The federal minimum wage was $7.25 an hour after it was increased in 2009. In 1980, the minimum wage was $3.25 an hour. The CPI (1982-84 = 100) was 82.4 in 1980 and was 214.5 in 2009. Which of the following is true?
A) The 1980 minimum wage is about $8.46 in 2009 dollars, so the minimum wage has gone down in real terms.
B) The 1980 minimum wage is about $8.46 in 2009 dollars, so the minimum wage has gone up in real terms.
C) The 1980 minimum wage is about $1.25 in 2009 dollars, so the minimum wage has gone down in real terms.
D) The 1980 minimum wage is about $1.25 in 2009 dollars, so the minimum wage has gone up in real terms.
E) The 1980 minimum wage is about $4.50 in 2009 dollars, so the minimum wage has gone up in real terms.

Question

Quizplus · Accepted Answer

To adjust the 1980 minimum wage to 2009 dollars using the CPI, we use the formula: (1980 wage) * (2009 CPI / 1980 CPI) = ($3.25) * (214.5 / 82.4) ≈ $8.46. Since $8.46 (the adjusted 1980 wage in 2009 dollars) is higher than the actual 2009 minimum wage of $7.25, it indicates that the real value of the minimum wage has decreased.

The Federal Minimum Wage Was $7