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Study: Min. Wage Would be $18 if Tied to Productivity

Analysts say the federal minimum wage should be more than double its current rate, if it kept pace with worker productivity. (iStockphoto)
Analysts say the federal minimum wage should be more than double its current rate, if it kept pace with worker productivity. (iStockphoto)
August 4, 2016

PIERRE, S.D. - This summer marks the seven-year anniversary of the last time the federal minimum wage was raised - from $6.55 to $7.25 an hour - and the buying power of those dollars has fallen by 10 percent because of inflation, according to new analysis from the Economic Policy Institute.

David Cooper, senior economic analyst at the Institute and the study's author, said that until the 1960s, the minimum wage was raised at roughly the same rate as increases in worker productivity.

"Had that trend continued since 1968 and we had continued to raise the minimum wage pretty regularly every year,” Cooper said, "we would have a minimum wage today of close to $19 an hour."

The Democratic Party recently added a $15 per hour minimum wage to its party platform, and Republican nominee Donald Trump has also said he is in favor of an increase. Cooper's study found that if the minimum wage had kept pace with the average growth of typical U.S. workers' income, the rate today would be almost $12 an hour.

But according to the National Federation of Independent Business, raising the federal wage isn't possible for all businesses, especially in the South and parts of the Midwest. Groups opposing initiatives in several states to raise base wages to at least $12 per hour over the next few years claimed the move could lead to thousands of jobs being cut.

Cooper disagreed.

"The effect of increases in the minimum wage on employment is probably the most studied topic in all of labor economics,” he said. "Modest increases in the minimum wage have little-to-no effect on employment. I mean, that debate is basically settled."

Cooper said raising the wage floor also helps middle-class workers get paid more, and has a positive impact on local economies.

Brandon Campbell, Public News Service - SD