Minimum Wage versus Productivity

Here is an unusual topic for tonight’s post: minimum wage versus productivity.

I saw a short on YouTube that posits that minimum wage would be $25.52 if our wages had not become disconnected from productivity. I don’t know if you are aware that the latest economists thinking is that wages no longer track with productivity and so as productivity surges ahead, wages stagnate.

Here is an old image from Vox which borrowed from Economic Policy Institute:

I probably pulled this image in 2019.

So, the short had the following chart:

I’m going to crop that image to see if we can get a close up of the numbers:

Figuring out how to get inflation adjuste minimum wage

I decided to try to figure out how the economist created the chart.

The first element of the chart I tackled was the calculating the minimum wage in 2023$ – the orange dotted line.

To do that, I needed 2 things:

• The history of nominal minimum wage.
• Annual CPI number.

To get the history of minimum wage, I used the following website which run by an economist: A history of the federal minimum wage: 85 years later, the minimum wage is far from equitable | Economic Policy Institute.

For the annual CPI number, I used the FRED add-on in Excel. Yes, there is a FRED add-on where you can pull various statistics such as employment numbers, consumer price index, national income, and so on. The CPI number begins in 1959 (in the FRED) and I manipulated the Frequency Aggregation to get the annualized figures.

Here’s my citation for that: U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: All Items in U.S. City Average [CPIAUCSL], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/CPIAUCSL, August 2, 2025.

The site itself will give you monthly but I asked for annual figures from the Excel add-on.

The orange line in my chart is very similar to the cropped image’s dotted orange line. So, I’m on the right track. Again, to repeat, I adjusted the minimum wage to 2023$.

The calculation was as follows:

Inflation adjusted minimum wage in 2023$ = minimum wage at year X * (2023 CPI at 304.704 / year X CPI)

To calculate inflation adjusted minimum wage in 2024 into 2023$ = 7.25 * (304.704 / 313.698) = $7.04

Another example, inflation adjusted minimum wage in 2009 into 2023$ = 6.55 * (304.704 / 214.565) = $9.30

Converting minimum wage into productivity adjusted wage

Here is where I ran into trouble.

I used FRED again to pull productive output per hour.

Here’s the citation: U.S. Bureau of Labor Statistics, Nonfarm Business Sector: Labor Productivity (Output per Hour) for All Workers [OPHNFB], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/OPHNFB, August 2, 2025.

I applied the productivity value to the CPI-adjusted minimum wage, using similar calculation formula. Instead of 2023 being the baseline, 1968 was the baseline, due to the fact that economists regarded 1968 as the year wages diverged from the productivity.

So, here’s my result:

Wait a minute! The bright blue line looks nothing like the dark blue line in the chart from the shorts!

Crosschecked against AI

CoPilot verified my approach in the calculations.

I’m going to have to think about this.

CoPilot said the variance could stem from:

• CPI variants – there are different versions of CPI (urban, chained, retrospective series…)
• Productivity indices – quarters versus annual could drive differences

I believe my problem is in the way I converted the inflation adjusted minimum wage into a minimum wage consistent with productivity growth.