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

A $ 15 minimum wage could become a reality in the United States

While millions of people would benefit from a wage increase thanks to a higher national floor, this would not allow many workers to pay a “living wage” – the wage that a person or family needs to cover their wages. basic expenses.

This is especially true for families, in large part due to the higher cost of living, such as child care, compared to single adults.

Even with a raise of $ 15 an hour, a typical family of four couldn’t afford the basics in any state in the United States, according to a CNBC analysis of cost-of-living data gathered by researchers at the Massachusetts Institute of Technology. (This example assumes two children and two adults are working full time for minimum wage.)

Data weighs costs like food, child care, health care, shelter, transportation and other necessities. It does not include income from safety net programs for the poor.

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

Deficits would typically be larger for workers in the West and Northeast – in states like California, Hawaii, Massachusetts and New York, as well as the District of Columbia – where the cost of living and taxes tend to be higher.

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

President Joe Biden has called for an hourly wage floor of $ 15. House Democrats aim to pair the policy – which would gradually increase wages until 2025 – with a $ 1.9 trillion pandemic assistance package.

The Covid pandemic has propelled the concept of a living wage into sharper relief, as advocates say frontline and essential workers (often women and people of color) are underpaid for their work while putting their money down. health in danger.

Democrats are trying to push through additional pandemic aid by mid-March, although the minimum wage measure’s survival is not assured. Biden reportedly told state officials last week that the pay hike is unlikely to survive in the short term, but vowed to continue the policy.

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

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

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

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

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

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

Obtaining everyday items can be a challenge. For example, having a cell phone and high-speed internet access – closely related to the ability to find and keep a job in the digital age – costs around $ 120 a month, Glasmeier said. This represents almost 10% of the budget of a low-wage worker.

Low-paid workers may need to work additional jobs to pay their bills, and are often unable to save for emergencies or store money to buy assets like a house, Glasmeier said.

And there can be payoffs in areas like health, if people consistently buy low-cost processed foods because it’s all they can afford, she said.

The current wage gap over the cost of living is typically the largest for workers in the South and Midwest. There the cost of living tends to be lower, as does the minimum wage.

In those areas, a minimum wage of $ 15 would have a larger effect on narrowing the living wage gap, the data shows.

Of course, the state averages the mask variations at multiple micro levels.

Workers in suburban and rural areas typically have a lower cost of living than in cities, for example – and have more to gain from a higher national pay scale, Glasmeier said.

Even among metropolitan areas, there are marked differences. In San Francisco and San Jose, California, for example, a family of four would need about $ 130,000 per year ($ 31 an hour) to pay for the basics. In Jackson, Mississippi and Memphis, Tennessee, it’s closer to $ 79,000 ($ 19 an 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 data from MIT.

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 living wage just doesn’t make 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,” she says. “In other places, it might be an adequate salary to support a family.”

If Washington decides to raise the wage floor, federal lawmakers should also adjust the regional minimum wage based on the region’s median wage, Greszler said.

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

“We don’t want to put more systemic racism into it,” she said. “This is what the introduction of a regional minimum wage would do at the national level.”

Critics argue that a national wage hike would lead companies to cut jobs due to higher labor costs, which could outweigh the benefits.

About 27 million Americans would get a pay rise by the middle of the decade and 900,000 would be lifted out of poverty on 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, predicted CBO.

It would also cause the cost of childcare to increase by 21%, on average, or about $ 3,700 for a family with two children, Greszler predicts, reversing some of the wage gains.

“It would increase income for some but lose income for others,” Greszler said. “I don’t think these are very good compromises.”

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

“We believe the CBO’s assumptions about the magnitude of job losses are simply wrong and grossly inflated from what leading-edge economic literature would indicate,” according to economists at the Economic Policy Institute, a group of left reflection.

A meta-analysis, written by Arindrajit Dube, an economist at the University of Massachusetts at Amherst, found a near-zero employment impact by examining the evidence for various increases in the minimum wage.

According to EPI, a higher salary would also significantly reduce public spending on low-wage support programs, such as food stamps and tax credits for income from work and children.