The minimum wage is now the lowest it’s been in 70 years—making the federal wage floor ‘officially a poverty wage,’ report finds

The United States is witnessing a concerning trend as the federal minimum wage hits its lowest value in nearly seven decades. Since July 2009, the base pay has remained stagnant at $7.25 an hour, a figure that now translates to an officially poverty wage, according to a recent report by the Center for Economic and Policy Research (CEPR). This prolonged inaction has left millions of Americans struggling to make ends meet as the cost of living continues to rise.

Background & Context

The federal minimum wage has been a cornerstone of American labor laws since its inception in 1938. However, the last time the U.S. raised the federal minimum wage was in 2009, when the iPhone 3G was still a relatively new device and the world was yet to witness the rise of AI-powered virtual assistants like Siri. Since then, inflation has continued to climb, eroding the purchasing power of the $7.25 wage floor.

The consequences of this prolonged stagnation are multifaceted and far-reaching. A full-time, year-round job paying $7.25 an hour would now fall below the poverty threshold of $15,650 established by the Department of Health and Human Services. This stark reality highlights the disconnect between the federal wage floor and the actual costs of living in the United States, where housing, childcare, and healthcare expenses continue to soar.

Key Details

CEPR senior economist Sylvia Allegretto notes that the current wage floor is officially a poverty wage, a label that has become increasingly accurate as the purchasing power of the $7.25 wage continues to decline. The report further emphasizes that the federal wage floor has not seen a raise in 17 years, the longest period of inaction on the federal minimum wage since its inception in 1938.

Americans are largely in support of an increase to the federal minimum wage, with 62% of respondents in a 2021 Pew Research Center survey advocating for a $15 wage floor. However, despite the overwhelming desire for higher wages, the federal wage remains stuck at $7.25. New York City Mayor Zohran Mamdani has proposed a $30 minimum wage as part of his mayoral campaign, a figure that would see the city's pay floor increase from $16.50 to $30 by 2030.

What Experts Say

Experts warn that historically low wages have severe consequences for both individuals and the broader economy. A 1987 study by U.S. Congressional Budget Office economists Ralph E. Smith and Bruce Vavrichek found that 20% of hourly wage workers paid at or below the $3.35 minimum wage at the time earned incomes under the U.S. poverty line. Research from the Center for American Progress suggests that childhood poverty reduces productivity and economic output by approximately 1.3% of GDP per year.

Allegretto emphasizes that states with the $7.25 wage, mostly in the South, have among the highest levels of poverty nationwide. More than one-quarter of Mississippi's workforce earned below $15 per hour, as do one-fifth of jobs in Arkansas, Oklahoma, and Alabama. This highlights the pressing need for an increase in the federal minimum wage to alleviate poverty and stimulate economic growth.

Key Takeaways

• The federal minimum wage has remained at $7.25 an hour for 17 years, the longest period of inaction since its inception in 1938.
• The current wage floor is officially a poverty wage, with a full-time, year-round job paying $7.25 an hour falling below the poverty threshold of $15,650.
• Americans are largely in support of an increase to the federal minimum wage, with 62% of respondents advocating for a $15 wage floor.
• Historically low wages have severe consequences for both individuals and the broader economy, including reduced productivity and economic output.

What This Means For You

The prolonged stagnation of the federal minimum wage has far-reaching consequences for everyday Americans. With housing, childcare, and healthcare expenses continuing to soar, a raise in the federal wage floor is essential to alleviate poverty and stimulate economic growth. As the cost of living continues to rise, the need for an increase in the federal minimum wage becomes increasingly urgent.

As we move forward, it is essential to recognize the importance of a living wage and the need for policymakers to take action to address the pressing issue of poverty. By raising the federal minimum wage, we can create a more equitable and prosperous society for all Americans.