A Reality Check on the Minimum Wage Debate: Why It Should be Doubled

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Despite the differences between me and my conservative friends, there is one point on which we invariably agree: No one who works full time should have to rely on government assistance. In other words, if you work 40 hours a week you are a contributing member of society and should not have to rely on the government for financial assistance to survive. This seems logical. However, despite agreeing on this important point, my right-leaning friends often lose sight of reality and believe that if someone works 40 hours a week, he/she will be able to live independently, just so long as that person can muster the strength to live within his/her means. It’s simply a matter of hard work and self-discipline. Reality check.

The current federal minimum wage is $7.25 per hour. (Fortunately I had to look this up. The last time I earned minimum wage, it was $4.75 an hour.) If a person works 40 hours a week, he/she will gross $1,257 a month, or $15,080 annually. Let’s apply this to a specific situation. I consulted the website, paycheckcity.com, to find out how much a single person living in Texas would take home if he/she worked 40 hours a week at a minimum-wage job. The website calculated that this individual would take home $1,085 per month after paying federal taxes ($75.06), Social Security ($77.91), and Medicare ($18.22). (Granted, much of the federal taxes collected from low-wage earners are paid back every April, but people earning minimum wage don’t get to touch this money until the end of the year. And keep in mind that this payout during tax season only applies to the money they paid in income taxes, not the money they put into Social Security and Medicare.) Fortunately for Texans, there is no state income tax. Forty-three states implement state income taxes, meaning minimum-wage earners actually fare better in Texas than many other states.

Let’s say our hypothetical low-wage worker lives in Dallas, TX. In Dallas, an average one-bedroom apartment not located downtown (downtown is too expensive) is about $750 a month. If our minimum wage worker pays $750 a month in rent and spends $10 a day on food, he/she has $35 left over for other monthly expenses. Let’s say this is just enough to cover a very basic cell phone plan. Oops. Looks like our low-income worker forgot to budget for utilities (gas, water, electricity, garbage), transportation, clothing, TV, Internet, childcare, diapers, tithing, toiletries, household cleaning supplies, stamps, pets, and the occasional pizza. Owning a car and buying gas and auto insurance are clearly not an option. Forget about hobbies and recreational activities like traveling, buying books, going to the movies, or buying gifts. And tuition for school? Forget about it. Savings for retirement? Ha! Emergency fund? What’s that?

The highest minimum wage in the country lies in the liberal bastion of Washington State—where the minimum wage sits at a whopping $9.19 an hour. The average cost of a one-bedroom apartment in a suburb of Seattle is approximately $1,000 a month. Allotting $10 a day for food and running the same calculations, we have $45 left over before considering any other monthly expenses. This is virtually identical to the bleak situation in Dallas.

If Americans wants to make it on minimum wage, they have no choice but to depend on others. First of all, living alone is not an option. Minimum-wage workers have to live with their parents or share a dwelling with multiple roommates. Even then, they will likely have to rely on food stamps to eat three squares a day. They will have to rely on Medicaid or other government-provided healthcare programs. Given that monthly childcare expenses can easily exceed $1,000, it makes no sense for parents to ever work a minimum wage job, unless someone agrees to watch their children for free. This point illustrates the glaring hypocrisy demonstrated by conservatives who emphasize the importance of mothers staying home while simultaneously demanding that parents work and not rely on government assistance.

McDonald’s came under fire this year over a proposed budget they created for their minimum-wage employees. The most striking detail of the budget was that it required full-time employees to find a second full-time job—not a part-time job mind you, another full time job. McDonald’s freely admits that working 40 hours a week for their business is not enough to put a roof over their employees’ heads. For their employees to make ends meet, they must work 80 hours a week. Even then, the employees have great difficulty. For example, no money in the McDonald’s budget is allotted for paying the heating bill, while other expenditures are greatly underpriced. For example, the amount set aside for health insurance is a ridiculously low $20 a month.

Given all of these facts, why are we not all demanding a higher minimum wage? Because of minimum-wage myths that refuse to die.

One common myth is that most minimum-wage workers are teenagers. This fuels the argument that the minimum wage does not need to be increased because the people earning it are kids living at home. Furthermore, minimum-wage jobs are more about teaching teens responsibility, and the money only goes towards buying Playstations and makeup anyway. In actuality, 80% of Americans who earn minimum wage are over the age of 20. Twenty-five percent of minimum-wage workers have children. The fact that we have so many middle-aged and older Americans working these jobs runs counter to other conservative myth that minimum-wage jobs are simply short-term stepping stones for young workers who are on their way to more lucrative careers.

The other popular meme we hear is that raising the minimum wage will hurt the economy because businesses will cut jobs, which will result in higher unemployment. This is a hotly-debated point, but it shouldn’t be. This is an easy issue to research for the reason that the minimum wage has increased many times over the last 50 years, and we have a mountain of data each time it goes up. The jury is in on this issue. There is no correlation between minimum wage increases and unemployment. In fact, when the minimum wage stagnated during the Reagan years, we saw unemployment rise, directly contrary to the conservative meme. A 2011 study looked at businesses in Georgia and Alabama, following the minimum wage increases that resulted from 2007 to 2009. Of those business owners, only 4% said that laying people off was a “very important” strategy to make up for lost wages. Turns out business owners are much more creative and savvy than conservatives give them credit for. Business managers revealed multiple other strategies to make up for the loss in wages. In the states where the minimum wage exceeds the federal minimum wage, we have actually seen a slight decrease in unemployment, further negating the belief that raising the minimum wage will raise unemployment.

No one has a crystal ball, and no one can say with absolute certainty what the impact will be of raising the minimum wage; but don’t we owe it to our fellow Americans living in poverty to give it a shot? Keeping millions of Americans in a state of perpetual poverty because it might result in the price of a burger going up by ten cents seems as silly as it does heartless? Surely we can do better than that.

The minimum wage doesn’t just need to go up. It needs to skyrocket. It needs to double, at least. If the federal minimum wage doubled to $14.25, minimum-wage employees would gross $30,000 a year, hardly an exorbitant income. Conservatives love to tell us how welfare is a gravy train for people, and it only incentivizes laziness. But rather than make the welfare system more miserable through mandated drug testing and slashed benefits, we should be working to make full-time employment a path out of poverty. Both sides of the political aisle would love to see our unemployment rate plummet along with the number of people on the welfare rolls. There’s certainly a strong argument to be made that this could happen if people realized they can finally survive on a minimum-wage income.

– Nathan

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11 Responses to “A Reality Check on the Minimum Wage Debate: Why It Should be Doubled”

  1. A couple of points to ponder.
    you say that there is no evidence supporting the claim that raising the minimum wage. That may be true for the historically modest increases in the past. but the study you cited makes no such claim for a doubling in the minimum wage. It only supports a modest increase

    Most small businesses including a McDonald’s franchise operate on on narrow profit margins. Doubling the minimum wage net net operating expense by 40% or more. Wiping out all profits, no profit no jobs. Sure you can raise prices but at what point do people quit buying your product.

    What do you tell the workers that have put in years and have gained experience… received pay raises and taken on more responsibility. “sorry you and the new guy get the same pay”??

    If we double the minimum wage will we be able to build a wall tall enough to preserve these high wage jobs for our citizens?

    Finally did that $4.75 minimum wage doom you to a life of poverty?

    It didn’t for me and I started sweeping floors at $1.60 an hour and dropped out of high school eventually working my way up to the salary equivalent of $75.00 per hour.

  2. @Paul – The minimum wage was nearly doubled in 1949 under President Truman, with none of the ill-effects predicted by “pro-business” Republicans. I encourage you to read the following link:

    http://money.msn.com/now/post–the-us-has-nearly-doubled-its-minimum-wage-before

    While profit margins for the fast-food industry are not huge, they don’t have to be. If you sell 100 billion cheeseburgers, you don’t need huge mark-ups on each item sold. Recent research shows that fast-food restaurants are doing quite well; profits are soaring; and they can afford to pay their workers more without raising prices. Check out this link:

    http://business.time.com/2013/08/29/fast-food-companies-can-afford-to-pay-their-workers-more/

    As far as what to tell the people who are currently making $15 an hour? I don’t care. The farthest thing from my mind are the fragile egos of people who can’t handle the fact that they’re making $30,000 a year.

    I’m glad to hear that you make good money and no longer rely on the minimum wage. But that’s nothing more than anecdotal information on one person’s life. Although you no longer earn minimum wage, we know there are millions of Americans who do. Therefore, this remains very relevant.

    – Nathan

  3. IMHO, if the best job you can get is minimum wage then you should not live downtown. You should not rent an apartment alone. You should not buy a new car.

    You’d move to a rural area even if it meant changing jobs. You’d rent a room or share an apartment with a few people. You’d drive a beater with minimum insurance and set money aside for repairs. I have done all these things. After paying tuition, many college students live on less than minimum wage and work more than 40 hours a week.

    • Anonymous Says:

      William – I’m not sure what point you’re trying to make. Yes, people who earn minimum wage must make certain concessions. That goes without saying. However, all of the recommendations you make (i.e. sharing an apartment, living in a rural area) are addressed in my original piece. In fact, the numbers I cited above were for a person living in a suburb of Dallas, TX. I could have chosen downtown Boston, San Francisco, or Manhattan to drive my point home, but for the sake of fairness, I chose a relatively inexpensive part of the country. Even when taking these factors into account, we see that the minimum wage is not a livable wage. Living in a rural area and sharing an apartment still results in poverty.

      – Nathan

      • I guess I missed your point. Are you saying that regardless of personal choices, a worker at minimum wage is still in poverty? Well, if we accept the federal definition of “poverty” then the math proves you wrong. A minimum wage worker can break the 2013 poverty line by working just 40 weeks/year.

        My point was that with wise choices, many people can and do live on $290/wk. I reject the premise that it’s not a “living” wage. It’s not be a “solo apartment” wage and it’s not a “raise a family” wage but it’s not poverty. It’s not supposed to be lifetime wage. It is a livable wage.

  4. William – The poverty line for a single individual is $11,720. An individual earning minimum wage and working full time grosses $15,080. After taxes, they take home somewhere between $11,000-$12,000 a year. So technically, some minimum wage earners barely cross the government’s arbitrary poverty line. But are you really going to say with a straight face that people who earn $12,000-$15,000 a year are not poor? If so, you’re not doing any favors to your credibility.

    Your point that $290 a week is a liveable wage is as silly as it is heartless. Here’s why: The second we add another individual to the equation (i.e. a spouse who stays home; a child; an elderly relative, etc.), the person making minimum wage falls well-below the poverty line.

    You say that people can live on $290 a week, but I have to call BS. You don’t know anyone who survives on this much money. Again, I have to assume that you didn’t read my piece. I assume you only read the headline and then haeded to the comments seection. As I stated in my piece, people who make minimum wage have to live with relatives; rely on food stamps and other forms of social aid; and have no path out of poverty. So no, the minimum wage is not a liveable wage.

    Your question is a bit perplexing. You asked, “Regardless of personal choices, a worker at minimum wage is still in poverty?” That’s sort of like asking, “Regardless of personal choices, does 2+2 still equal 4? The facts are the facts. They don’t change because people of people’s choices. Regardless of the reasons you make minimum wage, it’s still the minimum wage.

    It’s obvious that you have a personal narrative that says poor people are lazy and/or make poor personal decisions; and you are taking part in cognitive gymnastics to make the case for your narrative. However, the facts do not support your position.

  5. No need to infer that I am silly or heartless. I respect your opinions and believe this is a topic worthy of debate. For example, reading your story prompted me to learn more about poverty and how it’s defined. I’ve also read the sources you cited. So I learned something in this exchange and I thank you for it.

    I think you pulled my question out of context, but I actually feel we are coming to agreement on a couple key points. There’s an HHS definition for “poverty” and it’s about $11,700/yr. At $7.25/hr a single, full-time worker is “poor” but not in poverty. Due to child-care a family of 3 would probably be in poverty even if both parents worked full-time. Like you, I want to help those families. You cite a study that says raising the minimum would directly or indirectly benefit 15% of all child. I’ll accept that but I hope you’d agree that it is irresponsible to have a child while earning minimum wage. Life happens but I hope you would not recommend it as a good plan.

    You seem to disagree with me that it’s possible to live on $290/wk and you suggest I don’t know anybody who actually does that. Well the minimum wage has increased over the years, but there was a time that my dad lived on a minimum wage income. My mom did it too. Even I did it myself for a period of about 3 years. Still to this day I have close family who are basically at this level. I don’t know how to sway you, but in my experience it can be done and it’s happening all around you. Watch episode 1 of “30 Days”. Morgan Spurlock has a rough time of it but manages to eat and live indoors on minimum wage despite what I consider to be some pretty dumb choices.

    We disagree on other points. IMHO, a single, full-time worker at $290/wk doesn’t need my help. Sure help would be nice, but I don’t think we need to raise the minimum wage for that person. Baring other factors like disability, they needn’t be homeless or hungry and they could work up from there. We’d both like to help the children in poverty though we’d disagree on the best approach. There are social programs and private charity trying to help those families. Raising everyone’s wage seems like sledgehammer on a thumbtack if the primary goal is to aid 15% of children.

    My personal narrative is that despite our “low” minimum wage most poor families can and do work their way up in the USA. There are facts that support this position. Time magazine reports, “42% of American men with fathers in the bottom fifth of the earning curve remain there.” Time cites this high number as a travesty and it is. Nonetheless it still means that 58% of men do break out of the bottom fifth. Upward mobility is not only possible, it is the norm.

  6. William – Thanks for the response. I think you make some fair points, but there are still three sticking points for me.

    1) You continue to highlight the importance of personal responsibility and accountability. I agree with you wholeheartedly that it is frustrating when a person makes an irresponsible decision and someone else has to foot the bill. You cited the minimum-wage earner who happens to get pregnant. Frustrating yes. Unfortunately, making this a centerpiece of the debate is sort of like arguing that we should provide abstinence-only education in our schools. It would be great if all teenagers were responsible, but that’s not a reality. When it comes to creating legislation, we need to act pragmatically, not idealistically. It would be great if every minimum-wage earner was a young, responsible individual using a low-paying job to develop the skills and maturity needed for a budding, lucrative career. Unfortunately, this is not the case. Talking about personal responsibility makes for a good sound bite, but it does little to address the very real problem.

    2) The people you know who get by on minimum wage are almost certainly relying on some form of public assistance, most likely food stamps. (Please refer to the third paragraph of my blog post above to see the logistical problems of making $290 a week.) If they aren’t relying on public assistance, they are likely relying on the charity of relatives and/or friends.

    2) The last issue I have is one I may devote an entire blog post to at a later date. Your argument is similar to many arguments I hear from conservatives in that you highlight the fact that most Americans are doing fine. You state (accurately) that most Americans don’t stay in minimum wage jobs, and the conclusion is that while things aren’t perfect, the system generally works. I think this marks a clear distinction between conservatives and liberals. Conservatives tend to be content if things are going generally well. For example, conservatives think it’s great that 85% of Americans have health insurance, while liberals are greatly concerned that 50 million Americans don’t have healthcare coverage. In this case, you take comfort knowing that the majority of Americans born into poverty manage to climb out of it, while I’m alarmed that 42% of these Americans stay entrenched in poverty.

    In the end, you and I are going to subsidize these individuals, either by paying taxes to cover their food stamps and other government handouts…or we can pay 10 more cents for a hamburger and 5 more cents for a Coke the next time we visit Wendy’s. I’d rather pay more for a burger and provide the person behind the counter a better paycheck than have my taxes raised with the result of making a working American dependent on Uncle Sam.

    – Nathan

  7. “conservatives think it’s great that 85% of Americans have health insurance, while liberals are greatly concerned that 50 million Americans don’t”

    Agreed. It’s the reason Conservatives are tagged as “selfish” and Liberals are tagged as “Utopians”. IMHO, we can’t save everyone especially if some are self-destructive. The counter argument is, “maybe that’s true, but we should try.”

    There is common ground. Many Conservatives DO want to help. We really do. But the options presented were “more taxes for more food stamps” or “raise the minimum wage”. Realize that Conservatives view this as a false choice. Government regulation and welfare are options of last resort.

    Is there common ground in the numbers? I agree that the 58/42% split is pretty bad and 50M uninsured is unacceptable but it’s never going to be 0 poverty with equal healthcare for all. So where is the line? I recognize that there is no “acceptable” amount of poverty but hope you recognize it will never be zero.

    At some point there is a line at which even I would say the free-market has failed and it’s time for government to step in. Health insurance is a good example. 50M uninsured. It’s time to do something. I’m not a fan of the ACA and I bet we’ll still have 50M uninsured next year, but I agree some legislation is required.

    Unfortunately, I’m just not with you on the minimum wage issue. Our country has pretty low poverty and the minimum wage is already above the poverty line. It’s absolutely not enough for a single parent and it’s probably not enough for two parents with one child but I’d rather find some other way to help those families even if it meant more welfare and higher taxes.

    • I would love nothing more than to hear new and creative alternatives to raising the minimum wage. This is a conversation Congressional Democrats want to have. Unfortunately, the Republican Party has failed to offer any ideas. The exact same situation played out with the healthcare debate. Democrats offered up numerous ideas (single payer, public option, ACA, etc.) The Republicans shot down every idea and then offered nothing in return. At some point the Republican Party needs to lead, follow, or get out of the way. This pattern of obstructionism is hurting America and certainly doing no good for the Republican brand.

      Acknowledging that there is a problem is only the first step. At some point, we need to talk about solutions. If there’s a better idea than raising the minimum wage, I’m all ears. But so far raising the minimum wage is the best idea on the table. In my opinion, not acting is not an option.

      – Nathan

  8. Thanks. This issue is one on which I am sharply divided from my fellow conservatives, and I have a really hard time not taking their assertions personally (just work harder, just get a decent education, etc.). I hate discussing this with conservatives. It’s like trying to negotiate a solution with someone who just insists on insulting you.

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