A Low Minimum Wage and an Outdated Poverty Line
With cost of living being different from state to state and minimum wage being so low why do we wonder there are so many individuals working multiple jobs, or the crime rate raising or the unemployment being at its highest it has been. How do we expect to be putting money back into the market and getting this country out of debt if we cannot even get ourselves out of debt. Someone once said, “More money, more problems. ” The federal minimum wage was just recently increased from $7. 25 to $7. 36 (Department of Labor, 2011).
While an increase seems to be a good thing for those relying on minimum wage jobs, the questions still remains as to whether or not it is even possible to survive on a minimum wage job. The first assumption to be made is that a job at minimum wage can even be found, which as we are increasingly aware, is a big assumption right from the start. However, assuming there is a job to be had, and assuming that this job has the option to work 40 hours a week, the person in question will make $294 a week, about $1472 a month, and $17,664 a year assuming 52 weeks of work a year, with each of these numbers representing wages before taxes.
For a single person household, this theoretically puts the person in question above the poverty threshold, which was $10,991 for 2008. In fact, a two person household has a poverty threshold of $14,051, so one minimum wage job is enough to keep this household above the poverty line also. However, a three person household where one of the people is under 18 would be unable to push above the poverty line, which for them is set at $17,330 (Census Bureau, 2008). So a minimum wage job is in supposedly enough to keep two people above this theoretical poverty line.
However, this poverty line is based on a very outdated way of thinking about affordable living, and does not realistically take into account the wide disparity of costs of living across the nation. For instance, a two person household living in Missouri will have intensely different costs as compared to a two person household living in New York. The cost of living index for Tennessee in 2008 was at 88. 3 percent of the national average, whereas the index for Hawaii was 162. 8 percent. Here in Colorado, where 16. percent of the population was below the poverty line last year, the cost of living index was 90. 5 percent (Top 50 States, 2008). Hawaii, like Colorado, is one of many states who do not have an independent minimum wage, so in a state with approximately double the cost of living of Tennessee, the minimum wage is the exact same. In Hawaii, to qualify for government subsidized housing, a two person household must have an income lower than $39,900 a year, which is more than double the amount it is even possible for a person to make at a full-time, minimum wage job (Hawaii Public Housing Authority, 2009).
But statistically only 8. 8 percent of Hawaii’s population is below the national poverty line. Even when compared to the poverty line that has been specifically tailored for Hawaii, which is $16, 760 an year, it would still be impossible for two minimum wage incomes to make more than would be required to qualify for subsidized housing. So, in an indirect way, Hawaii is acknowledging that at minimum wage jobs people cannot make enough to even afford housing on their own.
While Hawaii is the most expensive state to live in and of course the most extreme example, even in Colorado the poverty line is unrealistic. One income of $15,080 would fall into the 15 percent tax bracket, and would be taxed approximately $1873. 75 annually, leaving a take-home income of $13,206. 25, or just barely over $1000 a month after social security and other deductions are taken out (IRS. gov, 2011). Average apartment rent in Austin is $750 a month, but of course that is entirely out of the price range of someone making minimum wage (Rent. com, 2011).
A search on craigslist. com reveals that there are very few apartments available for less than $500 a month. So, right away, half of the $1000 a month income goes towards rent, if an apartment can even be obtained. When I signed a lease at my current apartment, I had to show proof of income indicating that I made at least three times the monthly cost of rent. My leasing agent told me that this is now very common practice during the application process. So, assuming a lease could even be obtained, about half of the monthly income would be taken up in rent payments.
Once you account for utilities, food costs, and gas if the person in question is lucky enough to have a car, the measly $1000 a month is all but eaten up. This issue affects society in a number of ways. First and foremost it affects those who find themselves unable to get anything other than a minimum wage job. As demonstrated, even in a state where the cost of living is less than the national average, living on minimum wage would be extremely difficult if not impossible. And, even if it were possible to make ends meet during an uneventful period of ime, unexpected events such as medical problems, car trouble, or an unplanned pregnancy would bring costs that far exceed any available funds. There is no room in this budget for buying school supplies for children returning to school; no extra money available to pay for necessary ongoing prescriptions such as insulin for diabetics. Health insurance is rarely available at minimum wage jobs, and paying monthly premiums would almost certainly be unaffordable for someone on such a tight budget, health concerns would often have be ignored.
Saving money would be virtually impossible, so any unforeseen expense would have to come out the monthly paycheck. Of course, this also means that expenses such as college tuition for children would also be out of the question. From a broader standpoint, these households and their inability to keep themselves afloat effect the entire population. From an economic perspective, these households have virtually zero discretionary income, which means that they have little or no opportunity to put money into the economy. There would be little or no eating out, shopping for non-essentials or travel.
These households are also more likely to need help from government sources, which are of course funded by taxpayers of all economic backgrounds. However, since the poverty line is defined as so low, at a glance it appears that a minimum wage job would be enough to live on. This makes it far more likely that solutions will be few and far between. If a problem is not acknowledged, there is no pressure on policymakers to do something about it. The numbers I have presented here are all based on a likely unrealistic assumption that the minimum wage job in question is a full time job.
If the worker is only able to get work for 35 hours a week, that brings a total annual income down nearly $2000, or around $150 less a month. A national poverty line is unrealistic by any means since the cost of living varies so greatly from one state to the next. The minimum wage, while increased $0. 70 from last year, still does not allow for an income that realistically could support more than one person in today’s economy. Colorado has a relatively low cost of living, and yet it would still be extraordinarily difficult to do anything more than survive on a minimum wage job.