The $ 15 minimum wage will not cover the living costs of many Americans

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

While millions would get a wage increase from a higher national wage, they would still not be able to pay a “living wage” to many workers – the wage a person or family needs to cover their basic expenses.

This is especially true for families, largely due to higher living costs such as caring for children, relative to single adults.

Even with an increase of $ 15 per 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 gathered by researchers at the Massachusetts Institute of Technology. (In this example, two children and two adults are supposed to work full time for a minimum wage.)

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

According to the analysis, single adults without children tend to perform better than families. But in about half of the states, the cost of living would still overshadow the incomes of workers who paid $ 15 an hour.

Deficiencies would generally be greater for workers in the West and Northeast, in states such as California, Hawaii, Massachusetts, and New York, as well as in the District of Columbia, where the cost of living and taxes are usually higher. .

“When people shout [that a $15 minimum wage] it’s such a radical proposal, the radical thing about it is, frankly, how low it really would be, ”said Judy Conti, director of government affairs for the National Employment Law Project, a workers’ advocacy group.

President Joe Biden has demanded a salary of $ 15 per hour. House Democrats plan to add the policy, which would gradually raise wages by 2025, to a $ 1.9 trillion pandemic aid package.

The Covid pandemic has pushed the concept of living wage into stricter relief, as advocates claim that essential workers (often women and people of color) do not pay for their work while putting their health at risk.

Democrats are trying to approve more pandemic aid in mid-March, although survival of the minimum wage measure is not assured. Biden reportedly told state officials last week that the pay rise was unlikely to survive in the short term, but pledged to continue the policy.

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

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

Many states have adopted a higher wage scale. Some cities and businesses have done the same.

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But 21 states used the federal minimum as of January this year, according to the Department of Labor. (Some, like Virginia, recently passed laws to raise it).

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

“People don’t survive on the minimum wage,” said Amy Glasmeier, a professor of economic geography and regional planning at MIT, who created a regional wage database in 2004 and updates it annually.

Offering everyday items can be a challenge. For example, having a cell phone and broadband Internet access (closely related to the ability to get a job in the digital age) costs about $ 120 a month, Glasmeier said. This accounts for almost 10% of a low-wage worker’s budget.

Low-wage workers may have to work extra jobs to pay bills and often can’t save for emergencies or store money to buy assets like a home, Glasmeier said.

And there may be side effects in areas like health, if people constantly buy low-cost processed foods because that’s all they can afford, he said.

The current wage deficit relative to the cost of living is generally larger for workers in the south and midwest. There, the cost of living tends to be lower, but so does the minimum wage.

In these areas, a minimum wage of $ 15 would have a greater effect in relation to closing the wage gap, according to the data.

Of course, the state averages the variation of the mask to more micro levels.

Workers in suburban and rural areas tend to have lower living costs than those in cities, for example, and will earn more with a higher national wage scale, Glasmeier said.

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

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

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

“To say that a minimum wage of $ 15 an hour is the living wage makes no sense,” said Rachel Greszler, an economist at the Heritage Foundation, a conservative think tank.

“In some places, it’s actually not enough, if you’re talking about a salary to support a family,” he said. “Elsewhere, it could be an adequate salary to support a family.”

If Washington decides to raise the wage, federal lawmakers should also adjust the minimum wage regionally according to the average wage in the area, Greszler said.

However, this approach would suppress wages in certain areas for people of color, who earn the minimum wage disproportionately, Conti said of the National Employment Bill.

“We don’t want to put more systemic racism in it,” he said. “That would be what would enshrine regional minimum wages at the national level.”

Critics argue that a national wage increase would lead companies to reduce jobs due to higher labor costs, which could offset profits.

About 27 million Americans would get a wage 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 would also be 1.4 million fewer jobs due to the policy, CBO predicted.

Greszler predicts that it would also cause the cost of caring for children to rise by an average of 21% to around $ 3,700 for a family with two children, which would negate some of the wage gains.

“It would increase revenue for some but lose revenue for others,” Greszler said. “I don’t think they’re very good commitments.”

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 wrong and inappropriately inflated in relation to what the avant-garde economics literature would indicate,” according to economists at the Institute for Economic Policy , a left-wing think tank.

A meta-analysis, written by Arindrajit Dube, an economist at the University of Massachusetts Amherst, found near-zero labor impact when examining evidence of several minimum wage increases.

A higher wage would also significantly reduce government spending on support programs for low-income people, such as food stamps and income and child tax credits, according to PPE.