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