Tuesday, 4 March 2008

Minimum Wage...how does one live off it?

I have long been curious as to how one would live off minimum wage. Yes, I am very fortunate that this required research on my part!

To tell the truth, I have only had 1 minimum wage job in my life and when I did I still lived at home with my parents. Like many who were lucky enough to catch a few breaks in life, I took advantage of my upbringing, but I have always wondered what life would be like if I had not been dealt such a good hand.

The following is an account of what someone actually gets for their labor at a full-time minimum wage job.

Current Minimum Wage: $5.85 per hour US
Full Time Hours: 2080
Total Annual Income: $12,168.00
Total Monthly Income: $1014.00
Monthly Taxes (SS, Medicare, Income): $197.07
Net Monthly Income: $816.93

Yes, folks that's it. Someone working a full 40 hours per week for 52 weeks a year NETS a grand total of $816.93 per month!

I don't know about where you all live, but in Austin, TX where I am, you would have a hard time putting a roof over your head much less doing anything else. With that being said, there are people who make this, and they do need to survive, so how could you make this happen?

I guess we need to start by identifying the critical components to one's survival.
  • Housing
  • Transportation
  • Food
  • Clothing
  • Health care
Alright, let's start with housing. In general, apartments require that you make at least 3 times the amount of rent in Gross Income. We know that our monthly gross income is $1014.00, so we would have to find an apartment for no more than $338.00/mo. Well, after checking all the apartment guides and the local Real Estate channels, you can not even get an efficiency/studio for this price in Austin. The cheapest I found was $415.00/mo. I even checked what you could get if you had a room mate or rented a room in some one's house, the cheapest I could find with this method was $400.00/mo. Additionally, according to my research the average 1 bedroom apt in Austin spends about $50.00/mo for electricity and utilities. Now the amount of money you have to spend on everything else you need is: $816.93 - $450.00 = $366.93

Next, we have transportation. Now some of you may have friends willing to take you to and from work for free, but most of us do not, so we need to figure out how to get to and from work. Now maybe you already have a car or you have the ability to buy a used car in cash. If you did then you could plan on spending an average of $40.00 per month on liability insurance (see iii.org) and at least another $40.00 per month on gasoline (provided you lived close to work or didn't go on any joy rides) plus another $20.00/mo for vehicle maintenance/registration. Money left over: $366.93 - $100.00 = $266.93

If you do not have a car, don't worry you can get a monthly unlimited bus pass in Austin for $10.00/mo. Frankly, as far as money goes, you would be better off taking the bus rather than having a car anyway. Money left over: $366.93 - $10.00 = $356.93

This brings us to the all important category of Food! Yes, we all need and love to eat! Now, according to wiki.answers.com the average US household spends $3240.00 annually on food. This seems low to me, but I'll go with it. Considering that the average household in the US is 3 people and most adults eat more than kids that would mean that the average adult would spend about $1200.00 on groceries annually which comes out to $100.00 monthly. Surplus cash:
w/car: $266.93 - $100.00 = $166.93
w/o car: $356.93 - $100.00 = $256.93

Next we have clothing. Regardless of how you feel about clothes it is a fact that in our society it is a necessity and most likely at a minimum wage job you will have some sort of uniform/dress code mandated to you, so you will in fact have to spend money on clothing. If you shop at the discount retailers like Wal-Mart, Target, TJ Maxx, and Ross, then you could plan on spending an average of $25.00/mo. If you are thrifty and shop at second hand stores like Goodwill and garage sales, you may be able to save a few dollars off of the 25.00/mo average. Money Left:
w/car: $166.93 - $25.00 = $141.93
w/o car: $256.93 - $25.00 = $231.93

Lastly, we have Health Care. According to a document from meps.ahrq.gov the average US adult spends about $984.00 per year (out of pocket) on health care. As far as I could tell, this seems to include insured and uninsured people and all types of health care costs such as prescriptions, emergencies and dental visits . So with that, we know that one can expect to, minimally, spend $82.00/mo on health care related expenses. Money left:
w/car: $141.93 - $82.00 =
w/o car: $231.93 - $82.00 = $149.93

Fun Money/Savings/Emergency = $60.00 to $150.00/month

After all of this, it would seem that someone earning minimum wage could in fact survive in the US, providing that they work a full 40 hours per week and either don't miss a day or get paid for their sick days/time off. Unfortunately, we know all too well that many companies in America that pay low wages either will not pay for sick days/time off or will not schedule their workers for a full 40 hour week. I know from personal experience and through discussions with friends that many companies will not schedule someone for more than 38 hours, which obviously would make it even more difficult for someone to survive on $5.85/hour.

I hope that you keep this in mind the next time one of your local/state/federal politicians tries to convince you that the minimum wage does not need to be increased. In my opinion, everyone deserves a living wage and clearly $5.85/hour is not it.

Thank you and good luck.

PS. In all fairness and disclosure, the minimum wage will be increasing over the next 17 months to $7.25/hour, but we all know that with inflation and the like, so will our expenses.


speaksoftlylove said...

You bring up a great topic, I actually saw a good TV show on minimum wage called -- 30 days - minimum wage.


sakins said...

Thank You! I saw that show too and loved it. In fact it was that show and the book Nickle & Dimed which inpsired me to look into this subject.