A recent report from the US think tank Center for Economic and Policy Research (CEPR) highlights that July of this year marks the 17th consecutive year the federal minimum wage has remained stagnant at $7.25 per hour. With persistent inflation and an unchanged base wage, the real purchasing power of the current minimum wage has fallen to its lowest point in seven decades, significantly below its historical peak in 1968.

Senior Economist at the Center for Economic and Policy Research, Sylvia Allegretto, wrote: "We are in the longest period of policy stagnation since the federal minimum wage was established in 1938. In fact, the current federal minimum wage has effectively become a poverty wage."

Indeed, last year the federal minimum wage became a "poverty wage," meaning a full-time, year-round job paying $7.25 per hour would yield an annual income below the $15,650 poverty threshold set by the US Department of Health and Human Services.

Amidst inflation exacerbated by tariffs and conflict with Iran, coupled with persistently high housing and childcare costs, an ongoing affordability crisis has brought the minimum wage back into the national spotlight. According to data from the Atlanta Federal Reserve, one economic hardship facing Americans is wage growth stagnation, with its rate declining from a peak of 6.7% in July 2022 to 3.6% last month.

A 2021 survey by the Pew Research Center indicates widespread public support for raising the federal minimum wage, with 62% of Americans favoring a $15 per hour floor. The majority of those opposing a $15 wage also believe the minimum should be higher than $7.25, even if not reaching $15.

Furthermore, the desire for higher wages remains a key issue for voters. New York City Mayor Zohran Mamdani has proposed raising the minimum wage to $30 as part of his mayoral campaign, with a plan to increase the city's wage floor from $16.50 to $30 by 2030.

The Problem with the Historically Low Wage

Senior Economist Allegretto explains that while 30 states and Washington D.C. have minimum wages above the federal standard, states adhering to the $7.25 floor are concentrated primarily in the South, where poverty rates are among the highest nationally. In Mississippi, over a quarter of the workforce earns less than $15 per hour, a situation mirrored for one-fifth of jobs in Arkansas, Oklahoma, and Alabama.

The link between low wages and higher poverty rates is well-documented: a 1987 study by Congressional Budget Office economists Ralph E. Smith and Bruce Vavrichek found that 20% of hourly workers (earning $3.35 or less at the time) had incomes below the US poverty line. Research from the Center for American Progress suggests child poverty reduces GDP by approximately 1.3% annually, impacting productivity and economic output.

Opponents of raising the minimum wage argue that real market wages have already increased with inflation and productivity growth. Calculations from the Cato Institute think tank show the average effective minimum wage was $12.13 as of January. Researchers contend that wage hikes would reduce employment opportunities for low-skilled workers, drive up consumer prices, and lead to job losses due to increased labor costs.

These concerns are reflected in California, where Governor Gavin Newsom signed a 2024 bill setting a $20 minimum wage for fast-food industry workers. Multiple studies, including a November 2025 report from the Cato Institute citing US Bureau of Labor Statistics data, note that following the implementation of the $20 wage law, the fast-food sector had 18,000 fewer jobs compared to other employment markets.

Other economists argue that opposition to these wage increases is overstated. A working paper from the University of California, Berkeley, released earlier this year found that California's new policy raised average weekly wages for eligible workers by about 11% without impacting employment. Prices increased by approximately 1.5%, equating to a 6-cent rise on a $4 item.

California's minimum wage policy may signal similar actions elsewhere in the nation. A report from the National Employment Law Project found that about twenty states are set to raise their minimum wages at some point this year.

"Many people are watching what happens in California," said the study's author, Michael Reich, director of the Center on Wage and Employment Dynamics at UC Berkeley. "It could potentially provide a model for the rest of the country."