If State Lawmakers Favor Gradually Phasing in the Minimum Wage, They Should Love Indexing it to Inflation

The legislature’s decision to extend until 2018 the phase-in period for raising the minimum wage to $10.10 will needlessly delay a boost in earnings for Maryland’s workers and demonstrates why automatic increases based on inflation are the right way to ensure that the minimum wage keeps pace with the cost of living in the future.

As we have argued before, the minimum wage is too important to too many workers to leave at the mercy of the periodic whims of lawmakers. Even slight inflation steadily erodes the value of the minimum wage relative to the cost of food, housing, and other necessities, so workers continue to fall behind until lawmakers agree to increase the minimum wage, often at a lower level relative to the cost of living. 

Sources: Minimum wage data: Maryland Department of Labor, Licensing, and Regulation, "History of Minimum Wage in Maryland," February 22, 2010,https://www.dllr.state.md.us/labor/wages/minwagehistory.shtml; Inflation data: Bureau of Labor Statistics CPI inflation calculator, http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=7.25&year1=2009&year2=2014

A predictable, gradual, and - most importantly – continuous increase in the minimum wage would fix that. Tying  the minimum wage to inflation, known as indexing, would also benefit businesses, since they would know in advance when the minimum wage is going  up and by how much, improving their ability to plan.

Maryland would not be treading new ground by instituting indexing. Eleven states already tie their minimum wage to inflation.  President Obama has pointed out that indexing the federal minimum wage is something that he and Governor Romney  agreed on during the 2012 election, and opinion polls consistently show that doing so is popular. In addition, indexing is already used in a variety of other policies, including determining Social Security benefits and the amount of assets that are subject to the estate tax. If lawmakers are willing to tie exemptions from the estate tax for millionaires to increases in inflation, they should be willing to allow the same for workers’ wages.

Advocates of raising the minimum wage have secured an important – though needlessly drawn out – victory in Maryland and t is important to continue to build on this momentum. They should continue to push lawmakers to index the wage to inflation, rather than waiting for it to inevitably lose its purchasing power over time, requiring yet another campaign to raise it in the future. The best way to capitalize on the current victory is to push for a more lasting one.