Outpaced and Outmatched: The $15 Minimum Wage’s Futile Mission

A flyer in Minneapolis advocating for the Fight for $15 labor movement. Photo by Tony Webster.

The U.S. economy's post-pandemic return has not been the fanfare-inducing comeback Americans had hoped for. Rather, its progress has been notably slowed by a pervasive labor shortage, supply-chain bottlenecks, and elevated consumer demand due to a COVID-driven accumulation of savings, culminating in a 5.4% annual increase in consumer prices in September 2021. 

Though the U.S. economy is far from experiencing hyperinflation (a monthly inflation rate above 50%), higher inflation itself is still extraordinarily damaging to an economy due to its erosion of savings and diminishing of purchasing power. However, it is minimum wage workers that truly bear the brunt of inflationary fallout. 

Minimum wage workers, who already have little to no savings, rely on the lowest level of fixed income in the nation and must spend virtually all earnings on living necessities. When the price of goods and services rise, minimum wage workers must revert to an even lower level of sustenance to afford a sufficient living standard. Given that Americans pay more for essential goods (e.g. healthcare, pharmaceuticals, broadband) than any other developed nation, a rise in consumer prices adds even more pressure to minimum wage earners, a demographic of over 1.5 million workers already subjected to higher rates of depression, anxiety, malnutrition, and mortality. Notably, since the last increase in the minimum wage to $7.25 in 2009, consumer prices in U.S. cities have risen by 28%; it’s clear that the current predicament of workers is dire.

In a similar moment of crisis, the federal minimum wage itself was implemented nearly a century ago as American workers continued to struggle in the post-Depression era. The first federal minimum wage was established at $0.25 an hour in 1938 under the Fair Labor Standards Act, one of many pieces of FDR New Deal legislation. In response to the abject poverty that pervaded the economy, U.S. society agreed that American workers should be guaranteed a certain level of income to ensure a sufficient standard of living. 

However, given that inflation is necessary for a healthy economy, consumer prices must and will always increase. In fact, the Federal Reserve, the United States’s monetary authority, even sets an inflation target rate (2% since 2012) that most corresponds to its mandates of price stability and maximum employment. Although consumer prices will always rise, the same cannot be said about the federal minimum wage.

Since its inception, the federal minimum wage has been raised on numerous occasions. However, the method through which the minimum wage is incrementally increased has been historically inefficient. Though consumer prices continuously rise, any current increase in the federal minimum wage remains contingent upon who wields power in the presidential office and both chambers of Congress, all of which become notably mired in the oscillating opinions of the public and the all too pernicious effects of lobbyists. Such variables prove demonstrably irrelevant to the rising consumer prices faced by workers, resulting in a staggeringly erratic increase in the minimum wage that is wholly incongruous with the ever rising cost of living.

Consumer price index for all urban consumers. Graph by the Federal Reserve of Economic Data (FRED) Research Department at the Federal Reserve Bank of St. Louis.

Federal minimum hourly wage for nonfarm workers for the United States. Graph by the Federal Reserve of Economic Data (FRED) Research Department at the Federal Reserve Bank of St. Louis.

In a democratic society, the conventional method of resolving such predicament is through legislative action. However, the current political landscape presents a bleak outlook for American workers. Though the Republican party has historically remained apathetic to the plights of labor movements and the workers they represent, the Democratic party has also been undeniably self-serving in its advocacy.

The rhetorical mantra of a $15 minimum wage has been a progressive slogan since 2012. Though promoting an increase in the minimum wage is certainly not a senseless endeavor, given that a raise of the federal minimum wage last occurred in 2009, it is senseless to believe that a temporary policy solution is fit for a perpetual economic phenomenon. However, the policy directives of Democrats are grounded in such senselessness.

Truly, raising the minimum wage to $15 would do very little to alleviate the financial situations of minimum wage earners after inflation has functionally eroded the buying power of $15. Though such an inconsistent increase of the minimum wage fails to provide an extensive policy solution in the long run, it does serve useful towards campaign prospects in the short-term. 

Indeed, Democrats’ usage of the $15 minimum wage’s emotional appeal to desperate workers merely satisfies a transient political victory. Eventually, consumer prices will rise again, the minimum wage will need to rise again, and Democrats will choose a new, arbitrary number to appeal to the masses with for re-election purposes. Given that the only alternative is an indifferent GOP committed to fanatical economic libertarianism, minimum wage earners must be resigned to re-elect officials with no interest in solving the issue in the long run, but willing to provide a temporary relief from inflation in the now.

The U.S.’s method of increasing the minimum wage has been an inefficient failure since its inception. Lawmakers in 1938 formulated no contingency plans for the inevitable rise in consumer prices, leaving workers at the mercy of the ever-volatile political theatre of Washington. The time has come, then, to rectify the oversights of our predecessors and the derangement of our current leaders. 

Instead of the left’s self-serving practice of inconsistently raising the minimum wage and the right’s puerile conviction of stagnation, the entire process must become objective and quantitative in nature and wholly isolated from the whims of elected representatives. The adjustment of the minimum wage must become a simple, mathematical correlation overseen by an independent regulatory body and be necessarily reliant on the price of consumer goods; when inflation rises, so too does the minimum wage rise in tandem.

In fact, as many as 17 states have instituted policies linking minimum wage to inflation, a practice termed “inflation indexing”. Within these states, minimum wage earners can rest in knowing that when prices rise, their wages are guaranteed a proportional rise as well. 

In a time when workers are forced to choose between feeding their children and obtaining life-saving insulin, it becomes abundantly clear that our minimum wage, and the ways through which we raise it, is not working, it's killing.

Daniel Kim (CC ‘24) is a Staff Writer at CPR and is in the Economics-Political Science joint major program. In his free time he can be found listening to renaissance motets while catching up on his readings in Butler.