The Federal minimum wage was last raised in 2009. Due to inflation, since 2009 prices have risen 44.65%. Namely, what cost $100 in 2009 now needs $144.65 to purchase the same amount.
While prices have risen 44.65% in those years, the Federal minimum wage has not risen. As a result. a dollar today only buys 69.132% of what it could buy back then. Therefore, it is obvious that workers on the Federal minimum wage have lost, and continue to lose. purchasing power. Anyone earning Federal minimum wages is living in poverty.
A worker earning the Federal minimum wage earns $7.25 per hour. If that person works 40 hours per week for 52 weeks, they earn $15,080 per year.
Going Down
“The U.S. dollar has lost 83% its value since 1975.”
$100 in 1975 is equivalent in purchasing power to about $576.81 today, an increase of $476.81 over 49 years. The dollar had an average inflation rate of 3.64% per year between 1975 and today, producing a cumulative price increase of 476.81%.
This means that today’s prices are 5.77 times as high as average prices since 1975, according to the Bureau of Labor Statistics consumer price index. A dollar today only buys 17.337% of what it could buy back then.
To put it another way, that dollar today is worth 17 cents of a 1975 dollar.
Academic
It is commonly taught in economics that the cause of inflation is too many dollars chasing too few goods. The theory is that inflation could be controlled by adjusting the supply of money, which itself can be controlled by the Federal Reserve through the use of interest rates changes. However, no one seemingly can control the amount of goods available for sale. No one can control attitudes and perceptions. These lopsidednesses means that control of inflation is a shaky affair.
Is it possible to control inflation? Yes and No. I believe control of inflation by small incremental measures is difficult, if not impossible. The U.S. inflation of the 1970s was brought under control by hiking interest to abnormally high levels. Many people were hurt financially. By 1980, the consumer price index rose 14%.
Not Everyone Escapes
John Connally was chosen by Nixon to be his Treasury Secretary. Connally had no formal training in economics. He later declared personal bankruptcy.
Inflation
While we cast a death stare at inflation, it is clear that inflation is seen as a good thing by economists, at least in moderation. The Federal Reserve actually promotes inflation, at least to a two percent level.
I don’t know about you, but I am not happy when my money loses value. Even a 2% loss per year causes pain. At a 2% per year inflation, one’s money loses almost 20% of value over ten years,
When money loses value, it becomes imperative to find income that is not fixed in value, such as owning assets that can grow. Owning inflationary assets becomes a necessity.
When inflation exceeds 2% per year and spikes as it has in recent years, there is plenty of pain to go around. Loss of financial value causes severe discontent. People get angry. I would contend that conspiracy theories accelerate more as inflation rises.
Does inflation inflame your attitude? Let me know here.
The Large Tree is by Paul Gauguin in Tahiti, 1891. Courtesy National Gallery of Australia, Canberra .
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