U.S. minimum wage is down to 38% of median pay

$5.15 vs. $13.47 an hour is a record income gap

October 24, 2003|By CBS MARKETWATCH

SAN FRANCISCO -- Americans earning the federal minimum wage have fallen behind U.S. median income by a record percentage this year, a study by the Economic Policy Institute found.

The current $5.15-an-hour minimum wage amounts to 38 percent of the national median income of $13.47 an hour in the first half of this year. The gap is the largest since the data were first gathered in 1973. The wage gap was at its narrowest in 1979, when the minimum wage amounted to 55 percent of median income.

A tight labor market led to a rise in median income in the late 1990s, but the minimum wage has been unchanged for six years. Because the minimum wage isn't linked to inflation, workers in the lowest-paying jobs have fallen behind on meeting basic costs of living, said Sylvia Allegretto, an economist with the institute, an economic research group.

"People making the minimum wage are actually losing ground," Allegretto said. "Inflation erodes in real terms the value of those monies over time."

In 1973, the minimum wage was $1.60 an hour, equivalent to $5.75 today adjusting for inflation. Today's actual minimum wage of $5.15 is in real terms 10 percent lower than that of 30 years ago.

The national median income rose 10 percent in the same period, to today's $13.47 from 1973's inflation-adjusted $12.26.

Some states have addressed the wage gap. Washington state links its minimum wage to inflation, and its minimum will rise to a national high of $7.16 in January from $7.01. That will push the state past Alaska, which has a $7.15 minimum wage, according to the U.S. Labor Department.

Oregon's minimum wage is $6.90. Connecticut's is also, but it rises to $7.10 in January. California and Massachusetts pay a minimum wage of $6.75, while Maine, Vermont and Hawaii pay $6.25. Rhode Island, Delaware and the District of Columbia pay $6.15.

Meanwhile, cities and counties continue to adopt living-wage ordinances requiring employers holding contracts with government agencies to pay an hourly wage adequate for the area's living costs. Baltimore enacted a living-wage ordinance in 1994; the current rate is $8.70 an hour.

"The cost of living is really different across states. You can see how a federal minimum wage is probably not really efficient," Allegretto said. In costlier locales, "a minimum wage of $5.15 would be really insufficient and very low. In other places, maybe it's not that far off the mark."

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