Granted, a yearly inflation adjustment would be an improvement over current practice, in which Congress raises the minimum if and when it feels like it — usually every five to ten years or so — without
any automatic adjustments in the interim.
But as a rule, the minimum wage should be adjusted upward according to increases in average wages, not in prices — except in those years when inflation rises faster than
wages.
Here’s why: One purpose of the minimum wage is to make sure that low-wage workers are able to maintain a minimally acceptable standard of living. That requires not only protecting their purchasing power in the face of rising prices, but also ensuring that they maintain their living standard relative to other workers.
Put more simply, if average workers get ahead, minimum wage workers should get ahead, too.
Say, for example, that inflation rises at 1 percent a year for several years, while average wages — which determine living standards — rise at 1.3 percent. If the minimum wage is merely adjusted for inflation, low wage workers will keep falling behind other workers in terms of their standard of living.
The way to stop that from happening is to peg the minimum wage to average wages, not inflation – except when inflation outstrips wage gains.
Specifically, the minimum wage should be linked to the average hourly wage of private-sector workers in production and non-supervisory jobs, a gauge that captures broad changes in the living standards of most workers, but excludes highly paid managers and supervisors.
Members of Congress should have no trouble understanding and supporting this. In general, congressional pay is adjusted each year using a formula that is based not on inflation, but on changes in private-sector wages and salaries.
They should apply the same basic standard to the minimum wage that they apply to their own pay.