The $ 7.25 minimum wage does not help families in any state pay the bills

Activists with Our Revolution will be holding signs outside the Capitol Complex on Thursday, February 25, 2021, asking for a $ 15 minimum wage to be passed by Congress to pass the $ 15 minimum wage increase proposed under the Covid Relief Act .

Bill Clark | CQ Appeal, Inc. | Getty Images

Following legislative setbacks, Democrats appear to have abandoned plans to add a minimum wage of $ 15 to Washington-weighed $ 1.9 trillion Covid Aid bill.

This means that the current national wage floor – $ 7.25 an hour, or about $ 15,000 a year before taxes – is expected to remain in place for the short term.

The current minimum wage does not cover the cost of living for a full-time employee in any US state. This comes from data on the cost of living published by researchers at the Massachusetts Institute of Technology.

The cost of living would eclipse the income of single adults in about half of the states by as much as $ 15 an hour. And the typical family of four couldn’t afford the basics in any U.S. state. (This example assumes that two adults who work full-time for a minimum wage have two children.)

The data weighs costs such as groceries, childcare, health care, housing, transportation, and other necessities. It does not include any income from safety net programs for the poor.

Setback for Democrats

The Covid-19 pandemic has pushed the concept of a living wage into greater relief as proponents claim to be on the front lines and key workers (often women and people of color) to be underpaid for their jobs while putting their health at risk.

The Democrats had set a goal of raising the federal minimum wage to $ 15 as part of a pandemic relief package they plan to pass by mid-March. The house passed the American Rescue Plan Act of 2021 on Saturday with a minimum wage of $ 15.

Democrats can pass the bill with a simple majority in the Senate – as opposed to the typical 60-vote threshold – using a process known as budget balancing.

But they were dealt a blow last week when the Senate MP ruled that a minimum wage of $ 15 did not meet the strict criteria for reconciliation. Older party members eyed a workaround that would have taxed large corporations that paid lower wages. They quickly gave up this “Plan B” due to a time crisis.

Now some progressives are calling for President Joe Biden to override the MP’s decision. Administrative officials have stated that this is not planned.

“If we don’t override the Senate MP, we will condone poverty wages for millions of Americans,” said Rep. Ro Khanna, D-Calif. On Monday.

Democrats, including President Biden, have vowed to continue the fight for a minimum wage of $ 15 if it is ultimately not included in the US bailout.

This plan would likely meet with significant Republican opposition. Some centrist democrats have also pushed back. Critics argue that a national wage increase would cause companies to cut jobs due to higher labor costs and potentially outweigh the benefits.

“It would increase the income of some but it would lose the income of others,” said Rachel Greszler, an economist at the Heritage Foundation, a conservative think tank. “I don’t think these are very good compromises.”

Where deficits are greatest

For single adults with no children, current lost wages relative to the cost of living are greatest in Georgia, Louisiana, New Hampshire, North Carolina, Pennsylvania, South Carolina, Texas, Utah and Virginia, according to a CNBC analysis of living wage data.

All are charged $ 7.25 per hour. (Virginia recently passed a bill to be passed later this year.)

Single adults who work 40 hours a week in these areas can, on average, earn less than half of their living expenses if they earn the minimum wage, according to analysis.

Families have an even harder time. In the same states – and a few others like Iowa, Kansas, Kentucky, Oklahoma, Wisconsin, and Wyoming – parents with two children who earn the minimum wage can cover about a third of their living expenses.

“People do not survive on the minimum wage,” said Amy Glasmeier, professor of economic geography and regional planning at MIT, who created a database of regional living wages in 2004 and updates it annually.

Buying everyday items can be a challenge. For example, a cell phone and broadband internet access – closely related to being able to get and keep a job in the digital age – costs around $ 120 a month, Glasmeier said. That is almost 10% of the budget of a low wage earner.

Low-wage earners may need to have additional jobs to pay bills and are often unable to save for emergencies or save money to buy assets like a home, Glasmeier said.

And there can be spillover effects in areas like health when people consistently buy low-cost, processed foods because that’s all they can afford, she said.

Regional differences

Of course, the state averages the mask variation on more micro levels.

For example, it can cost less to live in suburbs and rural areas than in cities, although there are exceptions, Glasmeier said.

Workers in certain occupations and industries are often disadvantaged by regional wage differences, she said. For example, food preparation jobs in rural areas pay much lower wages than in cities – resulting in greater shortages for such workers in rural areas compared to cities.

There are even significant differences between the subway areas.

For example, in San Francisco and San Jose, California, a family of four would need about $ 130,000 per year ($ 31 per hour) to afford the basics. In Jackson, Mississippi and Memphis, Tennessee, it’s closer to $ 79,000 ($ 19 an hour), according to MIT data.

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