The internet is rife with misconceptions about the minimum wage. In a recent video, personal finance influencer Mark Tillbury compares the price of a Big Mac in 2005 with that year’s minimum wage, and then contrasts both figures with today’s.
Using some napkin math, he pointed out that the 2005 minimum wage would have been able to buy two Big Macs, whereas in 2026, it would only buy one.
Tilbury’s implication was that the value of labor has eroded compared to the price of goods. His comparison is misleading, because inflation has actually made the federal minimum wage redundant. As the real value of dollars has declined, wages have increased in nominal terms.
For example, $7.50 in 2005 is equivalent to around $12.75 in today’s dollars. As inflation has marched on and raised the prices of goods and services across the board, it has become almost impossible for employers to pay people that little, because it would not reflect current prices.
In 2023, only 1.1% of hourly workers earned the federal minimum wage, according to the Bureau of Labor Statistics. That figure is likely lower today. In contrast, the median wage in this country is over $64,000, north of $30 an hour. Tillbury argues that “one hour of work today buys you just one Big Mac.”
But in reality, for the typical American, it’s closer to five. He is correct that a burger costs more than it used to, but the real difference, when compared to then-median wages, is marginal. All of these calculations are before taxes however, which he also left out.
A widely shared post on X disputes the idea that Texas is more affordable than California by weighing cost of living against each state’s minimum wage. Once again, the minimum wage has been made redundant by inflation, and it’s not a fair basis for comparison. The average hourly wage in Texas is approximately $35, nearly five times the federal floor.
Salaries are a function of supply and demand, not government planning. Employers hire workers up to the point where the value of their labor justifies the wage, while workers decide whether to supply their labor based on the pay offered. As the Texas example shows, the true minimum wage is whatever the market decides, and in 2026 that’s almost never as low as $7.25.
Minimum wages can also hurt the workers that they’re meant to help. California’s minimum wage is among the highest in the nation, and California now has the highest unemployment rate of all 50 states. When labor costs become a real financial burden, companies automate instead of hiring, and the least skilled are usually first in line to be replaced.
In states without a high minimum wage, like Utah, businesses can perhaps afford to give a teenager a chance; in California, at $20 per hour for fast food workers, the math doesn’t always lend itself that way.
Arbitrary wage floors also carry a forward-looking risk too. Many expect AI-driven productivity gains to bring about deflation (unless the Federal Reserve has different plans).
In a deflationary economy, where productivity makes the supply of goods so abundant that prices fall significantly, a fixed minimum wage stops workers from pricing their labor in accordance with those conditions. In a hypothetical future where a banana costs $0.05 because of AI-powered automated farming, a $7.25 minimum wage completely eliminates the possibility of human employment.
And if AI does eventually strain the labor market, despite predictions of imminent AI unemployment repeatedly proving wrong so far, a wage floor deprives workers of a critical bargaining chip against automation.
Once again, the economics that determine the degree to which automation is a good return on investment depend on labor costs, and a high minimum wage is likely to accelerate that process.
