Real Kato Blog: Minimum Wage

Do you think it's enough?

Every now and then I look at my finances and try to calculate when I would be able to retire. I also try to figure out exactly how much income I would need to get by, if I lost my current job.

The other day, I went through the exercise of determining whether someone could survive by earning minimum wage. This wasn't about me in particular; this was about a hypothetical single person living in Raleigh, with no savings and no support structure, trying to earn enough to survive.

The federal minimum wage is $5.15 per hour. Given a standard forty-hour work week, working fifty weeks out of the year, your gross annual income would be $10,300, or $858 per month.

On your federal income tax return, your standard deduction is $4,850 and your personal exemption is $3,100. That means your adjusted gross income if $2,350. You would owe about $235 in federal tax, but you would probably be eligible for a $182 Earned Income Tax Credit. So your overall federal tax liability would be just $53, or less than $5 per month.

However, you still have to pay payroll taxes (FICA); that takes a juicy $65/month chunk out of your paycheck. And state taxes would be about another $12 per month. So the total tax bill is $82 per month.

In this area, if you looked hard enough, you could probably find a small one-bedroom apartment or room rental for about $350 per month. You'd probably pay about $50 per month in utilities, if you're frugal enough. And add another $20 per month for a no-frills landline phone. So your housing and utility costs are $420 per month.

Allowing yourself a budget of just $6.50 a day for food, your monthly food bill is $195 per month.

You'd need to buy things like toothpaste, toilet paper, laundry detergent, and other consumable items; that figures to be $50 per month.

Every now and then, you'll need to buy some new clothes. If you allow yourself one nice suit (for job interviews and such) every two years, and then add in the various socks, undergarments, shirts, and pants for everyday wear, you'd probably need to budget about $20 per month for clothes.

In this town, you need to have a car to get around, since there's practically no public transportation. You'd try to get an inexpensive used car (in the $2500 range), but you'd pay rather ruinous financing rates because your credit wouldn't be so good. Now, I'm going to be generous and allow for a $500 down payment and an 8% interest rate. Even with that, your monthly car payment is a whopping $162 per month. Ouch.

You have to pay property tax on the car, but that would be negligible. The killer is going to be gasoline at $45 per month, insurance at $20 per month (if you're a good driver), and scheduled maintenance at $15 per month. So your vehicle maintenance comes to $80 per month.

How are we doing so far? Well, we've spent $1009. So that means we've gone into debt by $151. And we still haven't purchased health insurance (which, even if our employer offered us a good health plan, would still be about $45 per month.) Here are some other things we haven't accounted for:

- furniture
- a television
- a microwave oven
- a computer
- beer
- movie tickets for dates
- flowers and a birthday card for Mom

If I considered all that and tried to figure out just how much someone would need to scrape by, that puts us up to about $1300 per month. Oh, but wait: at that point we'd no longer qualify for the Earned Income Tax Credit, so make that $1315. That equates to $7.89 per hour. And remember, this is for a single person who can live in a tiny apartment and only has to feed and clothe himself. And this is in Raleigh, which is a fairly inexpensive place to live, compared to other parts of the country.

The current rate of $5.15 per hour was established back in 1997. If we only adjusted for inflation, it should be at $6.27 per hour. But we haven't even done that. Isn't it about time we did something? Right now, people who earn minimum wage are essentially slaves. This is what people mean when they use the phrase "wage-slave". We've enslaved an entire class of people so we can pay 38 cents less on a jar of pickles at Wal-Mart. What does that say about our society?

Permalink 3 Comment

Posted by Ken in: commentary, interesting

Comments

Comment #1 from Crouching Hamster (Guest)
2005 Jun 27 - 2:00 am : #

Excellent. Take this somewhere, please.

Unfortunately, there's going to be a reality show about living on minimum wage. Hey - in America, it's entertainment.

Comment #2 from Sonja (Guest)
2005 Jun 27 - 11:06 am : #

Yup. Very sad. And this is why most minimum-wage earners work TWO jobs.

Comment #3 from MonoCerdo (Guest)
2005 Jun 27 - 11:08 am : #

That was really interesting, and, like the Crouching Hamster, I also think you should consider submitting it for wider publication. You know, somewhere! Submit it there! And have them publish it!

Comments are closed for this post.

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