A nationwide livable wage would be close to $25 an hour, says Amy Glasmeier, a professor of economic geography at MIT. Michael M. Santiago/Getty Images
More than 20 states rang in the New Year by raising the minimum wage. The highest minimum wages are in the $16 to $17 range.
“And, according to our analysis, that is going to increase wages for almost 10 million workers,” said Sebastian Martinez Hickey, who tracks the minimum wage at the Economic Policy Institute.
He says more than half the workers getting a minimum wage hike are women. About 11% are Black, and more than a third are Hispanic.
Forty-three-year-old July Monroy makes $17 an hour — just above the minimum wage inLos Angeles —where she’s a manager at McDonald’s.
“My check is only like $800, $900 every two weeks,” she said.
That barely covers Monroy’s rent and other bills. So she cleans houses to make extra money. Monroy is a single mom with five kids who are all young adults. Her youngest son is 18 and still lives with her.
And two other sons in Texas also struggle to make ends meet making the minimum wage there, which is ”$7 or like $7.25, probably,” Monroy said.
She’s right — $7.25 an hour is the federal minimum wage and Texas is one of 20 states at that rate. Monroy said her sonsare also in community college. And if she has any money left at the end of the month, it goes straight to them.
“They’re living in Texas, doesn’t matter if they do like, 38, 40 hours they don’t making more than like $500 for every two weeks,” she said.
So her two sons in Texas are getting by on about $1,000 a month each.
“Yeah those are the stories that just make your hair raise,” said Amy Glasmeier, a professor of economic geography at MIT.
Glasmeier helped develop the Living Wage Calculator, which estimates what workers across the country would need to earn to cover the cost of living. They load prices for things like child care, housing, transportation and food into the calculator. And it spits out the living wage for a particular state or city.
“The minimum wage, in almost every location in the United States does not cover a living wage,” Glasmeier said.
She said even the highest minimum wage, $17 an hour, doesn’t cut it. A livable wage, nationwide, would be closer to $25 an hour, according to her research.
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FAQs
Wage Setting in Competitive Labor Markets
If the market wage is higher, say $6, firms take a loss because workers cost more than their production is worth. In this situation, firms cut their payrolls to restore their profits.
What if the minimum wage is set above the market wage? ›
Answer and Explanation:
When minimum wages are above the market wage, the cost of hiring labor will increase. The minimum wage is downward rigid and flexible upwards.
Why won't raising the minimum wage work? ›
Opponents of raising the minimum wage believe that higher wages could lead to inflation, make companies less competitive, and result in job losses.
What happened when the minimum wage was increased? ›
In general, increasing the federal minimum wage would raise the earnings and family income of most low-wage workers and thus lift some families out of poverty—but doing so would cause other low-wage workers to become jobless, and their family income would fall.
Does raising minimum wage actually raise prices? ›
It is well established in the international literature that minimum wage increases compress the wages distribution. Firms respond to these higher labour costs by reducing employment, reducing profits, or raising prices.
Why are wages not keeping up with inflation? ›
Despite inflation, companies are giving out performance-based raises more than cost-of-living adjustments. Performance-based compensation adjustments remain the most common reason that workers received a raise (at 35 percent), similar to last year's poll.
When the minimum wage is raised in a competitive market? ›
KEY TAKEAWAYS. In a competitive labor market, an increase in the minimum wage reduces employment and increases unemployment. A minimum wage could increase employment in a monopsony labor market at the same time it increases wages.
What is the economic argument against a higher minimum wage? ›
The impact of raising the minimum wage has been studied since its inception. All credible research has come to the same conclusion: raising the minimum wage hurts the poor. It takes away jobs, keeps people on welfare, and encourages high-school students to drop out.
When a firm pays a wage that is higher than the market wage in order to increase worker productivity, the wage is called? ›
an efficiency wage.
What is the biggest problem with minimum wage? ›
Minimum Wage Has Not Kept Up With Inflation
While the minimum wage has been adjusted numerous times since its implementation in 1938, it has failed to keep up with inflation and the rising cost of living.
These states and localities have the highest minimum wage rates in the U.S.:
- District of Columbia: $17.
- Washington: $16.28.
- California: $16.
- New York City and Nassau, Suffolk, and Westchester counties: $16.
- Connecticut: $15.69.
The higher federal minimum wage would also lift some 400,000 workers out of poverty, according to the CBO study. At the same time, the average estimate is that about 700,000 workers would lose their jobs. The median estimate is a reduction of 500,000 workers.
What if the minimum wage kept up with inflation? ›
A minimum wage employee earning $7.25 an hour who is working full-time earns about $15,080 (which is just $20 more than the poverty level). That annual salary from 2009 would need to grow to around $21,870 today just to keep up with the rising cost of goods and services.
What are the negatives of raising the minimum wage? ›
When wages go up, businesses must spend more money on paying their workers. This can pressure their finances, especially if they make little profit. As labor costs rise, some businesses may be forced to reduce their workforce to maintain profitability, resulting in unemployment for affected workers.
What is the minimum wage in the United States? ›
The federal minimum wage for covered nonexempt employees is $7.25 per hour. Many states also have minimum wage laws. In cases where an employee is subject to both the state and federal minimum wage laws, the employee is entitled to the higher of the two minimum wages.
What is the disadvantage of raising minimum wage? ›
When wages go up, businesses must spend more money on paying their workers. This can pressure their finances, especially if they make little profit. As labor costs rise, some businesses may be forced to reduce their workforce to maintain profitability, resulting in unemployment for affected workers.
Does minimum wage affect economic growth? ›
Increasing the minimum wage has repeatedly been shown to raise the pay of low-wage workers and improve the overall economy.
Would raising the minimum wage reduce poverty? ›
The higher federal minimum wage would also lift some 400,000 workers out of poverty, according to the CBO study. At the same time, the average estimate is that about 700,000 workers would lose their jobs. The median estimate is a reduction of 500,000 workers.
