I hear the federal minimum wage in the United States is being raised to $7.25 by 2009. Celebrate good times! I think I’ll do a little dance in the street. Right.
While this is a nice little step forward it isn’t really anything most people could hope to actually live on. Why is the minimum wage so low? I’m not really sure of the specifics, but I do know that it isn’t a livable wage. For those who are mathematically challenged, someone working at that rate full time would make slightly more than $950 per month, after taxes.
It’s very, very difficult to live on $950 per month. Almost impossible for most, and even if you can just barely squeeze by, good luck amassing any savings or paying for an unforeseen expense or emergency.
How to Live on Minimum Wage
Let’s break down where $950 per month will get you, just for kicks.
We’ll say that you are renting an apartment, which is shared with a roommate. The price of rent has gone up quite a bit recently, so we’ll assume you live very modestly ($600 per month together) and split this amount. That’s $300.
Heating and electric amount to $100 total, so that’s $50.
You have a phone. $30.
You also have to eat, right? If you cook a lot and never eat out, you MAY be able to get by on $100 per month. That would be very, very frugal.
Transportation. We’ll say that you can’t afford a car, so you take the bus. $80 per month for this.
We’ll also assume that you are one of the lucky ones with health insurance. Even so, this probably will cost you $100 per month, minimum. We’ll say that you have a “good” employer who offers health insurance (but for some reason pays minimum wage!)
Finally, we will assume $100 per month for incidentals, like toothpaste, band-aids, medication, toilet paper and perhaps some new socks.
We have come to a grand total of $760. Congratulations. You can put an amazing $190 into savings every month. You are really living the American Dream now.
Of course, this thriving lifestyle is only possible if you:
- Have no kids
- Live with a roommate (at least one)
- Have no credit card bills, college loans, or other outstanding bills of any kind
- Have no car
- Really, really like to cook or hunt for your food
- Never eat out, and never really have any entertainment of any kind
- Rarely shop for any new clothing
- Never have any medical emergencies of any kind
- Never miss work for any reason
- Never travel
- Never update any of your furnishings at “home”
If you are very good at simple living though, you might be able to pull it off.
But why should life be this difficult for the working class?
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escapee November 8, 2007 at 8:42 am
You are so right- have you read Nickel and Dimed yet? It’s practically impossible to live on minimum wage.
Victoria November 9, 2007 at 10:58 am
That was a great book – very eye opening and a must read for anyone who naively thinks people can survive on the minimum wage.
Mike November 9, 2007 at 11:56 am
I’ve read excerpts from that book and they really resonated with me. At some point I’ll sit down with it and read through it. We definitely have a problem on our hands that is more complicated than we may think. The minimum wage thing is solvable, but it will take a lot of time and sound decisions by our government. We’ll see if they are up to the challenge!
escapee November 9, 2007 at 12:24 pm
I’ve actually worked for *below* minimum wage before. I was a waitress and made around $2.01/hour back in the late 80’s when I was a teenager.
What most people do not realize is that people who are waiters in most cases are paid below minimum wage- you are expected to make the rest up in tips, which there is no guarantee you will get.
Also- where I worked we were required to do “side work” which is stuff like scrubbing out iced tea urns, rolling silverware in napkins, wiping everything down, etc. The pay for this- $2.01/hr. Sometimes it would take me 2 hours to finish it all.
This is why I HATE people who are bad tippers. Especially if they have gotten good service.
Scott Jackson November 9, 2007 at 6:02 pm
Nickel and Dimed is not a good source, the author didn’t actually live the minimum wage “lifestyle,” driving around in her BMW and living at a nice hotel.
Mike November 9, 2007 at 6:47 pm
Definitely, and a lot of employees who receive tips get paid like nothing… it’s all the tips. I believe there are a few states where it’s ok to pay employees solely on tips if they are below a certain age or work a certain number of hours (I think Kansas is one of them.)
About Nickled and Dimed – this may be true, but it’s still a good read. I think the material is more important than the source in many cases.
jobot November 10, 2007 at 1:47 pm
Actually, you forgot about taxes. Federal income tax would be 10%, state (mn) is 5.35, and Social security is 7.65%. That’s 23%; we’ll say 20% to figure in tax breaks, etc.
So $950 a month – 20% in taxes is $760. You need to redo is Mike, with $200 less.
I think $100 for food is pretty generous if someone is really poor. I’d say $50-75. You can buy a lot of food for $50 if it’s not a bunch of shit or pre-made stuff.
That said, I don’t see why anyone who needs to make to more than minimum wage can’t. Rather than artificially raise the wages of jobs, money should go toward employment and training programs (which states already provide)to help people fill jobs of higher value to employers that are not filled. An exodus of workers to these jobs will lower the pool of workers for min wage jobs and those wages should increase.
I’m tired of people sitting on their hands waiting for the government to fix everything and take care of them (Ron Paul for president in 08!). There’s plenty of $8/hour jobs in Minneapolis–come here and take those jobs if you’re making min wage.
Mike November 10, 2007 at 3:29 pm
Some of this I agree with, but in reality not everyone can afford to come to a city where life is better. There are language barriers also for many workers, who can only realistically get jobs at places like McDonalds that don’t pay nearly as much as others. Ideologically, I agree with you… it would be great if we could all rely on our own devices, but the system is set up where the more needy amongst us don’t have as many options.
Actually, I did factor in taxes to the minimum wage ($7.25 x 4.33 weeks in a month x 40 hours per week is about $1,250 before taxes)
jooba November 11, 2008 at 4:21 pm
Higher minimum wage means companies have to charge more for their goods and services; society as a whole pays more.
So, we could do that, or adults could just not work minimum wage jobs and leave them to high schoolers and college students, and not expect a minimum wage job to support a family.
Mike November 12, 2008 at 10:39 am
Perhaps, but these days it is more about the discrepancy between the level that minimum wage is at and what companies are paying for their goods.
I wrote this article in 2007 before the recession of 2008, so I was perhaps anticipating that companies had a bit more leeway. Then again, in a free market it is difficult to stay ahead, stay in business, and keep workers happy.
Perhaps our free market system is what needs to be changed. You cannot live on minimum wage.
jooba November 16, 2008 at 1:03 pm
Nor are you supposed to…
I think they tried it once though where all jobs received the same payrate. Lawyers got the same as bricklayers, CPA’s the same as roofers. I think they called that system… communism.