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Friday, August 3, 2012

What You Don't Know About the Minimum Wage Will Hurt America

I bet you don't think about the minimum wage very much, unless you're one of the folks trying to live on it. There's a move afoot to raise the minimum wage, and you should support it. It's in everyone's best interest to make sure working Americans make a living wage.

Senator Tom Harkin has proposed the Rebuild America Act, which would, among other provisions, raise the minimum wage. It's about time we revisit the minimum wage. Here are some important facts you should know about the minimum wage:

Way below inflation: If the minimum wage had been raised to keep pace with inflation since it was $1.60/hour in 1966, it would now be $10.55.

Annual income: If you work full time on minimum wage, your annual income is $15,080. Go ahead. Try living on that for a year. Morgan Spurlock tried it for 30 days in his old TV show. If you never saw it, you missed an eye-opener.

Tipped employees: Tipped employees have a minimum wage of $2.13/hour. Tip well!

Affording an apartment: In no state in the U.S., even those with higher minimum wages, can a minimum wage worker afford a two-bedroom apartment at fair market value working only 40 hours/week.

Disproportionately women: 64% of minimum wage workers are women. Compare that to the percentage of women who are CEOs, at 4%. Something is wrong here.

Good for the economy: Minimum wage workers tend to spend their pay increases, mainly because they have to. Increases in the minimum wage are good for the economy.

Majority big corporations: Most minimum wage workers are working for big corporations, who have reported record profit increases. The old canard that it would put mom and pop shops out of business is malarkey. 

More college educated: More college-educated folks make minimum wage than those who never graduated high school. If you think minimum wage workers brought their troubles on themselves by dropping out, you are wrong.

Now that you have the facts, I hope you'll tell your Congressional representatives and Senators that you support raising the minimum wage to something Americans can actually live on.


  1. he has to really grin at this post. he can't think of a more self-contradictory idea than the minimum wage law. she wants the government to force the private sector to do something which it won't do itself voluntarily.

    in other words she wants the government to force itself to give raises to those who are being paid minimum wage now. :)

    1. Hi griper. Of course I want government to regulate corporations. If they didn't, we'd still have sweat shops and exploding Pintos. Yes, I want government to force the private sector to pay employees a living wage. I think it's a reasonable imposition.

  2. Dear griper,
    Why not force the private sector to do something it doesn't want to do? Capitalism requires regulation --unless you're pining for the Dickensonian (or maybe Lochner?) era.

    I think minimum wage should be raised to $10.50/hr and tied to the consumer price index (which should be calculated the way it was in the 1970s, not using the faux CPI of today) and adjusted annually for inflation. It should also be calulated regionally, just like Service Contract Act wages.

    Business owners all seem to think they're entitled to a huge profit. The way I see it, if your business model depends on paying workers less than a living wage, it's either a defective business model or you're lousy at running a business.

    1. Hi Susan. I couldn't agree more! A CEO who has three mansions on the backs of workers is not anything but a robber baron.

  3. Susan: I agree completely! I think that modern american capitalists have forgotten an essential part of capitalist theory, espoused here by Henry Ford: "Make the best quality of goods possible, at the lowest cost possible, paying the highest wages possible." The third part businesses ignore consistently, and to their detriment.

    1. Hi Kimberlee. Great quote! Thanks for sharing it.

  4. The business that disregards its employees in favor of profits will quickly find itself without either one.

    1. Hi Cube. I hope you are prophetic. We've let companies get away with runaway profits on the backs of underpaid workers too long.

  5. that's a lawyer for you, ignore the argument put forth and present a misleading concept of that argument by only addressing a part of it. :)

    the gist of my argument was that government is forcing itself to do what it will not do voluntarily, raise wages for those who draw a minimum wage from the government.
    and moreover, all it does is add to the deficit spending of government as if it isn't high enough already. of course part of this will be made up by the additional taxes that the poor will be paying because they got a raise in pay.

    and whether you admit or not, the private business will not absorb that added expense as government must. they will pass it along to the consumer in the form of higher prices for their product or service. and guess who that effects the most?

    as for the economy a raise in the minimum wage will have very little effect on it because the net amount to spend will not be that much.

    and an individual earning minimum wage can live quite well too. i know that as a fact. one reason is that in a lot of places that start you out at minimum wage will result in an increase of pay after the trial period of employment.

    i understand that as a lawyer you are an advocate of the employee but you are not looking at the whole effect of such a law.

    1. Using ADP's payroll calculator, I plugged in the $15,000 figure, assuming no other deductions beyond those mandated by the federal government (ie: no state income tax). This results in a net amount of $243 based on a weekly pay schedule or roughly $1025 on a monthly basis.

      Now, let's start with the basics. I'll use Minneapolis as my example, given that's where I'm at.

      I was able to find a 525 sq. ft. apartment for $550/month, which is a smaller, but reasonable amount of space for one person to live comfortably. This studio apartment also includes heat, water and trash. So that's living space taken care of.

      Running total: $550.00/month

      Now to food. The USDA's official food plan for a female aged 19-50 is $161/month for the "thrifty" option. Males in the same age group are $181/month.

      Running total: $731.00/month

      Oops, we forgot to pay utilities. Let's be a little conservative and say that electric runs $40/month, accounting for AC in the summer months. Cable TV probably isn't too likely, and DSL internet can be had for $30/month. Oh, we need a phone too. Off-contract, call it $50 for a cell phone as our example person's only telephone. That brings the total for utilities to $120.

      Running Total: $850.00/month

      In a wide open city like Minneapolis/St. Paul, our example would really have trouble getting anywhere in a reasonable amount of time without a car, which means insurance. Now, our minimum wage earner is very possibly in the approximately 50% of those under the age of 25 and therefore won't have any particular discounts.

      Just for fun, though, let's lowball this and say that it's going to cost $420 every 6 months for insurance so we have easy math. That's $70/month for car insurance, probably with state minimums.

      Running Total: $920.00/month

      Given that we're being pretty frugal here, a budget of $50/month for clothing seems reasonable. That roughly equates to 2-3 t-shirts and a pack of underwear, in case anyone was wondering. Or one pair of jeans at Old Navy with enough money left to grab lunch at McDonald's. Go ahead, super size me.

      Running Total: $970.00/month

      Gee whiz, I forgot gas money. That's another $50/month

      Which should leave that person still needing renter's and health insurance. Given that they're being paid minimum wage, it's statistically unlikely that their employer is footing the bill for even the most basic preventative care package.

      The $5 left over each month isn't enough to pay for Netflix streaming, so unfortunately, there's no entertainment budget to speak of.

      This example also assumes that the person has no children and no debt at all. And no clean clothes, since there wasn't money left in the budget for that either.

      A really excellent thing to take a look at is: http://playspent.org/ - while not amazingly scientific (just like what I've written above), it offers a great deal of insight into the decisions that minimum wage workers have to make every day.

    2. Hi Cube. Yes, a single person can possibly live on minimum wage. The working parent cannot. The calculations in the article were based on a 2 bedroom apartment. In Minnesota, a minimum wage worker with a family requiring a two bedroom apartment would have to work 84 hours a week to survive. Or maybe they should follow Newt's advice and put the 10-year-old to work as a janitor.

    3. Donna - my entire deal there was in response to Griper's comment that a person can "live quite well" on minimum wage. I was attempting to point out the logical fallacy of that statement by putting together a real-world type example of how it's a pretty tough go even as a single person with no kids or debt. :)

  6. griper- "and an individual earning minimum wage can live quite well too. i know that as a fact. one reason is that in a lot of places that start you out at minimum wage will result in an increase of pay after the trial period of employment."

    Griper- One must have lived in some very, very economically depressed countries to think of minimum wage in the US as "living well". Using the "basket of goods" model of poverty, social adjustments are made by region in order to define what poverty is. In the US, the minium goods required for basic survival are: Food, clothing, shelter (with appropriate environmental controls, such as AC in Arizona, and heat in Maine), transportation to and from a place of employment, and health care. If you think that a minimum wage job, even working two of those at full time, can provide the above without government assistance, I would love to see how. An excellent guide would be the budget/deductibles the IRS allows for bankruptcy proceedings when computing whether or not to collect past due taxes. (You'll have to dig for the link, I can't find it ATM, sorry!). That's the best estimate of the true cost of living in the US, and that excludes all form of entertainment and cell phone access (which is required to be able to work in the majority of jobs anymore).

    Fantasy land, thy denizens name be griper.

    1. Hi CLH. I agree with you 100%. We pay more, as taxpayers, in the form of aid for housing and food, healthcare, and other expenses for minimum wage workers than we would pay in the higher cost of goods if we mandate a living wage. Raising the minimum wage three times in 30 years is appalling and irresponsible. It should be tied to cost of living and automatically raise every year.

  7. i stand by my statement and that economically depressed nation is the good ol' USA.

    and Donna, that higher cost of goods that you are willing to pay is also the amount paid by that minumum wage earner thus offsetting any raise he got along with the higher taxes he would end up paying too not only on the federal level but also on the State and local level. so, he ends up with less than when he started and he would still be on welfare if he was already on it.
    and remember, they cannot write those added expenses off like you can
    as i said you are not looking at the whole effect, only the partial effect as you see the employee getting up front.

  8. and one more thing after rereadig the comments. i can see at least $100 that can probably be trimmed from that budget stated in one of the comments and that is only from reading it not experiencing it. so i have no doubt in my argument now.

    1. By all means, please share. And explain as well how you plan to account for unexpected expenses and health care.

      Unless you can put together a budget for the AVERAGE person on minimum wage (ie: not a single person with no children and no debt), this is really just borderline trolling.

  9. he smiles. the average person doesn't get paid the minimum wage. and i wouldn't construct a budget for the average person because the situation is unique for each individual just as Donna will tell you that each of her cases are unique thus dealt with on an individual basis.

    and i'll overlook the ad hominem accusation.


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