The minimum wage back in 1970 was $1.60 per hour. Today’s minimum wage is $7.25 – a 353% increase that looks great at first glance. The only problem is that the Consumer Price Index (CPI) was 37.8 in 1970 and 220.223 in 2011 – a 482% increase in the price of an average item.
That effectively means that the buying strength of a dollar is significantly weaker by 129% – the difference between today’s CPI and the CPI of 1970.
Trent Hamm, writing as a guest blogger for the Christian Science Monitor, uses these numbers to conclude that today’s fresh graduate has a worse initial income outlook than a graduate of 1970. This means that today’s grads can do less with the money they first earn when compared to when their parents first got jobs.
But even this increase pales in comparison to education and home prices as Hamm goes on to explain.
A 1970 minimum wage earner would need to work 14 hours a week to earn enough money to pay for public schooling. Today’s minimum wage earner would need to work 35 hours a week to pay for public schooling. Even home prices have jumped up by 917% when compared to the 70’s. That’s translated to an approximate 300% increase when both inflation and the housing bubble collapse are brought into the picture.
So what does Hamm have to say to the parents of the current generation?
“Don’t compare the path they’re following to the one you’re following. It’s an unfair comparison all around.”
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