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Minimum wages increase, but workers still do not make ends meet in any state in the country

2023-02-26T16:57:36.962Z


Experts give four reasons why wages are not living anywhere in the US for the lowest incomes. They mention corporate lobbying, historical racism, and a system designed so that some earn little, among others.


By Gili Malinsky -

CNBC

Twenty-three states and Washington DC raised their minimum wage in January.

Four more states are set to do so later this year.

The new wages vary from state to state, ranging from $9.95 per hour in Montana to $16.10 per hour in DC

While the federal minimum wage has been stuck at $7.25 an hour since 2009, many states have been raising their own.

“States began to institute increases in their own minimum wages during periods when there was no action on them at the federal level,” says Ben Zipperer, an economist at the Economic Policy Institute.

“So the longer the gap between federal minimum wage increases, the more likely it is that some states will raise their own state minimum.”

Still, the vast majority of single people who work full time and earn the local minimum wage don't make enough to get by.

CNBC Make It compared state minimum wages to the average living wage for an adult without dependents based on the MIT Living Wage Calculator and found that no state

offers a minimum wage that is in line with living wage

.

We then compare them to the Census Bureau income levels for households with no families to see how many people earn near or below living wage in each state.

Deatrice Edie, a McDonald's employee, works at home after a protest outside a restaurant branch over a minimum wage increase to $15 an hour, in Fort Lauderdale on May 19, 2021. CHANDAN KHANNA / AFP via Getty pictures

In Kansas, for example, where the minimum wage is $7.25 an hour and the living wage is $15.69, about 48% of households with no families living are at or below the income level That includes that living wage.

They represent approximately 17% of the state's population.

These comparisons aren't perfect, but

they do give an idea of ​​how many single people might be struggling to make ends meet

.

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With so much information readily available about what it would take to survive in each state, why haven't wages kept up with the cost of living?

These are some of the reasons.

Minimum wage setters "are probably using 2012 cost of home rentals"

When it comes to how states calculate their minimum wages, many use a cost of living index.

Multiple components fall into this basket.

The Living Wage Calculator

, for example, includes food, housing, transportation, childcare, medical needs, taxes, pets, and household expenses like cleaning supplies, since these are statistically what Americans pay the most.

In terms of costs, MIT calculates many of these based on publicly available data from sources like the Bureau of Labor Statistics and the Department of Housing and Urban Development and updates them annually.

But when it comes to how policymakers calculate the cost of living, "you'd be surprised to see that they're probably using 2012 home rents," says Suman Banerjee, an associate professor of finance at the Stevens Institute of Technology.

They are likely

using other outdated ciphers

as well .

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There are multiple reasons for this, including the fluctuating effects of inflation on the cost of goods, slow legislative change, and lobbying influences.

Whatever the reason, the problem is "mainly the lag factor" in calculating what is currently an appropriate price for each component, Banerjee says.

Give a low-wage worker $100 and he'll have no choice but to spend it all

General economic theory also influences decision-making about the minimum wage.

Some legislators believe that it is key to make sure that some people earn much more than they need to be able to invest in projects such as starting companies.

By contrast, ensuring that some earn as much as they need (or, in many cases, less than they need) means that they are constantly buying existing goods and services.

The argument is that when it comes to someone making $1,000 a month, “if you give them $100, it will all be used up” because that person needs to spend it all to cover their basic needs, Banerjee says.

“But if you give that same $100 to the guy who makes $10,000 a month, possibly that $100 is saved,” she explained. 

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That is,

to ensure that money continues to be pumped into the economy, it is incumbent on policymakers to ensure

that some people are paid low enough wages that they have no choice but to spend it.

'You have several states with a long history of very cruel racism'

At least when it comes to some of the southern states, the country's history with slavery also factors into current minimum wages.

States like

Alabama, Mississippi, and Tennessee

don't technically have a minimum wage, so use the national default of $7.25 per hour.

In Georgia, the minimum wage for employers not governed by the federal regulation, the Fair Labor Standards Act, is $5.15.

“There was an enormous amount of value in the work, but it was not monetized because the slaves were not paid,” says Amy K. Glasmeier, professor of economic geography and regional planning at MIT of labor history in the US. and creator of the living wage calculator.

Even when they legally had to start paying everyone, they kept wages low.

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Now, “there are several states with long histories of very cruel racism that

still oppose paying higher wages to workers who are disproportionately black or Hispanic

,” Zipperer says.

“And that takes the form of having no minimum wage or just following federal guidance or having extremely low sub-minimum wages,” she explains. 

“Low wages in this country are a very widespread problem”

Cities can also set their own minimum wages.

While Illinois' minimum wage is $13 an hour, Chicago's is $15.40, for example.

While the one in Oregon is $13.50, the one in Portland is $14.75.

Also, when it comes to state living wages according to the Living Wage Calculator, they are weighted averages.

They take into account how many people live in each county and their living expenses, then calculate an average that reflects that.

But on the ground, there is more variation in what residents require.

The minimum wage in California is $15.50, for example, which covers Trinity County, where the living wage for a single person with no dependents is $15.41.

But it doesn't cover Alameda County, where the living wage for a single person with no dependents is $22.35.

When it comes to Census Bureau data, it's important to note that “non-family household” doesn't just mean single people with no dependents.

It also means single, unrelated people who live together (like roommates).

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“I think the fact of the matter is that low wages in this country are a very widespread problem,” Zipperer says.

There are many reasons why states will not increase their minimums, more than even the ones outlined above.

The simple answer is that there are a lot of powerful people who don't want that to happen

,” she says.


Methodology

To approximate the percentage of people who earn less than a living wage, CNBC Make It used estimates from the MIT Living Wage Calculator for the annual income of single people without dependents.

We then compared those estimates to the 12-month income section of the US Census Bureau's 2021 American Community Survey for non-family households.

The Census Bureau divides the annual income data into deciles and publishes the percentage of people in each of those 10 income levels.

To estimate the percentage of single people earning near or below living wage, we compared MIT's living wage estimates for each state with the corresponding Census Bureau income level.

Source: telemundo

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