53.1
1. In 1988, I
worked at Mr. Donut for minimum wage, $3.35 per hour. Has the real minimum wage
increased since 1988? Assume an inflation rate of 2.5% per year. [5 pts]
If it is currently 2018, then 30 years
have passed since 1988. To compare dollars in 1988 to dollars in 2018, you have
to either deflate 2018 dollars or inflate 1988 dollars. Let’s inflate 1988
dollars:
3.35(1.025)^30=7.03, which is much less than the current minimum wave. So yes, the real minimum wage is much higher today than it was in 1988.