Question: An article in the Sacramento Bee (Stafford, 2003) on July 7, 2003 reported that the current minimum wage is only $5.15 an hour and that it has not kept pace with inflation. The Consumer Price Index at the time (the end of June 2003) was 183.7.
a. One of the quotes in the article was "to keep pace with inflation since 1968, the minimum wage should be $8.45 an hour today." In 1968 the minimum wage was $1.60 an hour and the Consumer Price Index was 34.8. Explain how the author of the article determined that the minimum wage should be $8.45 an hour.
b. The minimum wage was initiated in October 1938 at $0.25 an hour. The Consumer Price Index in 1938 was 14.1, using the 1982-1984 base years. If the minimum wage had kept pace with inflation from its origination, what should it have been at the end of June 2003? Compare your answer to the actual minimum wage of $5.15 an hour in June 2003.
c. The minimum wage of $5.15 an hour was set in September 1997 when the Consumer Price Index was 161.2. If it had kept pace with inflation, what should it have been at the end of June 2003?
d. Based on your answers to parts a to c, has the minimum wage always kept pace with inflation, never kept pace with inflation, or some combination?