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United States

Workers

The Lowest Minimum: Why We Still Have a $2 Tipped Minimum Wage

Yesterday, CEPR released a short study asking how high the minimum wage would be if it had risen in line with productivity since 1968. Between January and February of that year, the minimum wage increased 14 percent from $1.40 to $1.60; instead of shedding jobs, the labor market seemed to improve. Between 1967 and 1968, the prime-age employment rate increased half a percentage point, and the unemployment rate fell to 3.6 percent.

Such an experience would ordinarily give policymakers little reason to fear minimum wage hikes. However, since 1968, the minimum wage has failed to rise in line with either productivity or inflation. Had it risen in line with productivity, it would have been $18.42 in 2014; had it risen in line with inflation, it would have been $9.54.

CEPR and / July 24, 2015