Minimum wage of $ 15 does not cover the cost of living for many Americans

A minimum wage of $ 15 could become a reality in the US

Although millions will receive a boost due to a higher national wage floor, it will still fall short of paying a “living wage” for many workers – the salary a person or family needs to cover their basic expenses .

This is especially true for families, mainly due to higher cost of living such as childcare, relative to single adults.

Even with an increase to $ 15 an hour, a typical family of four could not afford the basics in any U.S. state, according to a CNBC analysis of cost-of-living data collected by researchers at the Massachusetts Institute of Technology. (This example assumes that two children and two adults work full time for the minimum wage.)

The data weighs costs such as food, childcare, health care, housing, transportation and other necessities. It does not include income from safety net programs for the poor.

Some adults without children, according to the analysis, will generally do better than families. But in about half of the countries, the cost of living would still pay the earnings of workers, who paid $ 15 an hour.

The shortages will mostly be greatest for workers in the West and Northeast – in states such as California, Hawaii, Massachusetts and New York, as well as the District of Columbia – where the cost of living and taxes are higher.

‘When people shout [that a $15 minimum wage] is such a radical proposal, the radical issue about it is, frankly, how low it would actually be, ‘said Judy Conti, director of government affairs at the National Employment Law Project, a group advocating for workers.

President Joe Biden has asked for a salary cap of $ 15 per hour. House Democrats aim to link the policy – which will gradually raise wages until 2025 – to a $ 1.9 billion pandemic aid package.

The Covid pandemic has further eased the concept of a living wage, as advocates claim frontline and essential workers (often women and people of color) are underpaid for their labor while endangering health.

Democrats are trying to pass on more pandemic aid by mid-March, although the continued existence of the minimum wage measure has not been ensured. Biden reportedly told government officials last week that the salary increase is unlikely to survive in the short term, but promises to continue the policy.

A minimum wage of $ 15 would more than double the current federal standard.

The current national rate – $ 7.25 per hour, or about $ 15,000 per year before tax for a full-time worker – was set in 2009. It does not increase with the cost of living, and so the purchasing power has eroded over time.

Many states have accepted a higher salary. Some cities and businesses have done the same.

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However, according to the Department of Labor, 21 states have used the federal minimum since January this year. (Some, like Virginia, have recently passed laws to increase it.)

The U.S. minimum is less than half the “living wage” for a single adult ($ 15.41 per hour, or about $ 32,000 per year before tax), according to national data compiled by MIT. That’s a third of what a family of four has to live on – about $ 21.50 an hour per parent, or nearly $ 90,000 a year together. And the consequences are compounded for single parents.

“People do not survive on the minimum wage,” said Amy Glasmeier, a professor of economic geography and regional planning at MIT, who in 2004 compiled a database of local living wages and updated it annually.

Presenting everyday articles can be a challenge. For example, having a cell phone and broadband Internet access – strongly linked to the ability to get and get a job in the digital age – costs about $ 120 a month, Glasmeier said. That’s almost 10% of a low – wage earner’s budget.

Low-paid workers may have to do extra work to pay bills, and often cannot save for emergencies or save money to buy assets such as a home, Glasmeier said.

And there could be repercussions for floods in areas such as health, if people consistently buy cheap processed foods, because that’s all they can afford, she said.

The current wage deficit compared to the cost of living is usually the largest for workers in the South and Midwest. There, the cost of living tends to be lower – but also the minimum payment.

In these areas, a minimum wage of $ 15 will have a greater effect compared to reducing the living wage gap, the data show.

Of course, the mean averages of mask variation are at multiple micro levels.

Workers in suburban and rural areas usually have lower living costs than in cities, for example – and earn more from a higher national wage scale, Glasmeier said.

Even among metro areas, there are clear differences. In San Francisco and San Jose, California, a family of four would need about $ 130,000 a year ($ 31 an hour) to afford the basics. In Jackson, Mississippi and Memphis, Tennessee, it is closer to $ 79,000 ($ 19 per hour).

By comparison, in Holmes County, Mississippi, a rural area north of Jackson, the living wage is less than $ 17 an hour for a family, according to MIT data.

Regional variations have led some to conclude that the federal government should not accept a uniform national minimum wage.

“To say that a minimum wage of $ 15 an hour is the living wage simply does not make sense,” said Rachel Greszler, an economist at the Heritage Foundation, a conservative think tank.

“In some places, it’s actually not enough to talk about a wage to support a family,” she said. “In other places, it may be enough to support a family.”

If Washington decides to increase the pay floor, federal lawmakers will also have to adjust the minimum wage regionally according to the median of the area, Greszler said.

However, this approach would suppress wages in certain areas for coloreds who earn excessively the minimum wage, said Conti of the National Employment Law Project.

“We do not want to add more systemic racism to it,” she said. “This is what setting local minimum wages would do at the national level.”

Critics argue that a national salary increase will lead to companies reducing their jobs due to higher labor costs, which may outweigh the benefits.

About 27 million Americans would receive an increase by the middle of the decade and 900,000 would be lifted out of poverty due to a minimum wage of $ 15, according to the Congressional Budget Office. But there will also be 1.4 million fewer jobs due to the policy, CBO predicted.

It would also cause the cost of childcare to rise by an average of 21%, or about $ 3,700 for a family with two children, predicts Greszler, who ignores wage gains.

“It will increase the income of some, but lose the income for others,” Greszler said. “I do not think these are very good compromises.”

However, some economists dispute the analysis of the Congressional Budget Office.

“We believe that the CBO’s assumptions about the scale of job loss are just wrong and inflated inappropriately compared to what the latest economic literature would indicate,” according to economists from the Economic Policy Institute, a left-leaning think tank.

One meta-analysis, written by Arindrajit Dube, an economist at the University of Massachusetts, had an almost zero impact on work while examining evidence of various minimum wage increases.

A higher wage, according to EPI, will also significantly reduce government spending on low-income programs, such as food stamps and the earnings income and child tax credits.