Public Comment

The Minimum Wage is Not a Living Wage

Harry Brill
Friday October 12, 2018 - 04:53:00 PM

Achieving a minimum wage in Berkeley for $15 an hour, which unlike most minimum wage laws, will be increased annually in the beginning of July next year according to the inflation rate. The law, which became effective October 1, was a major victory.

The vast majority of minimum wage laws pay well under $15 an hour and lack an inflation adjustment provision. As a result the purchasing power of these wages will continually decline. But generally speaking, these new minimum wage laws make an enormous difference in the standard of living of many thousands of working people. As low as these wages are, they are an immense improvement over the federal minimum wage of only $7.25 an hour

However, without exception these wages are still poverty wages.

According to an official study of poverty in California, at $15 an hour, which is in the $31,000 range annually for a full time year round worker, a family of four would still lack the resources to meet basic needs. The California poverty rate, which is 20.6 percent of the population, is the highest in the country. Prices keep rising but wages for several decades have been stagnant. 

What working people need to escape poverty is not simply a higher wage. They need a living wage. A living wage would provide a family with the costs of health care, food, shelter, clothing, transportation, and other essentials to enjoy a decent life.  

Thorough and careful research was conducted by MIT and the liberal Economic Policy Institute to determine the costs of essentials throughout the United States and the annual wage that is needed to cover these costs. But because prices often rise considerably and rapidly, there is an inherent tendency of these institutes and others to underestimate the cost of living. Let us look at these issues in Alameda County, California where probably many of the readers of this commentary live. For a family of four - husband, wife, and two children -- with only one person working, the minimum hourly wages must exceed $33 an hour for a 40 hour week to qualify as a living wage.. That amounts to a wage of $70,000 annually. 

According to the estimated budget, these families have to spend for housing over $26,000 a year, which is $2,166 a month. However, the average rent for a two bedroom apartment now in Alameda County is $2,529 a month, which is over $300 per month more than their budget would permit. Most of the rental increase occurred within the last six months. So as careful as the studies about the cost of living may have been, costs are actually higher than what the experts determined. The estimated wage of $70,000 to adequately support a family of four is a rock bottom figure, at least in Alameda County. That's more than twice the minimum wage that was achieved in Berkeley. 

Nationally, things are very tight for many individuals and families. Rents and the employees' share of health care are rising rapidly, which appreciably erodes the paychecks of working people. According to the Federal Reserve, 40 percent of Americans cannot pay for a $400 emergency expense. Moreover, thirty-four percent have no money in the bank, and many others have very little. So the total number of individuals with little or nothing is 65 percent. In fact, the average household debt according to the Federal Reserve is $137,000. So ironically, borrowing is among the necessities of life. 

Since the problem of poverty is a national problem, the federal government rather than the states and cities should be mainly responsible for addressing this issue. That it has failed to do so is a national disgrace. The federal minimum wage has remained $7.25 since 2009. 

Had the federal minimum wage kept up with the increases in worker output, it would be over $20 an hour. That certainly would have been welcome because many poor workers and their family would be less poor. However, this hourly rate would still be lower than a living wage for families. 

Actually, the federal minimum wage law is worse than it is realized. In addition to the hourly minimum the law exempts many businesses from providing any minimum wage. As a result, the number of workers who are paid below the minimum under the law is larger than the number of employees who receive the minimum wage. The gap would be greater if many in the workers in the federal exempt category were not covered by state and local wage laws.  

What then could be done to achieve a living wage for all workers? That's a formidable challenge. Perhaps it would be helpful to keep in mind that we should not be shackled by a culture of low expectations. So along with celebrating our minimum wage victories, our slogan must be "Not Enuff, Not Enuff, and Not Enuff". 

As Franklin D. Roosevelt said, "No business which depends for existence on paying *less than living wages to its workers has any right to continue in this country.. By living wages, I mean more than the bare subsistence level - I mean the wages of a decent living."