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When President Obama proposed increasing the minimum wage, he argued that a minimum-wage worker today should earn the same amount of money in real terms as a minimum-wage worker in 1979. But why pick 1979? Why not go back to 1938, the first year of the minimum wage? Why not 1999? For each of the years listed below, calculate what the minimum wage would be today if it had kept up with inflation since that year. Today, the minimum wage is $7.25 and the consumer price index (CPI) is 256. (Round your answer to two decimal places.)

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jepessoa

Answer:

Year Minimum wage CPI  Wage today adjusted for inflation

1938 $0.25   14  $4.57    

1979 $2.90   69  $10.76    

1999 $3.80   127  $7.68

$1 in 1938 is equivalent to 256/14 = $18.29 today

so $0.25 is equivalent to $18.29 x 0.25 = $4.57  

$1 in 1979 is equivalent to 256/69 = $3.71 today

so $2.90 is equivalent to $3.71 x 2.90 = $10.76

$1 in 1999 is equivalent to 256/127 = $2.02 today

so $3.80 is equivalent to $2.02 x 3.80 = $7.68

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