Minimum Wage Earners Have Lost More Than 27% of Their Buying Power Due to Inflation

Talk about a giant setback.

At this point, most of us are well aware that inflation has been rampant this year. Consumers are now racking up higher credit card tabs to cover the cost of everything from gas to food to apparel. And it's hard to predict when living costs will start dropping to more manageable levels.

In June, the Consumer Price Index, which measures changes in the cost of consumer goods, rose 9.1% on an annual basis. That's the highest measure in roughly 40 years. And while it's causing workers across the board to lose buying power, it's dealing a particularly tough blow to those earning minimum wage.

A drastic loss in spending power

The federal minimum wage is $7.25 an hour, a figure that hasn't budged since July of 2009. But because of the way inflation is soaring, those earning minimum wage today effectively earn 27.4% less than they would have back in the summer of '09.

Here's another way to look at it. In 1956, the federal minimum wage was $0.75, which is the equivalent of $7.19 in June of 2022 dollars. What that basically means is that those making the minimum wage have not gained buying power in 66 years.

An ongoing problem

Even before inflation started soaring, it was easy to argue that the federal minimum wage just isn't a reasonable income to live on -- at least not on a full-time basis. For those earning minimum wage at a side hustle but having access to a more generous full-time salary, it's a different story.

But the reality is that many people put in a 40-hour workweek and are limited to an hourly wage of $7.25. That amounts to just $290 a week, or $15,080 a year.

Meanwhile, the median American rent is more than $2,000 per month, according to Redfin. That means that workers earning minimum wage who rent an apartment at half that cost still spend the overwhelming majority of their income on housing alone.

Is there any relief for lower earners in sight?

President Biden had initially tried to implement a minimum wage hike in the course of giving out COVID-19 relief. But ultimately, that provision didn't make it into an official relief bill.

Some states and cities have taken action to address the minimum wage problem -- namely, by implementing their own minimum wage that's higher than $7.25 an hour. But that protection does not exist in some parts of the country.

There are also a number of well-known companies that have gone out and raised their own minimum wages. But that's not a choice that all employers have been forced to opt into.

What's especially frustrating about this glaring lack of a minimum wage increase is that so many other measures are pegged to inflation, yet the minimum wage isn't. Just look at Social Security. Beneficiaries are entitled to an annual cost-of-living adjustment that's specifically tied to inflation. That way, seniors on a fixed income don't lose buying power.

Why aren't minimum wage earners entitled to that same protection? It's a question lawmakers will hopefully do their best to address as living costs soar and more and more low-income workers continue to struggle.