US Minimum Wage Rates 1938-Present [Rates are those that were in effect at the end of each year. The minimum wage was instituted under the Fair Labor Standards Act in 1938. Ammendments in 1961 and 1966 extended coverage to more workers.] Year 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Wage $0.25 $0.30 $0.30 $0.30 $0.30 $0.30 $0.30 $0.40 $0.40 $0.40 $0.40 $0.40 $0.75 $0.75 $0.75 $0.75 $0.75 $0.75 $1.00 $1.00 $1.00 $1.00 $1.00 $1.15 $1.15 $1.25 $1.25 $1.25 $1.25 $1.40 $1.60 $1.60 $1.60 $1.60 $1.60 $1.60 $2.00 $2.10 $2.30 $2.30 $2.65 $2.90 $3.10 $3.35 $3.35 $3.35 $3.35 $3.35 $3.35 $3.35 $3.35 $3.35 $3.80 $4.25 $4.25 $4.25 $4.25 $4.25 $4.75 $5.15 $5.15 $5.15 $5.15 $5.15 $5.15 $5.15 $5.15 $5.15 $5.15 $5.85 $6.55 $7.25 $7.25 $7.25 $7.25 $7.25 $7.25 Math 110 Activity 6a Open the CPI file to use for this activity. 1. Converting to Constant Dollars A. Your mother says that when she was a teenager in 1980 she babysat for neighbors and was paid $3.50 per hour. What is a comparable wage today? Convert her wage to 2014 constant dollars to answer. B. As the old song goes, \"Shave and a haircut- two bits\". Two bits are equal to one quarter. Assuming the song originated in 1912, how much would that shave and a haircut cost in today's money? Convert the price to 2014 constant dollars to answer. C. In 1935's Night at the Opera, Groucho Marx inveigles Margaret Dumont to pay for his dinner at a fancy restaurant. His meal alone cost $9.40. How much, in today's money, did she pay for his five-star meal? Convert the cost to 2014 constant dollars to answer. 2. Comparing Prices A. The annual average price of a gallon of gasoline (regular unleaded) in 1976 was $0.64. In 1998 it was $1.06. Was gas more expensive in 1976 or in 1998? Convert the 1976 price to constant 1998 dollars and then compare it to the actual price in 1998 to answer. Show your work and explain your reasoning. B. In 1995, the price of ground beef was $1.37 per pound. In 2014, the price had risen to $4.20 per pound. Was ground beef more expensive in 1995 or in 2014? C. In 1995, the price of a gallon of milk was $2.29. In 2001, the price was $2.66. Was milk more expensive in 1995 or 2001? 3. Comparing Salaries A. In 1948, the President of the United States earned a salary of $75,000. Today, the President earns a salary of $400,000. Comparing the actual salaries (without converting to constant dollars), can you conclude that the President's salary today is worth more than the President's salary in 1948? Explain why or why not. B. Convert the 1948 salary to 2014 constant dollars. When comparing constant dollars, whose salary was worth more--Harry Truman, President in 1948, or Barack Obama, President in 2014? Show the work and explain your answer. C. A worker was making a salary of $40,000 in 2007. Her boss told her she was getting a 3% raise in 2008. What was her salary in 2008 after the raise? D. What is her 2007 salary in 2008 constant dollars? According to this value and her actual 2008 salary from part (c), did she really get a worthwhile raise? Why or why not? What does this tell you about the annual inflation rate in 2008? 5. Inflation A. What was the annual inflation rate in 1982? Explain the meaning of this inflation rate. B. What was the annual inflation rate in 2009? Explain the meaning of this inflation rate. Converting a series to constant dollars 6. Minimum Wage Open the file MinWage, which contains the minimum wage for the US since 1938 when it was instituted. (Many states also have minimum wage laws. In states whose minimum wage is higher than the federal wage, employees are entitled to the higher of the two minimum wages. The minimum wage in IL, as of July 1, 2010 is $8.25) A. Make a scatter graph of this data. For this graph, choose the subtype with straight lines but no data points, and choose a layout without a trendline. Paste graph here. What does the graph tell you about the actual minimum wage over the years? B. Explain why the graph above does not convey the buying power of the minimum wage in each year. In other words, do you know what you could buy with the wage at that time? Explain why or why not. C. Now convert the minimum wage for each year into 2014 constant dollars by first pasting the CPI values for 1938 to 2014 into column C in the Minimum Wage file. In column D, calculate the minimum wage in 2014 constant dollars. Don't forget to use cell references and \"freeze\" the cell reference for the \"new\" CPI. D. Make a new graph of the minimum wage in 2014 constant dollars (choose the same subtype as above). Paste your graph here. What does the graph tell you about the constant dollar value of minimum wage over the years? E. If you were earning minimum wage, in which year would you wish to live? Why? F. Look at years in your first graph when the actual minimum wage did not change (for example: 1981-89, 1997-2006). Then look at your second graph and describe what happened to the minimum wage in constant dollars during those years. Explain why this pattern occurs. G. The graph below was widely distributed in September of 1997 just after one of the last increases in minimum wage. While it is very attractive, the graph is problematic. What is the impression that this graph gives about the minimum wage? Compare this graph to your first graph of minimum wage. How are they different? Explain how this difference leads to a misleading impression about minimum wage over the years. Consumer Price Index Source: Bureau of Labor Statistics (www.bls.gov) Year 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 CPI 9.8 9.9 10.0 10.1 10.9 12.8 15.1 17.3 20.0 17.9 16.8 17.1 17.1 17.5 17.7 17.4 17.1 17.1 16.7 15.2 13.7 13.0 13.4 13.7 13.9 14.4 14.1 13.9 14.0 14.7 16.3 17.3 17.6 18.0 19.5 22.3 24.1 23.8 24.1 26.0 26.5 26.7 26.9 26.8 27.2 28.1 28.9 29.1 29.6 29.9 30.2 30.6 31.0 31.5 32.4 33.4 34.8 36.7 38.8 40.5 41.8 44.4 49.3 53.8 56.9 60.6 65.2 72.6 82.4 90.9 96.5 99.6 103.9 107.6 109.6 113.6 118.3 124.0 130.7 136.2 140.3 144.5 148.2 152.4 156.9 160.5 163.0 166.6 172.2 177.1 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 179.9 184.0 188.9 195.3 201.6 207.3 215.3 214.5 218.1 224.9 229.6 233.0 236.7 What is that salary of $7000 in 1965 worth in today's money? For example, the price of gasoline in 1981 was $1.38 per gallon on average. In 2005, it averaged $2.30. Was gasoline more expensive or less expensive in 2005? the price of a gallon of gas in 1990, which was $1.16, to the price of a gallon of gas in 2000, which was $1.51 Electricity Prices (US city average, per KWH) Year 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Price $0.077 $0.079 $0.080 $0.082 $0.084 $0.087 $0.088 $0.092 $0.092 $0.094 $0.094 $0.094