Introduction and executive summary
The federal minimum wage was established in 1938, as part of the Fair Labor Standards Act (FLSA), to help ensure that all work would be fairly rewarded and that regular employment would provide a decent quality of life. In theory, Congress makes periodic amendments to the FLSA to increase the federal minimum wage to ensure that even the lowest-paid workers benefited from broader improvements in wage and living standards.
Yet for decades, lawmakers have let the value of the minimum wage erode, allowing inflation to gradually reduce the buying power of a minimum wage income. When the minimum wage has been raised, the increases have been too small to undo the decline in value that has occurred since the 1960s. In 2016, the federal minimum wage of $7.25 was worth 10 percent less than when it was last raised in 2009, after adjusting for inflation, and 25 percent below its peak value in 1968.
This decline in purchasing power means low-wage workers have to work longer hours just to achieve the standard of living that was considered the bare minimum almost half a century ago. Over that time, the United States has achieved tremendous improvements in labor productivity that could have allowed workers at all pay levels to enjoy a significantly improved quality of life (Bivens et al. 2014). Instead, because of policymakers’ failure to preserve this basic labor standard, a parent earning the minimum wage does not earn enough through full-time work to be above the federal poverty line.
– Economic Policy Institute