Minimum wages don’t keep pace with inflation

The argument

Proponents of this position argue that a legal wage floor is a poor anti-poverty instrument because it is fixed in nominal terms while the cost of living is not. A minimum wage is set as a figure; what that figure buys keeps moving. Unless the figure is revised continuously, the protection it offers decays automatically, and the decay is easy to miss because the stated wage never falls. The evolution of the federal minimum wage in the United States is offered as the illustration. In 1968 the federal minimum wage guaranteed a full-time worker an income of $19,553 a year, which was enough to keep a family of three, two parents and one child, above the national poverty line. A single full-time job at the legal floor therefore did the work that the policy is supposed to do. By 2013 inflation had eroded the real value of that floor, and the minimum wage guaranteed a full-time worker just $15,080 a year. That sum would not even be sufficient to keep a family of two, one adult and one child, above the poverty line. The same statutory guarantee had moved from lifting a household of three clear of poverty to failing a household of two on a full working week. What this shows, on this view, is a structural feature rather than a single legislative lapse. The guarantee weakened without being repealed, narrowed or even debated, because keeping pace with inflation requires repeated political action that the mechanism itself does not supply. Any gain from raising the floor begins eroding from the moment it is enacted, and the burden of poverty reduction is placed on a number that only ever catches up in arrears. Relying on a legal minimum wage to tackle poverty is therefore hazardous, proponents argue, and a minimum wage is ineffective at reducing poverty.

Context

Minimum wages are an ineffective tool to tackle poverty because they don’t keep pace with inflation. The minimum wage is set to a fixed amount. Unless legislators revisit the minimum wage each year and make adjustments for inflation and real wage growth, those earning the legal minimum wage will fall behind.

Premises

Counter-arguments

A minimum wage can keep place with inflation if it is designed with automatic increases on par with the rate of inflation. This would ensure that every full-time worker received a pay increase that matched the rate of inflation each year, allowing them to retain their purchasing power.

Rejecting the premises

[Rejecting P1] A minimum wage can keep pace with inflation.