US minimum wage would be $26 an hour if it had kept pace with productivity, economist claims

Only 20 states have kept the $7.25 minimum wage after more than a decade of stagnating incomes

A Publix supermarket in Florida with Covid protections for staff (Larry Marano/Shutterstock)

An economist has said that minimum wages in America would be $26 (£18) an hour if they had kept track of productivity, in a warning about pay falling behind the cost of living.

The federally mandated minimum wage, which was first introduced in 1938, has not risen since it was put at $7.25 an hour 12 years ago, despite rising in line with inflation for the first 30 years.

Dean Baker, senior economist at the left-leaning Center for Economic and Policy Research, argued in a recent blog post that pay would be $26 an hour if the wage had risen alongside productivity.

"That may sound pretty crazy, but that's roughly what the minimum wage would be today if it had kept pace with productivity growth since its value peaked in 1968," he wrote — arguing that pay for Americans had arguably flat-lined or fallen on the basis of inflation.

Although he went on to describe the $26 an hour figure as more of a “thought experiment” that would potentially lead to mass unemployment, Mr Baker added that "having the minimum wage track productivity growth is not a crazy idea”.

Productivity, in relation to minimum wage, refers to the about of income generated by a worker in an hour.

Mr Baker explained that in recent years, CEOs and white-collar workers have taken larger shares of wealth and profit, with lower wage and blue-collar workers not benefiting.

Democratic lawmakers, including senators Bernie Sanders and Elizabeth Warren, have called for the introduction of a higher minimum wage at $10 (£7), which has been resisted by Republicans despite extra hazards imposed on low wage workers during the Covid pandemic.

However, only 20 states continue to use the $7.50 an hour minimum wage, with California — which has a higher cost of living than other places in the US — requiring companies with 26 workers or more to pay $14 (£10) an hour.

In a recent poll carried out by CBS News, a majority of Americans were in favour of increasing the federally mandated minimum wage, boosting hopes that Congress may pass a higher minimum wage in future.

Around 9.1 million Americans who remain out of work following the onset of the Covid crisis, meanwhile, lost their unemployment benefits on Labor Day, the annual holiday in recognition of workers.