Earlier this year retailers Gap, Old Navy and Ikea voluntarily gave their minimum wage employees a pay raise. The only hope for a raise for thousands of other low-wage workers around the country is congressional action, which seems unlikely in the near future.
The federal minimum wage has been $7.25 since July 24, 2009. Prior to 2009, wage hikes in 2007 and 2008 raised income levels for low-paid workers. In his 2014 State of the Union address, President Barack Obama called for Congress to raise the federal minimum wage to $10.10. Congress has not considered the issue this year, however.
The president’s call has fanned the flames of an ongoing battle between employers and employees in cities and states around the country over what constitutes a “living wage.”
According to the National Conference of State Legislatures, 38 states, including Alabama, introduced minimum wage bills during the 2014 legislative sessions. Of the 34 states that considered increases to their state minimum wage, only 10 states enacted an increase.
In this year’s state legislative session, bills in the Alabama House and Senate seeking to establish a state minimum wage with regular increases tied to the Consumer Price Index failed to make it out of committee. Alabama is one of five states that does not have a state minimum wage. Thus the federal minimum wage applies to covered workers.
According to the White House Raise the Wage campaign, a hike in the minimum wage will lift wages for 28 million Americans. Information posted on the campaign’s website, www.whitehouse.gov/raise-the-wage, asserts that 482,900 Alabama workers would be affected by a wage hike. Based on what it calls “the fair market rent” for a two-bedroom housing unit, the White House estimates that an increase in the minimum wage would translate to the amount of almost 8 months of rent for the average Alabama worker.
But who makes minimum wage in Alabama?
According to the U.S. Department of Labor Bureau of Labor Statistics (BLS), there were approximately 1 million workers in Alabama over the age of 16 who were paid an hourly rate in 2012. Of those employees 31,000 earned the minimum wage of $7.25 an hour and 34,000 earned less, translating to 6 percent of hourly workers in the state earning the federal minimum wage or less. Nationally 4.7 percent of all hourly paid workers earn wages at or below the federal minimum wage.
Though the percentage may seem small, many of these workers are people we encounter every day, according to the BLS. Minimum wage workers tend to be teens and adults under the age of 25. Women are twice as likely as men to earn at or below minimum wage. Workers without a high school diploma are more likely to earn less as well.
According to the Pew Research Center, almost half of all minimum wage employees work in food preparation and food service-related occupations. Many work sales, personal care or other service jobs.
In an April 2014 editorial that ran in several state newspapers, Ron Gilbert, executive director of the Community Action Association of Alabama, wrote that for “those earning at or near (the federal) minimum wage, making ends meet in today’s economy is not easy.” Gilbert went on to say that “low and stagnant wages don’t cover the ever-increasing cost of basic expenses (and) … too many families are still scraping the bottom of the barrel every month.”
Consider housing and food, the two largest monthly expenses for most families. Data published in the National Low Income Housing Coalition’s study “Out of Reach 2012” reports that in Alabama, the hourly wage necessary to afford a 2-bedroom housing unit and utilities in 2012 at fair-market rent would be $12.50. At the current minimum wage level, the report says that either a minimum wage earner must work 69 hours per week or the household must contain 1.7 minimum wage earners working 40 hours per week year-round in order to afford housing.
Food expenses vary based on the number of people in a household and their ages. However, the United States Department of Agriculture’s Center for Nutrition Policy and Promotion publishes four food plans for families that estimate monthly costs for a variety of households. According to the August 2014 report, a family of four with two children will need roughly $600 each month to eat according to the USDA’s “thrifty” food plan.
A minimum wage employee who works a 40-hour week for 52 weeks a year will earn $15,080 before any deductions are withheld. Once basic living expenses like food, housing, child care and transportation are figured in, “a parent with two young kids earning the current federal minimum wage of $7.25 an hour would need to work more than 143 hours a week,” Gilbert wrote. “Even the best budgeting can’t stretch that minimum wage job to cover $4,500 in expenses. The math just doesn’t work.”
For working adults with children a wage hike could make a big difference, according to David Cooper of the Economic Policy Institute (EPI).
“Nationally more than a quarter (26.5 percent) of those who would be affected by increasing the minimum wage to $10.10 are parents,” and in Alabama, 21 percent of children “have a parent who would benefit from the minimum wage increase,” Cooper wrote on the EPI website in late 2013.
Amy Glasmeier, professor of economic geography and regional planning at the Massachusetts Institute of Technology (MIT), has developed an online living wage calculator designed to estimate the cost of living for low-wage families. On the site Glasmeier wrote that “while the minimum wage sets an earnings threshold under which our society is not willing to let families slip, it fails to approximate the basic expenses of families.”
“Consequently many working adults must seek public assistance and/or hold multiple jobs in order to afford to feed, clothe, house and provide medical care for themselves and their families,” Glasmeier writes.
Glasmeier’s calculator uses research and data to estimate the costs of basic living expenses and the hourly wage needed to meet those costs in all U.S. counties. The calculator lists the average costs of typical expenses like child care, food, housing and transportation as well as a comparison of the living wage estimate, minimum wage and poverty wage for the area.
“The estimates do not reflect a middle-class standard of living,” Glasmeier wrote. “As developed, the tool is meant to provide one perspective on the cost of living in America.”
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To see the living wage and cost of living estimates for your county or city, go to http://livingwage.mit.edu/. (TAB)
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