Question

3. At the time this book went to print, the minimum wage was $7.25. To find the current value of CPI, go to http://www.bls.gov/epi/home.htm. Click on "CPI Tables," which is found on the left side of the website. Then, click on Table Containing History of CPI-UU Indexes and Annual Percent Changes from 1913 to Present." This will give you the CPI from 1913 to the present. a. With these values, calculate the current real minimum wage in 1990 dollars. S. All Items Stated in real 1990 dollars, what is the percentage change in the real minimum wage from 1985 to the present? b.

Answer 1

Answer:

a) Real minimum wage in 1990 dollars arecan be calculated based on the CPI Real minimum wage 2011 = CPI_1990/CPI_2011 minimum wage in 2011 = 130.7/224.939 times 7.25 = 4.21 b) Real minimum wage 1985 = CPI_1990 minimum wage in 1985 where minimum wage in 1985 was $3.35 = 130.7/107.6 times 3.35 = 4.07 Real minimum wage has increased from 4.07 in 1985 to 4.21 in 2011 The percentage change in the real minimum wage will be The percentagechange in the real minimum wage = 4.21 - 4.07/4.07 = 0.034 = 3.4%