January 11, 2007

Minimum Wage--The Living Dilemma

You may have heard that the House of Representatives has recently passed a bill to increase the minimum wage. For those readers who may not be Anglophone, the minimum wage is a law that sets a minimum price that an employer has to pay an employee per hour.

The minimum wage is currently set at $5.75 an hour which, will seemingly reasonable, is actually quite low. The bill would require the new minimum wage to be set to $7.25, in incremental steps over the course of 26 months.[A few people will be exempt from earning the minimum wage. For example, restaurant servers earn about $2 per hour, that’s why tipping is so important. But that should be the topic of another post].

As you can imagine, people are already complaining and raising a fuss. Here are a few reasons that have been mentioned:

1. Employer: If I have to pay my employee $1.50 extra per hour, I will not make a good profit. This will force me to cut the working hours of my employees or fire some staff that I can’t afford.
2. Employer: If I raise the lowest employee’s hourly wage, I will have to raise everyone else’s, and then I’m really spending a lot more on wages.
3. Employee: If you raise my wages, I will not be able to qualify for subsidized housing. I will end up homeless or I will have to spend a lot more money on rent.
4. Economist: If you raise wages, the more fragile mom-and-pop store won’t be able to absorb the difference in expenditures. These stores will close or raise the prices on the goods they sell.

I like to think of it this way.

Yearly salary at $5.75 per hour—$11,960
Yearly salary at $7.25 per hour--$15,080


Bare Minimum Yearly Living Expenses
Room Rental-------------------$6,000
Food-----------------------------$3,600
Transport-----------------------$1,080
Clothing--------------------------$360
Medical and Drugs-------------$300
Cleaning/hygiene products---$300
Support to child or parent---$1200
Water and Electricity---------$720
Basic Phone--------------------$360
One Sick Day-------------minus $48
Movie and Entertainment----$240*
Total--------------------------$14,112

Note: The Movie and Entertainment line comes up to about $20 per month which represents going to see two movies, renting 4 videos, buying a few magazines or buying two books. Come on, even poor people need to do interesting things.



If you are interested in getting a better idea of what life is like at the minimum wage, read this great book called Nickle and Dimed—On (not) getting by in America, by Barbara Ehrenreich:

Millions of Americans work full-time, year-round, for poverty-level wages. In 1998, Barbara Ehrenreich decided to join them. She was inspired in part by the rhetoric surrounding welfare reform, which promised that a job -- any job -- could be the ticket to a better life. But how does anyone survive, let alone prosper, on six to seven dollars an hour? To find out, Ehrenreich left her home, took the cheapest lodgings she could find, and accepted whatever jobs she was offered as a woefully inexperienced homemaker returning to the workforce. So began a grueling, hair raising, and darkly funny odyssey through the underside of working America.
Moving from Florida to Maine to Minnesota, Ehrenreich worked as a waitress, a hotel maid, a cleaning woman, a nursing home aide, and a Wal-Mart sales clerk. Very quickly, she discovered that no job is truly "unskilled," that even the lowliest occupations require exhausting mental and muscular effort. She also learned that one job is not enough; you need at least two if you intend to live indoors.


Source: Henry Holt and Company

10 comments:

Anonymous said...

I didn't realize servers only get paid $2 an hour!!
Did you come up with the bare minimum living expenses yourself?
-Ammo

dedicris said...

oh my god ! Why on the hell you don't stay with mom and dad? Strudel's daughter .......

Anonymous said...

Your sister will only have ONE bachelorette party and bridal shower in (hopefully) all her life. You may want to refocus your priorities ESPECIALLY considering you've MONTHS of notice as to the date. Your sister adores you and raves about you all the time. You need to be there for her.

Nagging over.....

007 in Africa said...

Ammo, it's almost criminal that waiters get so little. Yes, I came up with expenses myself. It's easy: I've lived with very little money many times over and all I had to do was remember my expenditures per month and calculated them on a yearly basis. It's easy if you have excel :)

Dedicris, I'm starting to consider living back home soon.

Anonymous, I think that you may have stumbled onto the wrong blog. My sister's not getting married...That I know of.

dedicris said...

Jesus !!! can't you hear Strudel's angry loud voice crossing the Atlantic Ocean? - You fucking daughter, you lazy ass, you unuseful idiot, do you think you are still a baby? move your ass out of here. See those American girls, younger then you? they put the knapsack on their shoulders and go looking for jobs. They are too proud and indipendent to stay home with mom and dad. They do not cry mama any minute. They cross the deserts on camels .. they, ... they are lazy asses like you. STRUDEL

Anonymous said...

Hey Anonymous, why don't you grow a pair and post your name?

If you are by chance referring to me, since I am having a shower this weekend, get your facts straight. We're COUSINS, not SISTERS. And her priorities are very straight. Mind your own business!!

007 in Africa said...

Dedicris, I have a job. But thank you for your kind words of encouragement.

Water Africa said...

Difficult, but then how does it compare to life here in Africa?

William said...

You estimates for living expenses are high:

* USD 500/ month for room rental (or USD 16/ day) can be almost halved; not everyone lives in a densely populated area
* USD 10/ day on food can also be halved, given no restaurant food
* Basic phone does not cost USD 30/ month - even mobile plans are cheaper than that

In theory, the minimum wage should be 0 (as it is in many industrialized countries, like the UK until the 1990s). Tax credits are a much more effective way of targeting and alleviating poverty.

-- Will

007 in Africa said...

William, thanks for your revisions of the minimum living allowance, but I assure you that in Washington D.C., it would be extremely hard to be a functional member of society (meaning employed, and housed) for less than $14,112. Unless of course, you live at home, or you have support from friends/family. Of course, that estimate changes depending on which cities you live in. Also, could you please explain how tax credits make any sort of difference? Being an economist, I'm sure that you can explain this well.

Water Africa, that's a very good point. This estimate would have to be recalculated for a particular country/city in Africa to get an accurate feel of the minimum livable wage. I was interested to find out that a lot of African countries actually have legally set minimum wages. Whether they inforce this or not is another matter...