Photo by Gerd Altmann from Pixabay
Nowadays, it has been declared many times that the minimum wage should be at $15 an hour across the nation by activists, politicians, educators, restaurant workers, etc. It is causing up a stir in a noticeable way that it has caught the attention of the White House. President Biden recognizes that it’s an issue that needs to be solved immediately introducing it to the political lineup as an addition to efforts of economic relief during this Pandemic.
What is minimum wage?
“The Federal minimum wage provisions for covered, nonexempt employees are contained in the Fair Labor Standards Act (FLSA). The Fair Minimum Wage Act of 2007 included phased increases to the Federal minimum wage” (US Dept. of Labor). To note, there are some exemptions for this Act. These exemptions include “disabilities, full-time students, youth under age 20 in their first 90 consecutive calendar days of employment, tipped employees, and student learners.”
The wage varies state by state according to their cost index, which refers to the cost of living. There are other prices that are also considered when it comes to regular expenses for a resident. These four major categories are Grocery, Housing, Utility, and Transportation. Let’s first take a look at the cost index numbers. World Population Review lists their numbers by a percentage in comparison to the country’s average.
States With:
Highest Cost Index: 192.9 Hawaii
Average Cost Index: 104.63
Lowest Cost Index: 86.1 Mississippi
10 States With Lowest Cost Index:
Mississippi (86.1)
Arkansas (86.9)
Oklahoma (87)
Missouri (87.1)
New Mexico (87.5)
Tennessee (88.7)
Michigan (88.9)
Kansas (89)
Georgia (89.2)
Wyoming (89.3)
We’ll come back to housing. Let’s go into the other three categories from the same website.
Grocery
Highest Grocery Cost: 169.3 Hawaii
Average Grocery Cost: 103.34
Lowest Grocery Cost: 88.9 Texas
Utility
Highest Utility Cost: 172.7 Hawaii
Average Utility Cost: 101.62
Total Average Monthly Utility Dollars: $398.24 (Move.org)
Lowest Utility Cost: 82.9 Idaho
Move.org does a full breakdown of all utilities and their prices. Here are the average monthly utility costs in the US:
Electricity: $110.76
Natural gas: $72.10
Water: $70.39
Cable TV: $85
Internet: $60
Trash/recycling: $14
Total cost: $398.24
Transportation
Highest Transportation Cost: 148.6 Hawaii
Average Transportation Cost: 104.83
Lowest Transportation Cost: 83.6 Arkansas
These are what our numbers look like currently for this year. Let’s dive further into which state has the lowest minimum wage and compare it to their cost index. The same will go for the state with the highest of both subjects while using this website:
Note: This website looks at wages from 2020 - 2021 and shows future wage raise plans for states + DC that have taken those steps already.
Highest wage: $16.84 California in their city Emeryville
Lowest wage: $5.15 Wyoming
Difference: $11.69
Some will argue that one state is larger than the other. Well, that wage is specifically for one city out of the entire state. Then more factors can be added to it. But we’re trying to see if the $15 an hour will really have a huge impact on people paying their expenses or if it’s not needed at all. The difference is much larger when viewing the wages of tipped employees.
For tipped employees:
(All figures do not include the tip amount employees receive. These vary by individual and that’s if they even get one. Also, not all states have a separate category for those who receive tips. For example, tip pooling is one of the reasons for a state to not have this.)
Highest tip wage: $5.00 D.C.
Lowest tip wage: $2.13 Kansas, Kentucky, New Mexico, North Carolina, Texas, Utah, Wyoming
Difference: $2.87
Now let’s look at the difference between the cost of housing numbers from the World Population Review.
Median Cost of a Home: $200,000
Note: You can find a home for this price in any state. The details that come inside of the house vary state by state.
Highest Home Price: $615,300 Hawaii
Lowest Home Price: $119,000 Mississippi
Difference: $496,300
Statistica.com mentions that the average rent across the United States is above $7.25 an hour as of February 2020. Currently, there are 16 states that follow the Federal minimum wage. This annual salary equates to $15,000 a year.
Average Monthly Wage: $1,250
Average Rent: $1,468
Difference: - $218
If the average person brings home $1,250 for a month, ideally they should be able to afford all expenses. Rent payment is the first to go out of these expenses.
Avg Monthly Wage - Avg Rent = Avg Total Leftover (1)
$1,250 - $1,468 = -$218
Utilities are the second most needed expense in order to suit livable conditions.
Avg Total Leftover (1) - Avg Month Utility Total = Avg Total Leftover (2)
-$218 - $398.24 = -$616.24
We are already almost halfway negative to the average cost of the rent. For the sake of keeping up with these formulas, the negative means how much a person does not have available to pay after already working one full-time job. Now, we need food to live and need to feed everyone within an average individual household. Statistica.com indicates, “As of 2020, the U.S. Census Bureau counted about 83.68 million families in the United States. The average family consisted of 3.15 persons in 2020, down from 3.7 in the 1960s.” Since this number is above 3, let’s go with the average family household containing 4 people. Using the Official USDA Food Plans, in January 2018, a family of four with children 6-11-years-old using a low-cost food plan spending $847.40 monthly.
Avg Total Leftover (2) - Avg Fam Month Food Cost = Avg Total Leftover (3)
-$616.24 - $847.40 = -$1,463.64
The total we are at now for an average household’s expenses is now more than their monthly wage after they have already spent their entire paychecks for that month for the roof over their heads. We are still not done yet. We need to add in the major expenses for transportation because we all need to travel to and from work in order to make our money. ITDP.org remarks, “On average, Americans own 2.28 cars, meaning that many households in the United States have three or more vehicles. In fact, 35% of American households own three or more cars. Personal vehicles accounted for the largest amount of transportation expenditures in 2017 – a total of $1.1 trillion, almost 90% of total transportation expenditures. In 2017, transportation costs made up the fourth-largest expenditure among American households which spent an average of $9,737 each on transportation costs.” Furthermore, the average monthly transportation cost is $811.42.
Avg Total Leftover (3) - Avg Month Transportation Cost = Avg Total Leftover (4)
-$1,463.64 - $811.42 = -$2,275.06
Now we are left with -$2,275.06 of expenses to pay for essential needs of every average household in the United States after paying the average cost of the rent. Note that this number is almost double the average paycheck at the current minimum wage of $7.25 an hour with the major expense already made. Also, something to remember about this final number is that it does not include clothing, housing materials, school expenses, and others that have not been mentioned.
What is the government doing?
Federally, President Biden has mentioned that he wanted to attach the $15 minimum wage increase to the current COVID-19 Stimulus Bill in the lineup through the government approval process. In case you do not know what this is, the Bill gets introduced to the US Congress. Once it is approved, it goes to the US Senate. After the Senate approves the Bill, then it passes to the President, who gets the final say. Then changes are put into play to get things rolling. “Biden and Democratic leaders want to pass the relief package that extends unemployment benefits before the current benefits expire March 14.” (USA Today)
As of Saturday, February 27, 2021, Congress had approved of the increase and is now within discussion at the Senate House of Representatives. It is still unknown at this time that the Senate will approve of the minimum wage increase attachment. They have a choice of approving it along with the COVID Bill or they can detach them. If they really think about it, they’ll realize that changing the minimum wage will help all working-class people have a headstart in catching up with their lives during this Pandemic. Also, the pressures from citizens wouldn’t be as high as it was for this Bill to get started in the first place because they will have done double the work with as little effort with the full approval. America will not be repeating their words from last year in figuring out how to get ahead with little money. Besides the amount increase on the stimulus package, they will be doing their due diligence in getting us all ahead. Let’s hope that they put everything into perspective because it also means that more taxes will be returning to the Treasury come next year. These funds can be used for further relief efforts if this is still going on. If not, then it can be used for more future building projects to speed on ahead.
What do businesses think?
Corporations are pushing back on this change as they believe it will majorly crash them. They are also scared of the possible penalty that may come their way if they choose to deny ensuing the proposal. The details of this penalty are unsure but are being planned by Democrats within the Senate. While these corporations nitpick the details for their company’s benefit, not their workers, Costco pulled a $1 up on their competitors, Amazon, Target, and Best Buy, last week. This week, Costco will have their hourly employees (90% of 180,000) set to $16 an hour instead of the $15 boost. The CEO believes that it’ll be good for the employees. According to their numbers, Costco already had 20% of their employees making $15/hr last year. The company, Roundtable, disagrees and suggests that it “should be linked to the progress of defeating the coronavirus Pandemic”. The President of the National Retail Federation, Matthew Shay, mentioned that the increase should be “dictated by market conditions'' instead of the government. This statement is incorrect as there are already businesses in at least the 16 states who are relying on the government’s say for minimum wage.
More small business owners have argued that they will not afford their employees to affect their business operations as a whole. 60% of businesses would result in layoffs. The rise in the wage would conclude in the loss of 1.4 million jobs. Due to Covid, some of them are already on the verge of closing their businesses. This change would be detrimental to them. However, a plan was in the works to provide them with an incentive for small businesses to benefit. It has been proposed that they would receive tax credits if they did pay the higher wages. But with the time crunch, it looks like it has been thrown out the window to keep things simplified. Perhaps an addendum may be attached to this attachment after all of it gets approved. I don’t know about you, but that sounds like it would be more confusing than doing everything now in one shot to prevent any more setbacks for the American people. But that’s just me putting my opinion out there.
So what’s really going on?
“Before 2007, the minimum wage had been stuck at $5.15 per hour for 10 years.” (NELP 2016) This means that all economic increases become a hardship for the middle class and below. Why? Because it takes more money to pay for the roof over our heads, for food from restaurants to eat, and for the clothes that we want to wear. This price especially goes for school expenses with their supply lists and for childcare. To confirm, USA Today states, “Over the past decade, food costs, housing expenses and CEO pay has climbed yet those at the bottom of the economic ladder have not seen similar gains in their wages, progressives contend.”
The following table will show the history of changes starting from the beginning:
Date Minimum Wage Difference
Increase
Start 1938 Start $0.25 $0
(eq. $4.54) 2019 June 26, 1940 $0.40 + $0.15
1949 $0.75 + $0.35
1955 $1.00 + $0.25
September 1961 $1.15 + $0.15
September 1963 $1.25 + $0.10
September 1964 $1.15 - $0.10
September 1965 $1.25 + $0.10
February 1967 $1.00 - $0.25
February 1968 $1.15 + $0.15
February 1969 $1.30 + $0.25
February 1970 $1.45 + $0.15
February 1971 $1.60 + $0.15
1974 $2.00 + $0.40
1975 $2.10 + $0.10
1976 $2.30 + $0.20
1977 $2.30 $0
January 1978 $2.65 + $0.35
January 1979 $2.90 + $0.25
January 1980 $3.10 + $0.20
January 1981 $3.35 + $0.25
April 1, 1990 $3.80 + $0.45
April 1, 1991 $4.25 + $0.45
October 1, 1996 $4.75 + $0.50
September 1, 1997 $5.15 + $0.40
2007 $6.55 + $1.40
July 24, 2009 $7.25 + $1.70
According to the U.S. Department of Labor, “The federal minimum wage for covered nonexempt employees is $7.25 per hour.” This means that currently in this year of 2021, the federal minimum wage has not changed for 12 YEARS and is still sitting at an hourly wage of $7.25 since The Fair Wage Act was passed in 2007. When someone gets hired at a job, their wage will be determined between the higher number of federal vs. the states' minimum wages. The number has not changed while the economy has increased over the years. “The federal minimum wage was last raised on July 24, 2009, when it rose from $6.55 to $7.25 per hour, the last step of a three-step increase approved by Congress in 2007” (NELP 2016). America had the Great Recession from 2008 to 2009. Even during those tough times, we still had an increase. For the voices mentioning that we are in a Pandemic and there should not be any increase at all is silly. If we can have a Recession with an increase, then we can have one now too. Besides, did I mention that it is long overdue? To have the raise should not even be considered in the Senate House right now.
While many cons have been mentioned by business owners, here is a pro for the working-class Americans. Britannica states, “If low-income workers earned more money, their dependence on, and eligibility for, government benefits would decrease.” This shines hope for those who think the Treasury is going to be bankrupt. It is not going to happen in this way.
Overall, the minimum wage is determined for the American workers between the state’s mention, if they have one, or the federal wage. The worker is entitled to the higher number out of the two. Checking out the numbers for yourself will show you that $7.25 an hour or $15,000 a year does not seem balanced to the median household cost throughout the entire country as $200,000 and the average rent as $1,468. The $15 increase attached to the COVID relief Bill has already made its way through the first stop, Congress. It is now within the second phase beholders, which is good news. We are halfway there to getting it passed. The reality is though, the U.S. Senates do have the power to not accept this add-on and only push through the COVID stimulus package. Some businesses are agreeable to this Bill and are already stepping forward in making the amount change, while others are still fighting against it worried about their closures. Viewing the differences in the yearly table as minimal shows that even a small increase will not make much impact within people’s households, which is why the big jump has been introduced in the first place as a boost for the American people.
Bibliography:
Institute for Transportation and Development Policy. “The High Cost of Transportation in the United States” https://www.itdp.org/2019/05/23/high-cost-transportation-united-states/ March 3, 2021.
Meyersohn, Nathaniel. “Costco raises its minimum wage in US to $16 an hour” Media News Group, Inc.: https://www.mercurynews.com/2021/02/25/costco-raises-its-minimum-wage-in-us-to-16-an-hour/ March 2, 2021.
Procon.org, “Should the Federal Minimum Wage Be Increased?” Britannica: https://minimum-wage.procon.org/ March 2, 2021.
Raise the Minimum Wage Editors. “WHEN WAS THE LAST TIME THE MINIMUM WAGE WAS RAISED?” National Employment Law Project: https://raisetheMinimumwage.com/question-answer/when-was-the-last-minimum-wageincreased/#:~:text=The%20federal%20minimum%20wage%20was,per% 20hour%20for%2010%20years March 2, 2021.
Roberts, Joe. “Utility Bills 101: Utilities Tips, Average Costs, Fees, and More” 2021 Move.org: https://www.move.org/utility-bills-101/ March 3, 2021.
Statistica Research Department, “Average monthly apartment rent in the United States from September 2016 to February 2020” Statistica: https://www.statista.com/statistics/1063502/average-monthly-apartment-rent-usa/ March 3, 2021.
Statistica Research Department, “Average number of people per family in the United States from 1960 to 2020” Statistica: https://www.statista.com/statistics/183657/average-size-of-a-family-in-the-us/#:~:text=As%20of%202020%2C%20the%20U.S.,from%203.7%20in%20the%201960s March 3, 2021.
United States Department of Agriculture, “Official USDA Food Plans: Cost of Food at Home at Four Levels, U.S. Average, January 2018” Center for Nutrition Policy and Promotion: https://clark.com/wp-content/uploads/2018/02/costoffoodjan2018.pdf March 3, 2021.
U.S. Department of Labor, “History of Changes to the Minimum Wage Law” DOL: https://www.dol.gov/ agencies/whd/minimum-wage/history March 2, 2021.
U.S. Department of Labor. “Minimum Wage” DOL: https://www.dol.gov/general/topic/wages/minimum wage#:~:text=The%20federal%20minimum%20wage%20for,of%20the%20two%20minimum%20wages March 2, 2021.
Wikipedia Editors, “ Minimum wage in the United States” Wikipedia: https://en.wikipedia.org/wiki/ Minimum_wage_in_the_United_States#:~:text=The%20federal%20minimum%20wage%20was%20introduced%20in%201938%20at%20the,risen%20to%20%240.75%20per%20hour March 2, 2021.
World Population Review, “Cost Of Living Index by State 2021” World Population Review: https://worldpopulationreview.com/state-rankings/cost-of-living-index-by-state March 3, 2021.
Wu, Nicholas. “Democrats left scrambling on a $15 minimum wage now that it appears left out of COVID-19 stimulus bill USA” USA Today: https://www.usatoday.com/story/news/politics/2021/03/02/covid-stimulus-15-minimum-wage-unlikely-part-bidens-bill/6872251002/ March 2, 2021.
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