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Feb. 1, 2023

Ask the Expert: Will minimum wage keep up with inflation?

Antonio Doblas-Madrid, an associate professor of economics in Michigan State University’s College of Social Science, discusses the rise in minimum wage and how it compares to inflation.


Will the rise in minimum wage keep up with inflation?


Inflation has increased so much and so fast that these measures are mostly smaller than inflation and unable to keep up. If we look at the market in relation to current wages, in many cases the minimum wage is not even in the relevant range. Because the minimum wage has been frozen for a long time, it is still lower than market rates.

Antonio Doblas Madrid
Antonio Doblas-Madrid, associate professor of economics. Courtesy photo


Is there any concern that increasing the minimum wage will push out higher-paying jobs? 


Most workers are already receiving higher wages. And at current levels, given the degree of inflation that we have seen in the last couple of years, we are nowhere near a minimum wage rate that poses serious concern in that regard.  


The consensus surrounding the pitfalls of increasing the minimum wage was challenged by a famous study in 1994 in which New Jersey raised the minimum wage and its neighbor, Pennsylvania, did not. With metropolitan areas crossing the state line, there was an ideal sample of fast-food restaurants with a higher minimum wage and others with a lower minimum wage. The results were striking. Theory said jobs should disappear as a result of restaurants having to pay higher minimum wages. But the opposite happened. Not only were jobs sustained, but employment actually increased in the areas with a higher minimum wage.


Do you think minimum wages will continue to increase?


It depends. In the United States, we have a complicated patchwork of state and local regulations that influence minimum wage based on elections and which party has jurisdiction. I believe the ideal minimum wage regulation should reflect time, place and industry. 


By: Kaylie Crowe

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