Can a Family Survive on the U.S. Minimum Wage?
What does it truly cost to be able to live a comfortable life at home? There are millions of workers in the United States that make the current federal minimum wage of $7.25. It is widely discussed that this is unable to support any kind of family. Due to this, there is a movement to raise the current minimum wage up to $15 an hour. Through this, it is believed that the amount of poverty would greatly decrease, the government would have to spend less on programs, and children would be allowed more opportunities.
It is easy to believe that the increase would solve all the issues that the lower class in the United States experiences. As that would be a great case scenario, that is not likely the case as the money must come from somewhere or someone. Instead of raising the minimum wage, other options should be considered such as more benefits, a smaller raise in the wage, or increasing the earned income tax credit.
History and Background of our Minimum Wage
It is important to take a step back and see how we got to the issue at hand. Doing this will allow us to take a more educated look at a reasonable solution. The federal minimum wage was first created to prevent companies from underpaying their employees. It was first passed in 1938, thanks to the Fair labor Standards Act. At that time, the minimum wage was set to just 25 cents per hour. Due to inflation and an increasing cost of living that number has had to be increased significantly to the current amount of .
25. Inflation goes up about 3.15% per year (McMahon 2020). It has been some time since the minimum wage was last increased, 11 years to be exact. Since 2009, inflation has risen about 34.65% but the minimum wage has not risen a single cent. In 2009 when the minimum wage was increased, it was raised from just $6.55 to the current $7.25 (McCrery 2007).
Many states have even implemented their own minimum wage to adjust to higher costs of living in a given area. This can become as high as $14 an hour or just at the federal minimum wage of $7.25, depending on the location. In this case, the employee is entitled to whichever of the two have a higher wage. In 2018, a study shows that just over 1.7 million people are working at or below the minimum wage salary (U.S. Department of Labor). It is important to remember this because a majority of these people must provide for their families. Their needs should be able to be met when it comes to grocery shopping and any other daily activities to live comfortably. If not, children could possible not get a meal and face starvation as there are no groceries at their home. One field of work that is surprisingly underpaid is the healthcare field. According to this article, “Approximately 5 million women and 0.2 million men. employed in healthcare earn less than 15$ an hour” (Leigh 2019).
This is important to consider as many of these people had to spend time in college to achieve this position. In addition to this, many people also do not know that most minimum wage workers are single women, who have one or more children in their household. This causes a problem in a home with a single working mother because stress is often conveyed onto her children and can lead to problems in the future. Appropriate care also needs to be affordable so that the child can live a healthy and happy life. The United States has provided several necessities, but this cannot help in certain aspects of life. Another main reason people have minimum wage jobs is because they need to find a way to pay off their school debt. There are class action lawsuits in Philadelphia because students from a cosmetology school claim they do not get paid enough to pay off debt and be able to survive daily living (Laird 2015). When attending colleges, students build up a great amount of debt that they will have to pay off for much of their lives. If a decent job is not acquired after graduation, the struggle can be tough as the student debt is always lingering. As there are many issues that are embedded within our economy, it is important to explore both sides of the issue so that the right decision can be made.
Raising the Minimum Wage
On one side of this issue, people believe that this will simply erase all their personal finance problems. It is also well known that the minimum wage limit has not kept up with the inflation that the economy experiences over time. As the basic raw resources that contribute to producing products in the United States rise, so does the cost of the finished product. Over time this process continuously repeats and creates inflation. In 2009, $7.25 may have been enough to cover a decent living for a period of time but in the current world, this is not the case. What most people do not know is that inflation rises about three percent each year (McMahon 2020). Some claim the minimum wage should even be over $22 an hour. While this might be a bit too excessive, a smaller increment of an increase would not be all too bad.
Across the country the cost of living varies greatly depending on the city and location. If a person were to move from California to Oklahoma, the taxes and pay would be significantly lower. Oklahoma is less expensive allowing families to own more for less. The cost of living can be anything that requires money to survive in that area. This includes buying groceries, the cost of housing, and being able to utilize any services within the city. A person would be smart if they moved to a place, they knew they could succeed at and move when they have their feet on the ground with a steady job. With some having no choice but to stay in the city they are in, this can greatly affect how tight it is to make ends meet.
The current minimum wage is creating tough situations for the people who can only get a minimum wage job. These people are finding themselves and their families in poverty. It is difficult for those people to understand why they are living in poverty when they are working as hard as they can. Higher pay would mean that these minimum wage workers would experience a huge increase within their wage. This itself would help them work towards getting themselves out of poverty and increase the wellbeing for their family (Leigh 2016). Their children are going to look up to how their parents are living and will most likely end up in a similar place. No parent wants to see their child struggle, so they are willing to fight for a higher minimum wage check. With more money coming in, families will be able to contribute more to their health wellbeing, provide a more comfortable living, and increase within their social class (Tsao 2016).
It is not all too unheard of to hear about families struggling by making the minimum wage and just trying to pay bills and keep food in their children’s bellies. For these people they do not take pride in having to use the government, they want to be able to show they can do things on their own. Any person you talk to wants to have a good name for themselves and self-pride. This is not the case for people who are living in poverty. Their mindset is more negative, and they feel like people are downgrading them. Increasing the minimum wage would allow them to feel normal and gain self-pride in a humble way.
Another main point to consider is that the government would be able to relocate money to different areas of their budget as less would need to be spent on welfare programs. The government increases taxes to help people who are living in poverty. This often makes the taxpayers frustrated because they believe the people facing poverty should do something about it. If the minimum wage were risen it would allow the government to take less out of the taxpayers. For the people living in poverty, it could give them a sense of accomplishment and freedom that they were able to pay for their own things. The more money in people’s pockets, the more people would be able to support themselves without the help from the government. The United States government contributed almost 364 billion dollars in 2019 (Romich 2017). The government takes credit for contributing this money, but it was the taxpayer’s money who really contributed in 2019. Raising the minimum wage would allow everyone to have a better understanding of each other. There would be middle ground for the rich and the people who were facing poverty. For middle ground to be reached there needs to be an upside for the taxpayers. The government could put more on their social security or other retirement plans so that they do not have to worry about money when they want to retire. This seems like a compromise that both sides would have a win-win situation.
Keeping the Minimum Wage the Same
On the other side of this issue, there would be many consequences to take into consideration. While it seems great to have the care-free raise, it would likely result in the opposite over time. With companies having to pay their employees a higher salary, profits would greatly be limited. With this, they will have to reduce their revenue only by laying off some employees. According to the Congressional Budget Office, that with the minimum wage raised to just $10.10, more than 500,000 people would be terminated as a result of the increase (CBO 2014). With less employees, companies would be able to make up for the revenue gap from before the new limit was imposed. As the new raise would be great and beneficial, it would be all for nothing to be fired and not earn a salary at all. The employees like the idea of getting a raise but they will have to put in overtime since the company will be fighting others. With less workers that means more stress and hours on everyone which could cause clusters within the work field. Everyone handles stress differently, so they are risking a person blowing up and angering everyone else. That person could impact the other workers’ production rate. This is going to be the negative side of increasing the minimum wage.
Another possible outcome is a great increase in the price of goods that fill the shelves in grocery stores. As companies are forced to almost double salaries of hundreds of employees, they will have to raise money in a different way. This would be to increase the price of their goods so that the production costs can be covered. A study from Purdue University found that a raise of the minimum wage to $22 an hour would result in a 25% increase in prices” (McClure 2015). This would in turn begin to affect the employees themselves, as the cost of living would significantly increase. The raise would prove to be not as beneficial for families. For example, a larger family might not be able to support their children like they once did because gas, food, and other necessities have increased as well. A possibility would be that this family must get on government-provided food stamps so that they can survive. This is also going to have a negative effect on their mental state because they are not used to struggling.
Lastly, some companies already struggle to make profits as it is. With this increased pay expense, it would be completely impractical to keep their doors open. Many would have to file for bankruptcy or even possibly close their books for good. The most affected would most likely be that of franchises that base their profits on cheap labor. Examples of these companies include Walmart, McDonald’s, and even White Castle. From an article on CNBC, Vice President of the White Castle franchise Jamie Richardson stated, “such an increase would force the closure of more than 200 of our 406 locations across the country” (Sandholm 2013). Their employees already earn more than the federal minimum wage; however, the increase would still be devastating. This would be a similar story among many other franchises as stores began to close. Once the businesses begin to close the unemployment rates will increase. The employees are going to file for unemployment which is only going to make the government pay more money to the workers. The government pays workers between six hundred and nine hundred dollars a week. This causes the unemployed people to not be motivated to find a new job. Within recent months the government is sending unemployed workers an extra six hundred dollars a week to survive. Therefore, it is better to keep the minimum wage the same so that companies and employees can remain at their status and not cause any financial harm.
The solution to Both Arguments
With one side emphasizing the lowering poverty rates and decrease in government spending, the other side focused on the increasing inflation rates and the potential closing of hundreds of businesses. While both make valid points on both sides of the topic, it is important to consider that they both have common grounds that are reachable. One possible way to please both parties is by increasing the earned income tax credit. The EITC is a federal program that will benefit not only just the lower class but also the middle class. It is considered that doing so would be more beneficial than raising the minimum wage. The way that this is more beneficial is that it increases wages through tax code instead of raising the minimum wage. According to an article from Employee Policies Institute, a single parent working part time for the states minimum wage receives about $3,300 in earned income tax credit (Saltsman 2014). With this additional income, it raises their wage yearly to around $10.60 an hour. This is actually more than what some protesters are requesting. With the minimum wage acquired throughout the year, these two payments together drastically benefit the receiver, making bills much easier.
If there would not be enough to solve the problem, there is also another possible solution to explore. The main issue with raising the minimum wage is that skilled workers would lose incentives to work towards skilled occupations if the paid wage is almost that of a minimum wage fast-food job. As it is human nature to take the easiest route, skilled occupations would begin to severely lack. A solution to this problem would be to offer free training programs for unskilled workers to advance into a higher paying occupation. Allowing these programs to be extremely cheap or even free, would better benefit workers of America rather than forcing companies to pay more. As the baby boomer generation begins to retire, the trades field job demand will only increase for the long foreseeable future. After reading an article from Cerasis, there are an estimated 3 million trade jobs in the United States that are vacant (Robinson 2019). With this being known, it is definitely a secure option to take advantage of this need of workers. While it may not be a six-figure paying job, it is definitely a reliable and secure source of income.
Another possible solution could be to increase the children’s tax credit. This is additional money at the end of the year that a family can put back in their pockets. As children come with paying some extra bills, the federal government provides this to ease the financial stress. Coming from an article on Chron, the current child tax credit that low-income families qualify for is $1,000 per child (Mathews 2012). As this is coming from the federal government, employers would not have to face the challenges of being forced to pay higher wages. With this extra money, it would be greatly beneficial to low-income families who need financial assistance. As there is a great amount to consider on both sides of this argument, there are a few solutions that should be greatly considered as it would be beneficial to everyone instead of just a single class of the economy.
The minimum wage crisis affects everyone, but it is difficult to find a solution that fits everyone’s needs. Both sides of the argument have potential solutions, but it is up to us what happens in the future. As the crisis continues, the government should work with multiple sources to solve this crisis. With the right procedures from the government, the economic status of people in the United States could grow exponentially. The large number of people living in poverty could possibly be put to an end or drastically reduced. The future is bright for the economic world if we can get back on the right track, but it will not only take the government, it will take everyone.