The Fight for 15, OUR Walmart, and related campaigns have done a tremendous amount to raise the bar on the discussion of the minimum wage. A $15 minimum wage sounds like a lot, but how does it compare to what it actually takes to make ends meet? As campaigns raise their expectations about what types of wage victories are possible, we also have to be more prepared to explain how even these significantly higher wage floors are still just bare-bones incomes in many parts of the country (especially if you’re raising a family).
Step 1: Understand Why the Official Poverty Line Is Such a Bad Measure
There is widespread agreement that the official federal poverty line—which is used to determine eligibility for many safety net programs—vastly underestimates the amount of money an individual or family must earn to be economically self-sufficient. In fact, even many federal anti-poverty programs use a multiple of the poverty line to determine who is eligible.
Since the official poverty measure was developed in the 1960s, a lot about the economy has changed. Today’s poverty line is adjusted for inflation, but it does not take into account that a family’s costs are fundamentally different than they were half a century ago. Food is cheaper (33 percent of a family’s spending in 1963, vs. about 7 percent now). Other costs—transportation, child care, and healthcare—have gone up. The official poverty line hasn’t kept up with this changing world, and the result, according to an excellent article from the Center for American Progress (CAP) is that “[t]he poverty line represented nearly 50 percent of median income for a family of four in the early 1960s, but now represents only about 28 percent of median income. “
There are other problems, too—especially the fact that the poverty line doesn’t take into account differences in cost of living from place to place.
You don’t have to become an economist, but you should at least read the CAP article and this great piece from KQED in San Francisco, which lays out the history of the poverty line like a graphic novel.
A detail of an excellent graphic summary of changes to the poverty level from radio station KQED.
Step 2: Run the Numbers
There are several sources that can help you estimate a livable wage that take into account both geography and a more realistic sense of what a family’s basic needs are:
One of the most widely cited tools is the Living Wage Calculator developed by the Massachusetts Institute of Technology (MIT).
The Economic Policy Institute (EPI) has developed a Basic Family Budget Calculator, and includes an interesting and useful map that allows you to compare data county by county.
The National Low-Income Housing Coalition (NLIHC) bases its “housing wage” calculator on housing costs, then calculate the livable wage based on the widely accepted rule of thumb that families should not have to spend more than 30 percent of their income on housing costs. NLIHC calculates these numbers annually, and archives them as part of its series of “Out of Reach” reports, This is similar to the approach used in House the Homeless’s Universal Living Wage calculator.
So how do these models compare? The chart below takes a look at similar household sizes for several small, medium, and large metropolitan areas. For the EPI and MIT models, both sets of calculations are for households with two parents and two children. For the NLIHC model, which provides numbers by the size of the housing unit not the family, I included estimates for both two-bedroom and three-bedroom apartments.
So what are the differences among the models? The NLIHC model is the most different because it builds its estimate not by adding up specific categories of expenses but by estimating the income needed to afford housing in a certain place. As you can see, it consistently returns a lower livable wage number than the other two models. Still, if your campaign is focusing largely on the importance of creating more affordable housing, NLIHC model may be the right one for what you’re trying to accomplish.
The EPI and MIT models are more similar in their approach, but come up with slightly different numbers for each category of expenses. For Fulton County, GA, the two models break down their estimate of a livable monthly income like this
Regardless of which model you choose to use, one point remains crystal clear: the official federal poverty line, which for 2018 stood at $25,100 for a four-person household, is far lower than the actual cost of living.
3: Prepare Yourself for the Doomsayers
Every time someone raises the minimum wage, there are dire predictions that it will lead to major job losses and economic stagnation. But there is lots of evidence to the contrary.
A great place to start is this fact sheet by the Economic Policy Institute (EPI), which lays out the case for a $15 minimum wage, and counters arguments that it will hurt businesses and the economy. If you want to look deeper, here are a few pieces worth checking out:
This April 2017 paper by researchers at the University of Massachusetts, the University of London and EPI studied a large set of minimum wage increases and found that jobs created above the new minimum wage offset any losses of jobs at the old minimum. (This article in the Washington Post has a summary of it and some other research.)
A report by the University of California-Berkeley’s Institute for Research on Labor and Employment (IRLE) analyzes the effect of California’s $15 minimum wage on Fresno County, one of the state’s poorest, and finds a significant increase in workers’ wages, a small increase in overall employment, and only modest price increases offset by the overall higher earnings in the communities.
This post from the Harvard Kennedy School’s Shorenstein Center on Media, Politics, and Public Policy contains a very comprehensive round-up of the research on the effect of minimum wage increases from a variety of perspectives. If you really want to dig in on the subject, spend some time here.