The real value of the minimum wage declined

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Between 1990 and 2006, the real value of the minimum wage declined, as measured using the CPI. Assume that the goal of the minimum wage policy is to maintain a constant standard of living for minimum wage earners over time (i.e. their utility, on average, stays constant). One proposal put forward has been to index the minimum wage to CPI, so that it rises over time at the inflation rate. Provide two reasons why this proposal will likely lead to the standard of living of minimum wage earners increasing over time.

Reference no: EM13735969

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