Use the average annual consumer price index table to convert

Use the average annual consumer price index table to convert the 1978 minimum wage from actual dollars to 1996 dollars. Is the result consistent with the entry in the accompanying minimum wage table? Click the icon to view the table of federal minimum wages. The 1978 minimum wage in 1996 dollars is $.

Solution

The 1978 minimum wage in 1996 dollars is

Minimum Wage = Actual Dollars * CPI(1996)/CPI(1978)

=> $2.65 * 156.9/65.5

=> $2.65 * 2.395

=> $6.3475