US Minimum Wage Adjusted For Productivity

The minimum wage increased in 19 US states from the beginning of this year. For example, in California the minimum wage increased by 50 cents to $10.50 an hour. In the state of Massachusetts, it increased y $1 to $11 an hour. The chart below shows the rate increases by state:

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Source: Minimum Wages Set to Increase in Many States in 2017, WSJ, Dec 30, 2016

Despite these raises, the US minimum wage is still low according to one report by EPI. Productivity has soared for many years due to advancement in technology and automation. However much of the gains have been extracted and accumulated by the upper class. Hence if US minimum wage had kept up with productivity it would be much higher today. In 2016, adjusted for productivity the rate would have $18.85 per hour.

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Source: The top charts of 2016, EPI

From a global perspective also, the US rate is lower than other developed countries. In fact, an OECD report placed the US at number 11 with Australia ranking the top.

Source: OECD

Some of the reasons for the depressed wages for American workers especially the lowest skilled workers are: excess supply of labor due to natural population growth, legal and illegal immigration, automation that wiped out many low-paying jobs, extreme pressure on corporations that employ minimum wage workers to increase profits, etc.

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