Adjusted for Inflation, the Federal Minimum Wage at Lowest in Decades

by | February 14, 2022 | Employment Law, Wage & Hour

In December 2021, The Brookings Institution released portions of a study that revealed what the wage increases given to frontline workers at 13 “household name” companies actually mean in the bigger economic picture.

At Amazon, for instance, the average hourly wage went up 17 percent, from a pre-Covid-19 pandemic $15.75 in January 2020 to $18.50 by October 2021. Employees at Target saw their average wages go up by 11 percent for the same period, from $14.48 to just over $16. But as the Brookings study termed it, these wage increases were “nominal”—that is, they don’t account for inflation, which, in recent months, coming out of the pandemic recession, is at a 40-year high. In fact, the Brookings study found that, given 2021 inflation figures, some of the wage increases amounted to barely a dollar an hour or less.

In other words, it is great that such raises are being given, but they are not all that they’re cracked up to be. And they depend upon the employer’s good graces.

Things are worse if you don’t work for one of the companies giving voluntary wage hikes. Due to political stalemates, the federal minimum wage remains frozen at a mere $7.25. Adjusted for inflation, this is the lowest minimum wage in decades. Although advances are being made at the state and local levels, without significant increases at the federal level, many workers will be left behind and feel the squeeze when inflation dilutes their pay—unable to afford basic necessities despite working full-time. There is no excuse for continued inaction on the part of Congress and the federal political machinery.

More Salaried Employees Hurt by Existing Overtime Exemptions

Similarly, inflation is relevant to whether workers must be paid overtime under the federal overtime law. The law provides that certain workers are overtime “exempt” and do not need to be paid extra wages when they work over 40 hours in a week. Several of the overtime exemptions only come into play if an employee makes a guaranteed salary above a certain threshold. However, the salary level is not tied to inflation and remains disproportionately low. A federal judge in Texas blocked the Obama administration’s attempt to raise the salary threshold and index it to inflation. The failure to adjust the requisite salary levels means that more employees are captured by the exemptions and can be taken advantage of by employers seeking free labor.

Wages for Hourly and Salaried Workers Must Keep Pace with Economic Shifts

Inflation calls for adjustments to wage and hour laws and regulations to safeguard employees’ wages by guaranteeing that their pay keeps pace with economic conditions.

Ultimately, wage and hour protections are designed to ensure that workers are paid properly for all of their labor and to enable them to lead decent lives. If employees are subject to violations, they may be able to take legal action against their employers to recover lost wages, penalties, and other relief. Sanford Heisler Sharp has extensive experience representing employees who were denied their wages under the law and has recovered millions of dollars for workers ranging from delivery drivers to salespersons to workers in the tech industry.