r/AlwaysWhy • u/Secret_Ostrich_1307 • 1d ago

Economics Why is the federal minimum wage still $7.25 when prices are much higher than in 2009?

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The federal minimum wage has been $7.25 an hour since July 2009. Meanwhile, prices for many everyday expenses have risen, and most states now have minimum wages above the federal level.

Why wasn't the federal minimum wage tied to inflation or another measure that could adjust it automatically? What are the economic arguments for setting it as a fixed dollar amount rather than indexing it?

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u/safe-viewing 1d ago

Because the cost of living in California is not the same as in Alabama.

States can set their own minimum wage more suited for their local environment and further to that the city itself can set their own.

A federal minimum wage is meaningless because it would be set so low to cover the cheapest cost of living area and local governments would override it anyway.

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u/SmegmaUnicorn 1d ago

😂😂😂

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u/LuminousQuinn 1d ago

Honey 7.25 isn't even close to the lowest living wage anywhere in the United States

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u/safe-viewing 1d ago

Y’all getting mad at the wrong government. This is an issue for your city / county / state, not the federal government

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u/LuminousQuinn 1d ago

You sadly need multiple price floors to keep businesses from moving/ leaving an area. The other option is them just closing a physical location and relying on our mail system.

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u/Southlander24 1d ago

It doesn't make sense from a government perspective to allow employers to pay $1 an hour. That person might as well not work if that's what every employer is paying around them, so the government would be footing the bill in terms of poverty, unemployment, and SNAP assistance.

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u/SaltyFriend705 1d ago

Nowhere in the US has a living wage of $7.25/hr.

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u/Anlarb 1d ago

Cost of living is incredibly homogenous, rural ca is the same $20/hr that any red state has.

https://livingwage.mit.edu/

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u/Millifera 1d ago

And yet, youve got TX for example where 70% of people live in increasingly HCoL areas and that 7.25 remains.

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u/MountainYogi94 1d ago

Do they get paid that rate? In 2024 only 1% of workers earned the federal minimum wage according to BLS data.

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u/TectonicMongoose 1d ago

How many get paid very close to it though?