The FRED® Blog

# How binding is the federal minimum wage?

## The real value of \$7.25 per hour and the declining number of workers who make it

The federal minimum wage hasn’t changed since 2009. But in those 15 years, the real value of \$7.25 per hour has changed considerably due to inflation, especially in the past few years.

The FRED graph above uses data from the Bureau of Labor Statistics to show the federal minimum wage adjusted for inflation using the consumer price index, or CPI.

Keep in mind that the CPI data here correspond to actual prices in 1982-84. Thus, the real federal minimum wage (the blue line) is measured relative to the prices of that period. But it is the visual here that really matters: The real federal minimum wage has never been as low as it is now, at least within the period shown in this graph. (If you move the date tracker below the graph, you’ll see that it was lower in 1947-49.)

Of course, the federal minimum wage is only impactful if the state-level minimum wage is not set higher. And most states do set a higher minimum wage. This FRED map identifies each state’s approach to the minimum wage, including some that do not set one at all.

Now, the lower a minimum wage is, the less it’s going to matter in raising overall wages. And the fewer employees who earn that minimum wage, the less it will affect the US economy. The line in red shows the proportion of US employees who earn the minimum wage or less. (There are exceptions for certain professions.) The red and blue lines do indeed follow a very similar downward path.

How this graph was created: Search FRED for “minimum wage.” Use the “Edit Graph” panel to add the series “CPI”; change the frequency to annual, taking averages; and apply formula a/b*100. Use the “Add Line” tab to search for and select the “paid at or below minimum wage” series. Use the “Format” tab to move the y-axis for one of the series to the right. Start the sample period in 1979.

Suggested by Christian Zimmermann.