The alternative minimum wage for students for 2022 is still in effect, although it has been increased to $14.10 per hour.
Quebec $14.25 per hour effective May 1st, 2022
Effective May 1, 2022, the minimum wage in Quebec will be $14.25 per hour. From the minimum wage of $13.50 per hour in 2021, this is a 5.5 percent rise and a $0.75 increase. In Quebec, the alternative minimum wage for workers who get gratuities will increase to $11.40 from $10.80 in 2022. Over 301,000 people in various in-demand employment positions across the province are projected to be affected by this development.
New Brunswick $12.75 per hour effective April 1st, 2022/$13.75 per hour effective October 1st, 2022
New Brunswick’s minimum wage will rise twice this year, to $20 per hour in 2022. The 2022 minimum wage will be $12.75 per hour beginning April 1st, 2022, then rising to $13.75 per hour beginning October 1st, 2022. This means that the minimum wage will rise by $2 over the course of 16 months, partly due to the fact that it is tied to the Consumer Price Index, and New Brunswick will go from having the lowest to having the highest minimum pay in the Maritime provinces.
Nova Scotia $13.35 effective April 1st, 2022 / $13.75 per hour effective October 1st, 2022
Nova Scotia’s minimum wage will increase twice in 2022, first to $13.35 per hour on April 1, 2022, and then to $13.75 per hour on October 1, 2022, identical to New Brunswick. Nova Scotians earning minimum wage will receive a $0.40 boost, up 3 percent from $12.95 per hour in 2021, thanks to the minimum pay being tied to the Consumer Price Index. Nova Scotia’s minimum wage will increase twice more in the next two years, to $15.00 per hour in April 2024.
Prince Edward Island $13.70 per hour effective April 1st, 2022
In April 1st, 2022, the minimum wage on Prince Edward Island will be $13.70 per hour. The wage rate is based on the Consumer Price Index, and will increase by $0.70 per hour from $13.00. PEI, Canada’s smallest province, will have the highest minimum wage in Atlantic Canada until New Brunswick passes it in October.
Newfoundland and Labrador $13.20 per hour effective April 1st, 2022
Starting April 1, 2022, the minimum wage in Newfoundland and Labrador will be $13.20 per hour. This is a $0.45 increase from the previous year’s $12.75, with probable future increases to be announced in the spring.
Yukon $15.70 per hour effective April 1st, 2022
Starting April 1st, 2022, the Yukon’s minimum wage will be $15.70 per hour. This is one of the greatest minimum wage hikes in Canada, rising $1.85 from a rate of $13.85 in 2021. This rise is linked to a 3.3 percent increase in the Consumer Price Index for Whitehorse, the Yukon’s capital, in 2021.
Northwest Territories $15.20 per hour
In the Northwest Territories, the minimum wage will be $15.20 per hour in 2022. This was the first minimum wage hike in the Northwest Territories in three years, and it took effect in September 2021. Minimum wage workers in the territory received a $1.74 boost as a result of the 12.9 percent increase in the minimum wage. For the rest of 2022, no minimum wage hikes are planned in the Northwest Territories.
Nunavut $16.00 per hour
Nunavut’s minimum wage will be $16.00 per hour in 2022. Nunavut has the highest hourly minimum wage of any Canadian province or territory, but also one of the highest living costs. As the CPI reaches a 30-year high, the territory government has announced intentions to investigate potential minimum wage rises beginning this spring.
Federal $15.55 per hour effective April 1st, 2022
Starting April 1st, 2022, the minimum wage for jobs in the Canadian federal government will be $15.55 per hour. This is a $0.55 rise, or 3.6 percent, over the federal minimum wage of $15.00 per hour in 2021. Employees of the federal government will be paid at this rate regardless of where they work in the country. Even though the minimum wage in Ontario is $15.00 per hour in 2022, a Federal employee living in Ontario will still earn $15.55 per hour.
Each province and territory in Canada has a different minimum wage in 2022. The bulk of them have planned hikes to their minimum wages for 2022 that will take effect throughout the year. As they seek employment in a job role and field of their choice, job seekers should be mindful of minimum pay hikes.
What is a living wage in the year 2022?
Poverty Levels and the Living Wage In many areas, the federal minimum wage of $7.25 per hour is insufficient to lift a family of four out of poverty, which will be $27,750 in 2022.