Will a $10 Minimum Wage Get All Working Americans Out of Poverty?

Yves here. This Real News Network segment discusses what many readers know all too well, that even a $10 minimum wage fails to provide an adequate standard of living, particularly for parents. For instance, even though MIT has a living wage calculator, its results seem unrealistic (notice, for instance, a supposed living wage of $9.20 an hour for a single person in in Jefferson County, Alabama, is based on a budget that allots a mere $73 a month for “other” expenses, including clothes, shoes, cleaning and laundry, telephony and banking services). The RNN experts explain why the method for calculating the poverty line is outdated and underestimates living costs. They argue that a $15 an hour minimum wage, no matter how unattainable it seems politically, is the level needed to provide a true “minimum” wage.

The segment also does a good short-form debunking of the disgracefully partisan CBO’s claim that raising the minimum wage would result in 500,000 lost jobs.

More at The Real News

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    1. JohnnyGL

      Also, if you want to solve the problem of high black teenage unemployment, how about creating a program to….I don’t know…..maybe…..hire and develop skills for black teenagers, giving them a nice resume builder and some good experience under their belts.

      It might actually work better than holding down minimum wages for millions and crossing your fingers and hoping/praying that someone, somewhere, decides it’s a good idea to hire a few black teenagers in impoverished areas where there’s few opportunities as it stands.

      Because right now, there’s loads of entrepreneurs, ready to create wonderful new businesses and loads of existing businesses that would love to expand, but they’re really just agonizing over that extra couple of bucks per hour that they’d have to pay. Really, if we lowered the minimum wage back to $5 an hour, it would result in a massive hiring boom.

      1. Lyle

        Of course for the high youth unemployment of an earlier age we had a program called the CCC that was run on a military basis. In many areas we still benefit from the work that is being done. I sometimes wonder if for dropouts, we need to bring it back modified where work might include graffiti removal and urban cleanup, as well as the rural work that the CCC typified. Have it be 1/2 time work and 1/2 time GED prep.

    1. diptherio

      I think a more effective tactic to alleviate poverty would be to cap the “maximum wage”. Especially if we could ensure that the resulting savings to companies was distributed to the workers in the form of increased wages.

      Wealth creates poverty. What happened to all the returns to productivity that the workers haven’t been getting for the last 30 years? It’s been flowing into the bank accounts of the executives, of course. Sometimes the shareholders get a little too.

      Their wealth and their workers’ poverty are directly connected: the former causes the latter. Were the returns to productivity distributed on a more just basis (i.e. remuneration based on actual value added), income, and eventually wealth, would be greatly leveled. Since a dollar can only inhabit one pocket at a time, poverty and wealth would decrease in lock-step. For every action there is an equal and opposite reaction–as wealth is accumulated in one pocket, it is also depleted in another. A state of perfect equality would be a society where no one was poor, but neither was anyone wealthy.

      As my buddy likes to say, “if it wasn’t for money, we’d all be rich.”

  1. skippy

    Is this the same CBO that uses a 0 to1M margin of error ergo there is no math. “They start with the assumption that demand for low skilled labor might be elastic enough that jobs might be lost. On the other hand, they say, that might not be the case or, by increasing the income of those with a high MPC, it might result in higher demand and more jobs.

    Not being sure, they did the only thing they could do: slapped a range of numbers on it that are complete guesses, and may in fact have the wrong sign, and assigned it so large a margin of error as to make clear that it’s meaningless”. – H/T LET

    I addition I found this comment interesting –

    “Actually if any of you have read the CBO report about the effect of Obamacare, it’s all on the supply side. Not demand side. They find the effect on employers offering work is negligible. Those jobs aren’t lost. The difference is that some people will choose not to work whereas without healthcare they would have been forced to accept work to mitigate the risk to their health. This is not necessarily a bad thing. If people have healthcare then they may choose for a family member to stay home to bring up children etc. or many other activities that have an economic value. People have many more options. This is not a bad thing. It is not the virtue of being unemployed. It is the virtue of not being required to be employed. There is a massive difference.

    Direct quote from the report: “The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses’ demand for labor, so it will appear almost entirely as a reduction in labor force participation and in hours worked relative to what would have occurred otherwise rather than as an increase in unemployment (that is, more workers seeking but not finding jobs) or underemployment (such as part-time workers who would prefer to work more hours per week).”

    But the political media exist to remove all of those nuances and create headlines which they know their constituencies will never read beyond. CNBC knows for sure that none of these people will bother reading the CBO report.” H/T S.B. Smith – per link ref [ http://www.cnbc.com/id/101352849 ]

    skippy… get the feeling some are trying to recreate the early 70s w/ deity’s suspended in Mt Olympus not by virtue – but – virtual means. Hay is Mt Olympus secret pass word Breton Woods II.

    1. susan the other

      man, I adore it when you talk straight … and what we need are equally straight definitions… we need minimum survival defined by minimum well being, etc…

  2. Julia Versau

    The highlighted Living Wage chart for Jefferson, Alabama may need correction. For one, it shows the living wage required for 1 adult/2 children as $23.25 per hour, whereas 2 adults/3 children requires $21.66. Excuse me?

    1. washunate

      Don’t pay much attention to the MIT living wage project for specifics. The end result is obviously one that doesn’t incorporate a very broad notion of what it means to live. The notion that a single adult can spend $726 a month for decent housing and medical care in Alabama is hilarious, never mind 2 adults and 3 children getting that for $1,313.

      But the real tell is not what’s in the data. Rather, it’s what is not. Notice there is no dedicated line for vacation. No hobbies. No charity. No school supplies. No clothing. No computers. No short-term savings. No college savings. No retirement savings. Heaven forbid you have fun, whether it’s going to movies or drinking whiskey or buying a few music albums.

      And yet, even this most basic subsistence level of survival requires $37K a year for 1 adult to simply care for 1 child. Never mind the minimum wage, that’s $10K more than the median wage in the US.

      1. washunate

        P.S., if you’re not familiar, when I say ‘obvious’, what I mean is that they spell this out. They’re not trying to describe a middle class lifestyle. They are specifically trying to calculate a bare minimum necessity to live for a low wage family. Since this involves quite a bit of arbitrary fun with numbers, don’t get caught up worrying about any one figure that looks out of place. The discrepancy in the number you are worried about is the ability of the second adult to reduce the need for paid-for child care, which is a major expense.

        The point is the overall picture, not the exact hourly number. For more, see the description at the bottom of the home page.


  3. j gibbs

    The current minimum wage is $7.25. Raising it by one-third will give those still getting it more money. All of their income is now spent on necessities, and they will have more to spend on necessities, the price of which will go up accordingly. It will not surprise me if we will have even less customer service at Walmart, if that is even possible. It will cost a good deal more to have one’s lawn cut. Other consequences are also possible.

    There seems to be something called the Employment Policies Institute, a self styled non-profit research organization dedicated to studying public policy issues surrounding employment growth. It maintains a web site called minimumwage.com, dedicated to exploring various aspects of this issue. Anybody know who is behind it and whether it is legitimate research or propaganda?

    1. pebird

      Ha, prices would rise only if the economy is at capacity, we are far from that.

      Maybe we should reinstitute the 12-hour workday to revitalize the economy.

    2. TarheelDem

      Employment Policies Institute is a known neoliberal policy shill institute. Little research. Lots of peddling of propaganda. Main supporter is the restaurant industry, who absolutely don’t want to have their employees brought under the minimum wage. No doubt, agribusiness and large growers are also involved.

  4. JGordon

    Not that a lot of readers aren’t already aware of this, but our society (speaking to Americans) is structured pretty stupidly, making it incredibly expensive to live here. And if you are an American and you have no experience with other places in the world (as something like only 12% of Americans even have passports), well–yes, America is a very bizarre and risky place to live.

    For example in many places in the world it’s perfectly normal to live without a car, suffering little or no inconvenience due to that. And I’m certain that people living on a $10/hr wage, or on the minimum wage, would get along much better without a car, if that were possible.

    But that’s just one example. Air conditioning is another–intelligently designed houses, water features, trees, etc can reduce or completely eliminate the need for AC (even where I live, in south Florida)–yet people, especially poor people, live in poorly designed houses, wasting large quantities of energy, paying exorbitant amounts of money to keep their place cool.

    And then there is corruption of course, with the multiple layers of parasites to support who have inserted themselves into things like sickcare, the MIC, the “war” on drugs, the national security state, higher education, etc. All these things add up.

    The problem is then, not that the minimum wage is too low–because if you did manage to get the minimum wage raised, the parasites would only see that as an opportunity to move in and extract just that much more from the host, which would be counter productive.

    Therefore supporting an easy and simplistic answer to the problem like “raise the minimum” wage is counter productive. As CHS has recently said, humans tend to substitute easy problems for the hard problems they don’t want to face, and then go about solving the easy problems–and that’s exactly what we are talking about here.

    So do not fall into the trap of thinking that raising the minimum wage will fix anything. It won’t. The lives of people in America are going to continue to get more and more miserable right up until our society stops pissing away energy and the parasites have been cleaned from the system–regardless of what the minimum wage is. Because thinking that the minimum wage is too low is severely misidentifying the cause and scope of the actual problem.

    And incidentally the poor I am living around are beginning to look forward to the impending collapse of the economy and the society–while this was an issue that was on their radar previously, thanks to living near me they are not only growing many interested fruits and perennial vegetables in their yards, but are also much more keyed into who to direct their (increasing) angst against and how their actions can subvert the current economic order. Which I am a great advocate of. I can happily say that I am at least partially responsible for that shrinking real GDP number.

    As a final point I’ll say that the energy and resource do not exist in this world to support the American lifestyle for much longer. Therefore it will not be supported. Gradually adapting to a more efficient and less corrupt way of living now would offer a lot less of a traumatic experience than the rather more abrupt (knowing Americans, Mad-Max) transition that most people are on track to be making. And that would be a real solution that we should all direct our energy at, rather that pining for the phony solution of raising the minimum wage.

    1. tongorad

      Great comment. I lived in Thailand for 10 years, and living abroad was perhaps the greatest perspective-expanding experience of my life, certainly more so than going to college.

      Thailand isn’t perfect, but I feel that my family’s quality of life, earning middle class wages, was significantly better. Transportation, food, housing, health care was as good if not much better, and much cheaper of course. Perhaps the biggest thing I appreciated was not needing a car.

      Now that I’m back in the US, our car culture is daily misery. You nailed it, the US is indeed bizarre – and fucked up.

  5. F. Beard

    Miniminum wage? That would work if we banned automation and outsourcing. But a minimum INCOME would take advatage of both.

    There’s a story about a monkey with his hand trapped in a cookie jar BECAUSE HE WON’T LET GO OF THE COOKIE!

    Progressives, YOUR cookie is government privileges for the banks. Bad Monkey!

    1. Anthony Thomas

      Min Income is being pushed in several places now and that might be closer to solving the problem.

      You could work a part-time job which with all the automation will be needed more and more; a general reduction is hours is what is coming and nobody seems to want to talk about it.

      Anyway Bill Still supports at least $20K a year min INCOME, not wage. Combined with your typical service sector job, would mean a single person would earn about $34-35K a year which is more than enough to live almost anywhere in the United States without any federal, state or county programs that can be dramatically cut back and only for those that are seriously disabled and women with young children.

      Speaking of single mothers, some estimate that very soon (within the next decade) half of kindergarten classes in America will be children belonging to single mothers.

      This will exacerbate the issue of income inequality and might be just the catalyst for a serious push to change it from Min wage to Min income.

  6. F. Beard

    Miniminum wage? That would work if we b*nned automation and outsourcing. But a minimum INCOME would take advatage of both.

    There’s a story about a monkey with his hand trapped in a cookie jar BECAUSE HE WON’T LET GO OF THE COOKIE!

    Progressives, YOUR cookie is government privileges for the banks.

    Bad Monkey!

    1. JGordon

      Rather than banning outsourcing and automation, or guaranteeing a basic income (which will never happen, and if it did happen would not last long anyway due to biological/mineral resource depletion).

      An effective change that people can begin making in their lives right now would be to learn about how to generate or acquire resources locally, and then work towards meeting as many basic needs as possible outside of the industrial, globalized economy. No, it’s not a “solution” that will allow people to keep racing around in their high-maintenance automobiles, while they leave the TV and AC running 24/7 in (often empty) homes, but it would keep their children fed. And there’s a lot to be said for that–that people with realistic expectations about the future will respect.

      Incidentally, I’m not far off in age myself, but the millennials I talk to already have vastly different expectations and concerns about the future than most older people and are much more amenable to my message and teachings–which I see as positive step in the evolution of our society. There is hope that we will change enough in time to avoid the most catastrophic end. Although that result is not going to come from the top down, and wasting your energy on that kind of a solution is a foolish pipe-dream, especially when there’s a lot of other, genuinely useful stuff we could be doing.

    2. Jim A.

      I don’t think that a higher minimum wage will result in much increase in outsourcing. Really most minimum wage jobs are the ones that CAN’T effectively be outsourced. Things like fast food work, janitorial work, some construction work, etc. For the most part, if it was easy to outsource, somebody has already done it. Most of this work isn’t particularly suited to becoming more automated, but that’s likely to be a bigger factor than outsourcing. So I think that the job losses predicted by the CBO are likely to be greatly overstated.

  7. TarheelDem

    It’s pretty clear that the $10/hour minimum wage is a compromise position whose sole purpose is to force something, anything to kickstart the economy again. The aggregate effect of an across-the-board minimum wage of $10/hour (no exclusions for restaurant tip workers or agricultural workers) would be a substantial increase in aggregate demand. It has nothing at all to do with getting anyone out of poverty as far as I can see.

    The accusation that it would cost 500,000 jobs is laughable (and likely politically motivated to please the GOP know-nothings). Over the past three decades of “right-sizing”, most employers have so reduced their workforces that they can barely operate at their current demand levels. Increasing aggregate demand by an increase in the minimum wage will require hiring of additional personnel. Giving how many jobs have descended to minimum wage level, the aggregate demand created could be a substantial bump in employment after the grousing employers get over their firing-a-few-people-because-of-the-minimum-wage-law tantrum.

    1. JGordon

      The only thing that will kick start the industrial economy again is bringing oil prices back down to about $30 dollars a barrel. If you are not thinking in those terms, you have framed the nature of the problem incorrectly. In addition to the acknowledged political crisis, we are also in a resource crisis–that is, the resources do not exist to maintain our profligate lifestyle–as many people are already discovering.

      1. F. Beard

        I was surprised to see your name attached to a resourse scare.

        You do realize that the Earth-Moon system has more mass that it ever did because of meteors and infalling space dust and that the world has centuries if not thousands of years of fission energy to use? So we can recycle for that length of time?

        What we do lack is the courage and confidence and the peace that comes from righteousness:

        The wicked flee when no one is pursuing, but the righteous are bold as a lion. Proverbs 28:1

      2. TarheelDem

        As a matter of fact I have considered the resource crisis. Raising the minimum wage will allow some of the folks so employed to trade a gas hog for a more fuel-efficient (relatively) clunker and maybe even a used hybrid. That and the reopening of relations with Iran will drop oil prices–maybe not to $30 a barrel, but certainly lower than what they are. Raising the minimum wage will also begin a ripple in wage rates above the minimum wage as consumer demand returns.

        I’m not sure what “our profligate lifestyle” means these days except shorthand for resource anxieties. I’ve not seen a whole lot of profligacy in my neighborhood, compared to two decades ago. It seems that profligacy is becoming more concentrated, along with incomes.

  8. Barmitt O'Bamney

    Will a Band-Aid work on a sucking chest wound? Nope.

    I’m afraid what we have here in recent minimum wage proposals from the President and other Democrats is election year symbolism. In his 2008 campaign, Barack Obama proposed raising the minimum wage to $9.50. After he took office, however, the proposal was never heard from again. Now that the Democrats are no longer in control of the House, they are suddenly keen to raise the minimum wage. Follow through will likely be missing even if they win back the House. Follow through will likely be missing, even if the minimum is raised. Would it be better than nothing? Sure. Is it adequate? No way.

    I’m just surprised they picked $10.10 as their catchy symbolic figure, and not something really eye grabbing, like $17.76

    1. President Costanza

      Barmitt O’Bamney,

      I think we have a winner here. The Democrats didn’t want to anger the big money interests when they were in power, but now they need an issue to use against the Republicans, all while they secretly tell their big money donors that a minimum wage increase will never get past a Senate filibuster.

  9. Jim Haygood

    As Econ 101 teaches us, when you raise the price of something, demand goes … UP.

    Well, off to go shopping. All the stores are plastered with signs shouting, ‘PRICES HIKED 50%. EVERYTHING MUST GO!’

  10. TomDority

    Raising the minimum wage across the board will only have a temporary effect on the standard of living for those recieving a wage increase under the current revenue system/ tax structure. The economic environment favores unearned income and financialization of the economy. As soon as wages go up. land (‘real estate) prices will go up….this will swallow any gains made. The evidence has pointed this way for decades. The structure (economic system) is designed this way. Until the tax system favores work that produces something tangible and limits economic rent activities, general wage increases will do nothing to raise the standards of living – that is an absolute fact.

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