In a move set to reignite the debate over increasing the federal minimum wage, Walmart said Thursday it’s giving half a million of its employees a raise.
What do Walmart’s raises really mean in context of the minimum wage debate?
As the world’s largest retailer, Walmart’s actions will likely provide a boost to those who want to bump up the federal minimum wage from $7.25 per hour to $10. Those efforts have repeatedly been blocked by some lawmakers in Congress, leading many states to pass their own laws establishing minimum wages above the federal level.
But supporters of a higher federal minimum wage have also called for the rate to be tied to inflation. Why? As inflation increases, the same amount of money buys less stuff — so that $7.25 could feel more like $6.50 or $5.75.
Take a look at the chart above: The federal minimum wage, shown in blue, has been increasing since 1938. But the purchasing power of that wage, shown in orange, has mostly been falling since 1968.
You might notice a slight uptick in the minimum wage’s purchasing power in recent years. That’s because inflation rates were unusually low in the wake of the Great Recession. But as the economy continues returning to normal, expect the minimum wage to lose purchasing power once again.
To bring it back to Walmart: The company isn’t going so far as to tie its baseline wages to inflation. And while any pay raise is certainly better for workers than no raise at all, it’s important to remember that inflation’s impact means raises aren’t always as big as they seem at first.