Wage Would be $18 if Tied to Productivity Analysts say the federal minimum wage should be more than double its current rate, if it kept pace with worker productivity. (iStockphoto) August 4, 2016 To better understand the relationship between wages and productivity, it is helpful to look at one case study. Every time Congress acts, it does so amidst debate about the legitimacy of the wage. The effect of general productivity on wages is automatic in a free mar­ket with competition. While advancements in technology have increased the amount of goods and services that can be produced in a set amount of time, wages have remained relatively flat, the study points out. Even a $21.16 minimum wage wouldn’t represent progress. (iStockphoto) It costs more than a fucking dollar to make a hamburger. Progress would mean a minimum wage in excess of $21.16 per hour. The lesson here is that while productivity of workers is highly important when considering a gen­eral wage level, productivity does not determine what the wage rate ought to be for any given firm or industry within the economy. Therefore, it might be preferable to create an automatic mechanism for adjusting the minimum wage that would not only assume the value of a wage floor to society, but be tied to levels of productivity. If the minimum wage had been adjusted automatically to reflect increases in productivity over the past 80 years, the minimum wage would now be more than $20 per hour. It would mean socially standing still, just with better technology and higher productivity levels. Measuring the minimum wage against changes in prices is only one way to think of where the wage floor could be today. Given growth in the economy and improvements in labor productivity over the past half century, the minimum wage could have been raised to a point considerably higher than its 1968 inflation-adjusted value. When Congress does act, it is usually too little and too late. Of course, a minimum wage in the mid-20s is politically inconceivable. Pay Should Be Tied to Productivity. Study: Min. “In most places, the current minimum wage is a poverty wage,” Burns said in an email. The way minimum wage is tied to productivity is that the US government subsidizes the wages of those being paid too little via welfare programs to ensure that the private sector companies can keep their labor costs artificially low through the government paying the rest of their wages. The minimum wage should have reached $21.72 an hour in 2012 if it kept up with increases in worker productivity, according to a March study by the Center for Economic and Policy Research. Finally, while productivity is growing slowly, it’s still growing, while mid-level, real wage growth has been flat. A new analysis argues that the federal minimum wage would be about $10 higher if it were tied to gains made in worker productivity. Those who advocate an increase in minimum wage are trying to wave a magic wand and pretend deep‐ seated structural problems will just go away.