On Monday we looked at a Thought Leader-ish attempt to explain how working full time on minimum wage in the U.S. ($7.25/hr, no benefits) could allow a person to meet expenses and – and! – even "build wealth." Let's talk a little more about that $7.25.
I keep no secrets about what I am. I am a soft, middle-aging, middle-income professional with an advanced degree and a mediocre salary that allows me to live comfortably because I have no dependents. I'm not the hardscrabble poor, nor am I Wealthy unless one compares my financial situation to that of a homeless person. Recently I was recreating with a similar person – 40s, professional, Doing Fine financially, urban – and we got to talking about minimum wage. Accounting for various forms of withholding, a $7.25 hourly rate translates (and we were/are spitballing here) maybe $6/hr in net income. It's probably slightly less, and yes, a person earning this would qualify for things like the EITC at tax time, returning some of the withholding. But set that aside for now. Let's say that depending on where one lives, an hour of work at minimum wage nets six dollars.
My friend said – and maybe this is the kind of thing that only soft, non-poor middle age types can say after years of being spoiled by middle income living – "If someone told me that if I sat in a soft, comfortable chair doing nothing for one hour they would give me six dollars, I wouldn't do it." And I never thought about this previously, but almost immediately I realized I felt exactly the same. If a stranger grabbed my arm and said "If you (insert literally anything here) for one hour I will give you $6" I would laugh and keep walking.
Perhaps a person in deep poverty would feel differently, but the point that hit me was how truly little $6 is. And I'd like to think it's not just very little money to us because we're middle income urban hipsters. It's just not much, period. It's two gallons of gas, or one McDonald's Value Meal in some low cost of living areas, or 1 thrift store t-shirt, or 3 hours of City of Chicago metered parking, or…you get the idea. Six dollars, to all but the totally destitute, would very quickly be judged in economic terms, "Not worth an hour of my time." It strikes me as at or below the amount of money one could make panhandling or collecting returnable aluminum cans for an hour or two.
Obviously nobody works for one hour in reality. But just as obvious is that minimum wage employees are not working full time (40 hours) in all but the rarest cases. Figure 30 hours per week using our $6 net figure and you are taking home…$180 per week. For those of you who are also fortunate enough to make something more than that, sit back and think about that for a second. I socialize with people who think nothing about spending $180 on dinner. If you think about minimum wage employment in terms of actual dollars, it's not at all difficult to come to the conclusion that regardless of whether one is comfortable financially or at the poverty line it would be hard to look at the prospect of working to bring home $180 per week and thinking, "What's the point?"
The minimum wage is adjusted in nominal terms maybe once per decade, and as soon as that happens time and inflation eat into it in real terms. The reality is that in 2017 it would net a quasi-full time employee an amount of money so small that no amount of barebones living could compensate for its lack of buying power. If the only thing you took away from the example above is "Ed is a bourgeois asshole," congratulations, you're not terribly bright. Being lucky enough not to have to rely on the minimum wage at this point in my life makes it more, not less, obvious how unacceptably low it is. The next time you are in a bar serving $12 cocktails and $8 pints, remember this and maybe you will learn something about how little six dollars means to you, too.