Doing some research for a professor here on the minimum wage, I ran across this graph of the inflation-adjusted value of the U.S. minimum wage (which is a fairly common sight nowadays) plus the effective hourly bonus from the Earned Income Tax Credit (EITC) added on. This was the first time I had ever seen such a statistic. Since the the organization presenting the chart, the Employment Policies Institute, is hardly non-partisan, I took the numbers with a grain of salt (case in point: they use the value of the EITC for an earner with two or more kids, which is the most generous but, according to their own website, applies to less that 15% of minimum wage earners).

So, using historical IRS data on EITC rates and the minimum wage, I broke down the added value of the EITC for earners with no kids, 1 kid, and 2 or more kids. The results are below:

Some interesting points:

The real value of the minimum wage plus EITC benefits for earners with 2+ kids in 2006 ($7.42 in 2006 dollars) is about 4% lower than the highest historical real value of the minimum wage alone, which was $7.71 in 1968. The minimum wage alone, meanwhile, is 33% lower in real terms now than its 1968 optimum.

In 2006, the EITC added $2.27 per hour to the wages of earners with 2+ kids. By comparison, it added $1.37 per hour to those with exactly 1 child, and a paltry $0.07 per hour to workers with no children.

In 1998, workers with one child earned just $.01 below the 1968 optimum when taking the EITC into account. Workers with two or more children earned about $.90 more than the optimum.

It's not entirely an apples-to-apples comparison. Since the EITC subsidizes wages, we'd expect to see some change in work behavior, so the assumption of a constant 2000 hour work year for the past 60 years may not hold. Also, the Economic Policy Institute, the source of the inflation-adjustment data, uses the CPI-RS, which is on the one hand good because it folds in all the retroactive adjustments the Bureau of Labor Statistics has made to the CPI. Still, the CPI-RS may be a poor measure of the inflation burden that specifically hits low-income families. Nevertheless, the data show how critical the EITC is to maintaining the real value of a stagnant minimum wage... that is, so long as you have kids.