Policy Assignment

Should the minimum wage be increased annually at the rate of inflation?

The minimum wage is defined as, "The lowest wage permitted by law or by a special agreement," according to the Oxford Dictionary. I think most people agree that the lowest wage deemed by the government is never enough. However, I do not think that the minimum wage should be increased annually at the rate of inflation. Yes, the cost of goods rise over a period of time and the current value of the American dollar isn't stellar in these current times. But minimum wage is just that, the bare minimum an employer is allowed to pay their hourly employees, per the government. 

Graph courtesy of www.project. org

Employers could offer a higher salary to stay competitive in the job market and a potential job seeker does not have to take that minimum wage salary. You can see from the graph above that the minimum wage has steadily increased over the years. A person's wage depends on many different factors including: years of experience in particular field, education and prior salary. 

You may wonder, "Who decides when and how much the minimum wage should be increased?" The United States Congress decides what the federal minimum wage should be but individual states have the right to set it higher if and when it deems necessary. 

My next question would be, "should the minimum wage be decreased when inflation decreases?" I think the resounding answer would be, "NO!" Just like Principle 10 states: Society Faces a Short-Run Trade-Off between Inflation and Unemployment." This just means that when inflation rises unemployment is usually low because the cost of goods is higher and therefore more people may be working. Vice versa, when unemployment is high inflation is usually low. This is also referred to as the business cycle. 

As of January 1st, 2013,  the minimum wage in Colorado is $7.78 per hour. That is $.53 higher than the federal minimum wage. The following information was obtained from the CDLE or Colorado Department of Labor and Employment website. Also, if a person if a federal employee in a state such as Colorado that has a higher minimum wage the higher wage must be paid. 

Colorado State Minimum Wage

Effective Date	Minimum Wage	Tipped Employee Wage
January 1, 2013	$7.78	$4.76
January 1, 2012 - December 31, 2012	$7.64	$4.62
January 1, 2011 - December 31, 2011	$7.36	$4.34
January 1, 2010 - December 31, 2010	$7.24	$4.22

Article XVIII, Section 15, of the Colorado Constitution requires the Colorado minimum wage to be adjusted annually for inflation, as measured by the Consumer Price Index used for Colorado.

No more than $3.02 per hour in tip income may be used to offset the minimum wage of tipped employees.

 I can definitely see why some people are big proponents of the minimum wage being increased with the rate of inflation. When things cost more we need more money to pay for those things. There are millions of people who solely support their families on minimum wage paying jobs and it's tough and many look to the government to protect them and be their voice. Minimum wage should be monitored and studied on a regular basis both at the federal and state level.