Chapter 10 Project: The Spending Power of Minimum Wage Workers from 1968 to 2018

Directions: For this project, you will be creating a digital presentation (poster, PowerPoint, etc) for the problem that follows. You will be creating several growth models to see how minimum wage and spending power have changed over this time period. You must show all steps. The grading rubric specifies how point values are earned and in-between values are possible for each category.

Background Information

In the 1970’s a candy bar cost only ten cents. This sounds great until you remember that at the same time people made a lot less money. The change in the amount of cost is due to inflation. Sometimes the amount of money people make at their jobs increases at the same rate as inflation. When this happens, the relative cost of items is the same. If wages increase faster than inflation, the relative costs of items is lower, and people have more spending power. While if wages increase at a slower rate than inflation, the relative cost is higher, and people have less spending power.

The consumer price index (CPI) is a way to compare the relative price from year to year. A base value of 100 was determined for the years 1982 through 1984. To compare the relative costs from year to year, the CPI is used. A number above 100 indicates the items cost more than they did around 1982. A number below 100 indicates the items cost less. In 1913 the CPI was about 9.8. In 2015 the CPI was about 234. This means something that costs $9.80 in 1913 costs $100 in 1982 and $234 in 2015.

To determine spending power we compare CPI with wages. For this project, you will use the federal minimum wage between 1938 and 2018 to determine the spending power of entry-level workers. The data from 1968 will be considered year 1. The data from 2018 will be considered year 51.

Key values

Year

Term

Minimum Wage

CPI

1968

a1

1.60

34.8

1978

a11

2.65

65.2

1988

a21

3.35

118.3

1998

a31

5.15

163.0

2008

a41

6.55

215.3

2018

a51

7.25

251.1

Part I: Creating wage and CPI models

Why is inflation considered geometric and not arithmetic? Justify your answer.
Create a scatter plot from the key values for minimum wage.
Create a geometric growth model for minimum wage using a1 and a51. (hint: see textbook and use geometric means)
The cost of living is not the same in all parts of the United States. The minimum wage is based on the average cost of living for the country, but states and cities can adjust the amount to provide for a higher cost of living. Scottsdale, Arizona is 25% more expensive than the average cost of living. To create equal spending power, the amount of the minimum wage for Scottsdale should be multiplied by 1.25.

Create a model for a modified minimum wage for Scottsdale that adjusts for the cost of living.
Create a geometric growth model for CPI using a1 and a51.
Create one or more graphs to display your results in a meaningful way.
Part II: Predictions and Conclusions

The curve for CPI represents the costs of items. The curves for minimum wage and modified minimum wage represent spending power.

How has spending power changed over time?
If spending power stayed the same as it was in 1968 what should the federal minimum wage be in 2018, 2020, and 2028? What should the Scottsdale modified minimum wage be for 2018, 2020, and 2028?
Using this information, what do you conclude a fair minimum wage should be? Justify your response using facts from this project.
Grading Rubric

Category

20

15

10

5

Required Elements

All required elements as well as additional information is included.

All required elements are included.

One or two required elements are missing.

Several required elements are included.

Accuracy of Models

All models are correct.

One model is incorrect or missing.

Two or three models are incorrect or missing.

More than three models are incorrect or missing.

Graphing

All graphs include a title, labels, are properly scaled, and accurately display the information.

Graphs are missing 1 or 2components of a proper graph but display the information correctly.

Graphs are missing several components of a proper graph or are misleading.

Graphs are inaccurate.

Predictions

Predictions are accurate and based on the models.

Predictions are mostly accurate but contain an error.

Predictions contain several errors.

Predictions are inaccurate.

Conclusions

Conclusion is well thought out and addresses all parts of the project. All statements are justified with facts from the project.

Conclusion is well thought out and justified but includes only some parts of the project.

Conclusion contains many statements not justified by facts.

Conclusion is missing the justification, or the justification does not include any facts.