Contextualizing Minimum Wage in the Current Climate

Alexa Didinsky, for Citizen Works
July 25, 2025

Since 2009, the federal minimum wage has stagnated, causing problematic effects fo
workers in the American economy. In 1968, the minimum wage had peak buying power
($1.60) in accordance with value calculated to account for inflation (~$14.50 in 2024)
(Cooper, Martinez-Hickey, and Zipperer). The minimum wage continued to increase at
least once per decade until July 2009, when the minimum wage was increased to $7.25
(Payne-Patterson and Maye). The federal minimum wage has remained unchanged
since, and when inflation-adjusted to 2024, is only worth about ~$5.30 (Bureau of
Labor Statistics (BLS)). This means that since 2009, the federal minimum wage has lost
over 30% of its purchasing power due to inflation (Cooper, Martinez-Hickey, and
Zipperer). Because of this stagnation, minimum wage workers are effectively poorer
than they were fifteen years ago. In addition, the cost of basic needs is steadily
increasing with overall inflation (Consumer Price Index (CPI)) +45%. Depending on the
region, rent has increased on average by +90-100%, groceries +55-65%, and health
insurance premiums by +70% (BLS). This wage is no longer adequate to cover the
essentials for a single adult, let alone a family. This also means that $7.25 an hour in
2009 is equivalent to about $10.50 an hour today in real value (Cooper,
Martinez-Hickey, and Zipperer). In response to federal inaction, over thirty states and
dozens of cities have taken matters into their own hands by increasing local minimum
wages. California, for example, has a state-wide minimum wage of $16 an hour, with
many cities over $17 (Mitigation Guide).

The stagnation of the federal minimum wage can be attributed to general political and
economic reasons. Partisan gridlock has halted attempts such as the Raise the Wage Act
(2019 and 2021), which failed in the Senate. In addition, lobbying pressure from
businesses, especially the restaurant, retail, and hospitality industries, is likely a large
reason for the inaction. Focus by activists has shifted to state-by-state fights, tipping the
balance to local initiatives where change is more tangible.

The reality of the $7.25 federal minimum wage is that poverty is becoming increasingly
common. Full-time, the minimum wage is only $15,080 a year, which is below the
federal poverty line for both a single adult and the common family of two (Hickey and
Cid-Martinez). In addition, in the United States, the average worker earning minimum
wage is not able to afford a simple one-bedroom apartment at Fair Market Rent (FMR),
based on the 30% income-to-rent affordability standard without working at least 97
hours a week (National Low Income Housing Coalition (NLIHC)).

The Economic Policy Institute (EPI) estimates that raising state minimums to $10 in
2025 could benefit 1.5 million workers, and raising it to $15 would impact ~32 million
workers and lift 3.7 million people (including 1.3 million children) out of poverty
(Hickey and Cid-Martinez). Economists such as Michael Reich and Arindrajit Dube also
argue that the job losses many opponents to raising the minimum wage argue for are
much less severe than thought to be, and that higher wages could boost tax revenue and
reduce reliance on public aid (NELP).

The federal minimum wage has become symbolic, while in no way practical. Its
stagnation for more than 15 years stands in stark contrast to rising costs and
productivity gains. Instead of addressing the issue directly and raising the minimum
wage, the Trump administration has proposed a provision of the “One Big Beautiful Bill”
Act, which proposes no taxes on tips (One Big Beautiful Bill Act, 2025, sec. 70201). This
provision is a deduction for federal income tax that benefits about two-thirds of tipped
workers, according to current estimates (Press). This provision impacts the effective
income for tipped workers by potentially allowing them to retain more of their income,
but it does not set or increase the federal minimum wage.

This provision also creates an unequal tax system that heavily favors workers in
tip-heavy industries like restaurants, salons, and casinos, for example. Other low-wage
workers, such as store clerks and janitorial workers, to name a few, continue to pay full
taxes on their already low wages (Cooper and Mast). This also breaks the general
fairness principle in tax policy, as people with equal incomes should pay similar taxes
(Gleckman).

In addition, the provision undermines social security and medicare funding, which can
harm the workers who might be “benefiting” most from this provision currently. It
disrupts the “pay-in, pay-out” model that these programs rely on most by reducing
taxable income (Cooper and Mast). It also lowers future retirement and disability
benefits for these tipped workers, which could lead to a greater financial burden down
the line and cause long-term insecurity (Cooper and Mast).

Works Cited

“2025 US Minimum Wage Increases- Detailed State-By-State Overview – Mitigation Guide.”
Mitigation Guide, Apr. 2025,
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Brief, Research, et al. National Employment Law Project Minimum Wage Effects across State
Borders Estimates Using Contiguous Counties. 2011.
Bureau of Labor Statistics. CONSUMER EXPENDITURES – 2021. 8 Sept. 2022.
Cooper, David, et al. “The Value of the Federal Minimum Wage Is at Its Lowest Point in 66
Years.” Economic Policy Institute, 14 July 2022,
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Proposals in Congress and Now 20 States Could Encourage Harmful Employer Practices
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Martinez Hickey, Sebastian, and Ismael Cid-Martinez. “The Federal Minimum Wage Is
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National Low Income Housing Coalition. “Out of Reach.” National Low Income Housing
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One Big Beautiful Bill Act of 2025. Public Law No. 119-21, 4 July 2025. United States Statutes
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