Around Austin we've been hearing a lot lately about how important it is to have a so-called Universal Living Wage. This is part of a nationwide campaign which is using Austin as one of its test-markets for an effort to get local governments to establish minimum wages within their jurisdictions which exceed the federally mandated minimum of $5.15 an hour.
The theory behind this movement is that the federal minimum wage is too low for anyone to actually live on in many parts of the country, and that a large segment of the population is suffering because of low wages which make it impossible for them to afford basic necessities like food and housing. But is this basic premise correct, and can those pushing this idea even get their math right?
Let's set aside for the time being the questions of whether we should even have a minimum wage and of whether municipal or regional governments ought to be in the business of dictating wages to businesses, and look at the basic flaws in the reasoning behind the Universal Living Wage movement.
If you visit the Universal Living Wage website they give a rundown of the formula for figuring out what the ULW should be in an area, based on rents in that area and the HUD standard that 30% of a person's income should go to housing. For Austin it comes up with a result of about $10.60 an hour, more than double the federal minimum wage. It's a lovely formula, except for the fact that it is based on a completely flawed assumption - really a collection of faulty assumptions.
The underlying conceptual error is that they seem to believe that the minimum wage is all that a large portion of the work force will ever be paid, and that a minimum wage job should provide a good living without requiring any sacrifice from the worker. They assume that the minimum wage is the standard in the workforce - all workers are ever going to earn - rather than an entry-level wage which requires some sacrifice from workers who will likely be motivated to move on to better paying jobs in the future.
This skewed perspective leads to huge errors in how they model the wage requirements of workers. The gigantic, glaring false assumption is that all minimum wage workers live by themselves in an efficiency apartment or larger accomodations, paying exactly the average price in the marketplace. They assume that minimum wage workers are not married, do not live with their family, and can't possibly find ways to reduce their overhead by sharing living space or moving into a less desirable neighborhood.
Article comments
— go to most recent comments1 - mrbenning
Wow, kudos on a well written article. You've put into words something I've been trying to arrange in my head for some time.
I disagree that if the minimum wage were done away with that the starting wage would remain the same. I do agree, however, that workers should look at low paying jobs as stepping stones instead of careers.
My 2 Cents,
MRBenning
2 - bhw
I don't think people are too woried about young, single, childless workers just getting started earning minimum wage. They're worried about people who have family responsibilities earning minimum wage -- or at least I'm worried about them. Those people often can't share an apartment or pool incomes with 3 other working adults because their apartment is being lived in by their dependents who don't earn any income.
So, while I agree with you that a young, single, childless person can get by on the federal minimum wage in Austin, TX and similar towns, anyone trying to support a family cannot do so without other assistance.
And let's not even bother to do the math on how far you can stretch the $5.15/hour wage in more expensive places, like Mass. or CA.
3 - JR
Does everyone in a low-wage job get the opportunity to move up? That seems like quite an assumption right there.
4 - Nick Jones
Elitist pig, indeed.
5 - mrbenning
I'm a college educated male working at a job where I make quite a few bucks less an hour than many people I know working in retail without degrees. I've got friends who took on landscaping jobs after high school and are looking at starting up their own business. I also know college graduates who are couching it at home with mom.
Sometimes it's luck of the draw. Other times it really takes a Ragged Dick mentality (very clever link by the way).
Raising minimum wage will certainly help some people out, but it's not the end all solution. Even if it went to seven or eight bucks an hour, you still can't raise a family on that.
6 - Dave Nalle
>>I disagree that if the minimum wage were done away with that the starting wage would remain the same. I do agree, however, that workers should look at low paying jobs as stepping stones instead of careers. <<
It may be different in the industrial midwest, but in Texas and a lot of other parts of the country you'd be hard pressed to find a job that starts at $5.15 an hour unless it's some sort of entry level job with on-the-job training and rapid advancement. Illegal aliens working construction and landscaping start out at more than minimum wage around here, paid in cash with no taxes taken out.
>>I don't think people are too woried about young, single, childless workers just getting started earning minimum wage. They're worried about people who have family responsibilities earning minimum wage -- or at least I'm worried about them. Those people often can't share an apartment or pool incomes with 3 other working adults because their apartment is being lived in by their dependents who don't earn any income.
So, while I agree with you that a young, single, childless person can get by on the federal minimum wage in Austin, TX and similar towns, anyone trying to support a family cannot do so without other assistance.<<
It only seems that way because your assumptions about lifestyle are those of an affluant 20th century American, I'm afraid. If you look a century back in our own country or look to the third world you'll see a different reality. There are even counter examples right here in America today. All you really have to do is look at the hispanic immigrant community. They are willing to live in extended family groups with more than just two working adults per household to reduce expenses, including child care and it works very effectively. For example, a hispanic family that lives near us lives off of contract labor in the building industry. They live in a single 3/2 house with a 2/1 trailer in the yard. That's enough to house the equivalent of two families plus, with two adult males and their wives, 5 non-working kids and two adult 'cousins' who live with them and work with them. The women work part time and take care of the kids and all the men work regularly. That's the equivalent of 5 incomes for the household, with monthly housing expenses of about $1200, plus another $1000 or so for food. I haven't interrogated them, but based on what others are earning they are probably each making about $1500 a month, and the two adult males without families are likely sending a good portion of that back to Mexico. But if you do the math, you'll see immediately that they have a LOT of disposable incomem - probably over $3000 a month after paying expenses and sending $1000 back to Mexico. It's not a surprise that they have 3 nice new pickups parked in the yard. It's a decent lifestyle and it's achieved by living and working together as a family even if the wages they earn are relatively low.
Even if liberals have forgotten the American Way, immigrants are here to remind us.
Dave
7 - Maurice
Dave, you are brilliant and I really enjoyed reading your last response. My daughter wants to go back to college but doesn't want to change her 'lifestye' which includes getting her nails done once a week and having her hair dyed. When I explained to her that I rented a room from an old widower and rode a bicycle so I could afford college she just sniffed and said "that was in the old days". I am NOT financing her return to college.
One other thought. In AA they use the term enabler. It means someone that helps an alcoholic get more booze or get out of jail or otherwise enable the person to maintain their alcoholic lifestye. If we were to raise the minimum wage wouldn't we be enabling people to be successful without any effort on their part? Personally, I think paying people what they are worth makes people want to be worth more.
8 - DrPat
...paying people what they are worth makes people want to be worth more.
That's so right! And boosting the "minimum wage" reduces the number of "burger-flipping" jobs available to those who are on their way to be worth more.
9 - Shark
"...a minimum wage job is not a career."
No shit, Einstein.
Here in my major Texas city, all the local Blockbusters, Lowes, Home Depots, Targets, Walmarts, etc --- are filled with 50-something employees (lots of men!) who were laid off from various medium and high-paying skilled jobs; now they're making at or just above min. wage, and most have families.
And I know more than a few brilliant computer types, ex-airline pilots, etc. delivering pizza.
Can't wait till the 'new' economy reaches Elitist Pig Boy there in Austin -- exports his job to India, and sends his elitist ass to my house with a large pepperoni and a "let 'em eat cake" attitude.
I'll recognize him by the "BUSH 04" bumper sticker next to the "for sale" sign on his beat up BMW.
And he can expect the minimum *tip from me...
* one middle finger
(he's good with math!)
10 - spiderleaf
Wow, this is really only a small part of the story. But it's easy to forget the realities of life when you are on a rampage to push wages lower and do away with minimum living standards.
Okay. Family of 4 in LA (or anywhere really). Two parents earning $5.15/ hour = $824/ month (not $893). Combined they bring in $1648/ month gross.
Subtract $494.40 per month for rent (which would get you a one room apt in a shitty part of town).
Except you forgot taxes. So it's not really $494 a month after all.
How about child care while the parents are at work?
How about health care (since minimum wage jobs do not provide this "luxury")?
Okay, now transportation. How do they get to their jobs? How much does insurance cost? Or car payments? Or gas? Okay, they don't get to own a car then. But, public transist costs at least $2 per ride (or $8/ day for both parents - almost 2 full hours of work)
What about utilities? Food? Clothing?
If you can provide all the above for your family on less than $1500 a month, you are an exception, not the rule and your argument skirts reality in so many fundamental ways.
11 - Shark
re. Spider's math;
...hopefully -- all those expenses leave just enough left over for a *9mm Glock and a box of ammo.
* the new "stress release" in contemporary American culture
12 - Dave Nalle
>>Here in my major Texas city, all the local Blockbusters, Lowes, Home Depots, Targets, Walmarts, etc --- are filled with 50-something employees (lots of men!) who were laid off from various medium and high-paying skilled jobs; now they're making at or just above min. wage, and most have families.<<
Would you care to share with me what part of Texas you live in? The emergence of all those chain stores is a sign of rapid regional growth, which means corresponding growth in the entire job market, which means jobs should also be available at higher paying work. Here in the Austin area the jobs you describe are NOT going to older and experienced workers, they're going to younger workers - except the WalMart greeters, of course. The same is true in other Texas metro areas where I've spent time, including San Antonio and Dallas. In addition, many of those businesses are having trouble keeping enough workers and have people working extended shifts and are either starting workers at above minimum wage or advancing their pay scale fairly rapidly - not to a super high level, but to well above minimum wage.
>>And I know more than a few brilliant computer types, ex-airline pilots, etc. delivering pizza.<<
Then there's something wrong with them. Both of those occupations are in high demand nationwide. All you have to do is either move to somewhere the jobs are - in the case of computer work. Or be willing to work a non union job for a slightly lower (but still huge) salary if you're an airline pilot. I have no sympathy for people who won't do the minimum necessary to get work when it's available down the road.
>>Can't wait till the 'new' economy reaches Elitist Pig Boy there in Austin -- exports his job to India, and sends his elitist ass to my house with a large pepperoni and a "let 'em eat cake" attitude. <<
The new economy reached me years ago - I'm on its leading edge. I'm a self-employed entrepreneur and doing just fine.
>>I'll recognize him by the "BUSH 04" bumper sticker next to the "for sale" sign on his beat up BMW.<<
Might want to check for the Badnarik sticker on my Honda instead.
Dave
13 - RJ
"Does everyone in a low-wage job get the opportunity to move up?"
Yes.
Most employers offer some sort of raise after 90 days, or 6 months, or a year.
Also, the person could get a second, part-time job.
And they can also go to school part-time and eventually earn a degree which will allow them the earn much more than the minimum wage.
14 - RJ
Shark:
Around here, at least, pizza delivery drivers make a decent living. $5.15/hour plus 50 cents per delivery plus all their tips. It easily comes to over $10.00/hour.
Of course, most pizza delivery guys aren't full-time. And this does not factor in wear-and-tear on their vehicle. But, a pizza delivery person is clearly a few steps ahead of some 17-year old burger flipper...
15 - RJ
"How about health care (since minimum wage jobs do not provide this "luxury")?"
They don't?
7-11 has very good benefits, and they are always hiring. And they are almost everywhere. And they do not require college degrees. And they usually start their employees out at a bit higher than $5.15/hour...
16 - Dave Nalle
>>Wow, this is really only a small part of the story. But it's easy to forget the realities of life when you are on a rampage to push wages lower and do away with minimum living standards.<<
All I want to do is remind people that the minimum living standards set by leftist elitists in their Soho lofts are not a realistic target for most people, who should be willing to learn to live within their means.
>>Okay. Family of 4 in LA (or anywhere really). Two parents earning $5.15/ hour = $824/ month (not $893). <<
Nice math, but how many days do you think there are in a month? It's $824 for 4 weeks work, but it's $893 for an average month of work. To find the proper amount per month it's ($5.15x40hrsx52weeks)/12
>>Combined they bring in $1648/ month gross.<<
Actually $1787 if you do the math right.
>>Subtract $494.40 per month for rent (which would get you a one room apt in a shitty part of town).<<
Wow, rents are down in LA.
>>Except you forgot taxes. So it's not really $494 a month after all.<<
A family of 3 earning minimum wage does not pay taxes. In fact, after running them through TurboTax I find that they get an earned income refund of $2198, so I guess we can add that into the income.
>>How about child care while the parents are at work?<<
I actually did a longer version of this article at one point which included all the expenses as well. I may have to dig that up. How about they live near their parents and have a granny take care of the kids?
But if you insist we can't do that or anything else creative, then you take out $400 a month for child care.
>>How about health care (since minimum wage jobs do not provide this "luxury")?<<
At that wage level they're going to have to do without insurance. I know that I did without insurance up until about the age of 30.
>>Okay, now transportation. How do they get to their jobs? How much does insurance cost? Or car payments? Or gas? Okay, they don't get to own a car then. But, public transist costs at least $2 per ride (or $8/ day for both parents - almost 2 full hours of work)
What about utilities? Food? Clothing?<<
Let's just summarize with a quick run-down:
Monthly Income - $1787
Rent - $500
Liability Car Insurance - $100
Child Care - $400
Utilities/Phone/Cable - $200
Food - $400 (yes you can feed a family of 3 for this)
Gas/Public Transport - $100
Total Expenses - $1700
Surplus - $87
>>If you can provide all the above for your family on less than $1500 a month, you are an exception, not the rule and your argument skirts reality in so many fundamental ways.<<
Yes, most people seem not to be able to do it - but some people DO accomplish it, and it's not impossible. In addition you left out the possibility of one parent working a second job even part time. If you look at the figures, they are right on the borderline. Any additional income from overtime or another part time job would push them into the range where they would have enough money left over to provide for medical insurance and other luxuries.
Ok, that's the budget using your scenario. Here's mine.
How about they live like this:
Buy an inexpensive 2/2 house or mobile home with a mortgage payment of about $600 a month in an exurban area with jobs in the area.
They then share the house with relatives or with another couple or individual, ideally bringing their portion of the house payment down to $400 or less, plus reducing utilities and food expenses. Ideally they own the house and sublet to their roomies so they build up equity for the future.
They pick their housing based on ability to bike or walk to work - if you're working minimum wage you can do it virtually anywhere, so you can tailor hosing location to work availability.
And how about this. Just the husband works, but he works two jobs and the mom stays home and takes care of the kid.
Then their expenses look like this:
Housing - $400
Utilities/Phone/Cable - $120
Food - $400 (embrace the PB&J and Ramen)
Health Insurance - $300
3 Credit Hours of Community College - $360
IRA Contribution - $200
Total Expenses - $1780
Look at that. They're building wealth, saving in an IRA, have health insurance and are getting an education to advance themselves, all on minimum wage. Plus no one sharp enough to learn to live like this is going to stay at minimum wage for long, and even earning a tiny amount more per month will rapidly leave them with substantial excess income.
Oh, and a couple of other savings I probably ought to mention. If you're only qualified for a minimum wage job, don't have a kid. If that's your status and you DO have a kid, live with your parents until you get your life pulled together. That's the sensible thing to do.
But anyway, if you live frugally and manage your expenses and lifestyle intelligently, you can live on minimum wage. You just need to adjust your expectations to what you can afford.
Dave
17 - RJ
Of course you're correct, Dave.
But the Left would rather everyone believe that it's not possible, so that the gov't will have solid public support for more wealth re-distribution.
Telling a "poor" person that he CAN do it, and showing him/her the WAY to do it, is not exactly a priority for these folks...
18 - mrbenning
I'm just wondering what raising the minimum wage would do to the value of our dollar.
19 - Steve S
Telling a "poor" person that he CAN do it, and showing him/her the WAY to do it, is not exactly a priority for these folks...
It's not a priority for who?
The people who work running homeless shelters, who run social programs that help teens on drugs, prostitutes, at-risk people, etc. are primarily people who believe in giving help and charity. The majority who work in these social programs believe in social programs for the poor. That certainly doesn't describe any conservative on this thread.
Many people who are showing the poor people they CAN do it, ARE progressives. It's wrong for you to claim otherwise.
Addressing the original post now:
The underlying conceptual error is that they seem to believe that the minimum wage is all that a large portion of the work force will ever be paid,
One of the key cornerstones of democracy is a middle class. You must maintain a middle class. When a person is so poor that they cannot put shelter over their head or food in their mouth, then they spend all their time just meeting those needs, they cannot then seek to better themselves further. Setting a minimum amount that allows people to have basic needs met, so then they can have the ability to better their own lives and climb up the economic ladder, is the reason for wage laws.
Some people might believe that there will be those who never achieve higher than minimum wage, perhaps they've seen a lot of seniors greeting people at Wal-Mart's door, or had a grandmother wait on them at the 7-11. But most people don't think that the purpose of wage laws is because most won't rise above it.
The perception is that there will always be a need for it, as people struggle to climb up the economic ladder, but it won't always be the same people.
You get your money back from a liveable wage, as they spend the money back into the economy.
and that a minimum wage job should provide a good living without requiring any sacrifice from the worker.
who's advocating stripping away the ability to fire someone?
20 - Dave Nalle
>>You get your money back from a liveable wage, as they spend the money back into the economy.<<
Sure, to some degree. But my point is that what they are calling a 'Living Wage' and a real livable wage are not the same thing because they base their wage on the worker making no sacrifices in lifestyle to fit the wage he's earning.
>>and that a minimum wage job should provide a good living without requiring any sacrifice from the worker.
who's advocating stripping away the ability to fire someone?<<
No idea. Not me.
Dave
21 - Shark
Elitist Pig: "Would you care to share with me what part of Texas you live in? The emergence of all those chain stores is a sign of rapid regional growth, which means corresponding growth in the entire job market..."
NO. And NO, yer wrong.
Over the last 10 or so years, my large Texas city has been losing skilled, high-paying jobs -- but hey, one can spit and hit an endentured slave working for peanuts at a national 'chain'. (Ask around.It's pretty much the same EVERYWHERE else in the USA. )
re: Computer geeks and airline pilots:
E. Pig: "...Both of those occupations are in high demand nationwide..."
Man, lawd knows I hate to get into debates using facts, but this is a quick shot to point out that E. Pig is so full of shit, his eyes are brown.
From a US gov. web site on the future of aging computer geeks:
"Namaste. Thees is "Steve". Thanks you for holding. May I be of service to you?"
More bad news:
"...After September 11, 2001, air travel was severely depressed. A number of the major airlines were forced to reduce schedules, layoff pilots, and even declare bankruptcy. ...Pilots attempting to get jobs at the major airlines airlines will face strong competition, as those firms tend to attract many more applicants than they have jobs. They also will have to compete with laid off pilots for any available jobs."
ie. Blow me, Dave.
22 - P6
1- You can not...I repeat, CANNOT...get a mortgage when you make minimum wage. However that you think one can clarifies a lot. You probably aren't personally hostile to poor folks, just very wrong about what is faced.
2: There was a time in America when a person who couldn't support a household on their own was considered poor. Now it's just...normal.
23 - Mike Kole
I would ask any advocate of the living wage to consider this discussion's sake item. I'll round the minimum wage to $5. I know it's $5.15, but I'm rounding for the ease of the math.
If a city has 1000 workers and currently pays each the minimum wage of $5, then it spends $5,000/hour on this labor.
The living wage advocates say that the workers need to get $10/hour in order to live more humanely. The city agrees, and resolves to raise the pay to the living wage rate. It now spends $10,000/hour on this labor.
Problem is, like virtually every other governmental agency in the country right now, this city budget is a mess, with a small deficit running. There is no extra money to spend.
Since the raise in wages has been resolved, it shall happen. But how? Four options:
1. In order to spend the same amount on labor, the city would have to reduce the workforce by half. $5,000/hour can be allocated to either 1000 workers at $5/hr, or 500 workers at $10/hr.
This was a political decision, recall. The raises were not given for any other reason than that it was argued that the raises were needed. Productivity is unchanged. You can't just cut half the work force. That would have the net result of bettering half of the workers and impoverishing the other half, which defeats the purpose of the political effort. Doing this is just too unpalatable politically.
All of the workers must be kept.
In order to keep all of the workers at this new living wage, new funds must be secured.
2. Raise taxes.
3. Float bonds.
4. Cut spending elsewhere.
It's all well and good to want to raise someone's standard of living. However, it must be provided for. The advocates for the living wage NEVER indicate how this will be provided for, especially important in times like these when budgets are flat. It *is* doable when there are budget surplusses.
24 - Steve S
Dave's comment 20:
But my point is that what they are calling a 'Living Wage' and a real livable wage are not the same thing because they base their wage on the worker making no sacrifices in lifestyle to fit the wage he's earning.
I don't know what 'they' are basing their numbers on. I support a minimum/living wage. I support one that is adjusted for inflation. I support one that covers the basics of living, - food, shelter, health care, transportation, clothing and access to education. (transportation can be the ability to afford a seasonal bus pass, it doesn't have to be a rolls. But if you can't afford to get yourself to and from places, you can't work).
I know that when I lived in Okla. (early 80's), I was young and on a minimum wage. I was able to survive ALONE (don't know what inflation has done to the midwest now). BUT I wasn't able to better myself, to climb up the economic ladder, except by leaving. It was a day to day existance. I don't see what you are advocating as changing that.
I understand and actually somewhat agree with your premise that a minimum wage should be set so that people WANT to move on up economically, but I disagree with you on where that dollar amount is, and I adamantly disagree with your insinuations of whether there should be a minimum wage at all.
Mike, regarding your comment 23:
Your example is of government employees. I don't know of many government positions that start out at minimum wage, and can't find any reports of periodically raising the minimum wage affecting taxes.
It's not the government that needs to come up with the money to pay employees living on minimum wage, as much as it is corporations. If a city is paying such a large amount of workers minimum wage, what are those people driving on? Stagecoaches on dirt roads?
Corporations can afford to raise the minimum wage by cutting spending elsewhere. When some CEO's make so much money that it would require their lowest paid worker to work 812 years to equal ONE year's salary of the CEO, I say some cutting can go on there. Also, less advertising, we are being overly bombarded anyway. Count how many car commercials you see in one evening. Cut that in half, and the price of cars could probably drop 2,000 dollars alone.
It's all well and good to want to raise someone's standard of living. However, it must be provided for. The advocates for the living wage NEVER indicate how this will be provided for, especially important in times like these when budgets are flat.
But I am indicating how this can be provided for, in the corporate sector. Can you come up with statistics as to how many government employees start out at minimum wage? Perhaps nobody is countering your example because it isn't a realistic one? I'm not saying it's unrealistic, I don't know. But it's not my perception that that many people in the gov. are on minimum wage anyway.
SHOULD there be a government (city/state, etc) that does pay a lot of people minimum wage and need to raise it, then my response would be, yes, they need to find a way, because what are we supposed to do? Shrug our shoulders and allow peoples pay to remain the same while the cost of living surpasses them? If someone lives on minimum wage in 2004 and remains at that same rate in 2010, they are going to be able to do less with the money then. Saying 'too bad, so sad' is not a solution.
Did you know that if a CEO makes 25,000 times the pay of his lowest employee, then the company can write off the CEO's pay as a deduction? WHERE is the logic in that? The government can come up with the money to pay any necessary increases in minimum wage, by getting rid of loopholes that keep the elite from paying their fair share of taxes.
25 - Dave Nalle
>>1- You can not...I repeat, CANNOT...get a mortgage when you make minimum wage. However that you think one can clarifies a lot. You probably aren't personally hostile to poor folks, just very wrong about what is faced.<<
This is absolutely untrue. Tract home and manufactured housing builders are virtually giving away homes with no qualifications whatsoever. They have no-money-down deals and no-qualifying deals. I can find 5 or 6 developments like this within 3 miles of my house.
Dave