The minimum wage in 1960 was $1.00 per hour, or $2,080 per year for a forty-hour per week job.
According to the Social Security Administration (SSA), which tracks this data, the average annual wages for a full-time forty hour per week job at that time across all sectors was approximately $4,000, or about twice the minimum wage.
The minimum wage in 2017 was $7.25 per hour, or $15,080 per year. The average salary for that year was just over $50,000, or about 3.3 times the minimum wage, according to the SSA.
This means that minimum wage workers have lost significant ground relative to the rest of the economy, amounting to about 40 percent. Equalizing the purchasing power of minimum wage employees to 1960 levels would require an increase in the minimum wage to at least $10.10 per hour.
Meanwhile, the calculations that set the federal poverty line have changed as well due to out-sized changes in costs for health care and transportation, among other factors. The current federal poverty line for a family of three is $21,000 and for four is approximately $25,000 per year, implying a minimum wage of $10.10 and $12.50, respectively.
It bears noting that minimum wage jobs have never been a road to prosperity. Today, however, a total of approximately $21,000 per year is needed simply to keep pace with workers of 1960. At the time, this was enough to keep a family of three just above the poverty line. Today, the current minimum wage is not enough to keep a family of two out of poverty, as that level was approximately $16,000 in 2017.
Meanwhile, structural increases in costs for health care place more stresses on the working poor than they did in 1960. As a result, an increase in the minimum wage beyond nominal terms is required in order to preserve the economic viability of the workers at the bottom of the wage scale. It appears that a federal minimum wage of at least $13.00 per hour would be appropriate. Current proposals to increase the rate to $15.00 per hour over a number of years seem reasonable, as long as the increases are then further indexed to inflation.
One principal argument against raising the minimum wage is that it will cause many employers to fire employees and reduce overall employment. However, in the history of the minimum wage laws in this country, that has never proven to be the case. Some businesses have had to reduce staff levels in the short term, but in every single case since the beginning of the minimum wage laws in 1938, overall employment and overall economic activity has increased with each and every increase in the minimum wage. This is because the remaining minimum wage workers have more money to spend, and they spend it. This causes new jobs to be created, leading to higher total earnings and overall economic growth. According to economic theory, this has to do with a concept called the “Marginal Propensity to Consume”, which states that people with the fewest resources tend to spend the highest percentage of those resources immediately. That is why it makes more sense to give money to the people who need it most, rather than to people who do not need it and therefore will simply keep it.