No One Should Work Full-Time & Live in Poverty

Sep 24, 2014 | Economics


In December 2013, President Barack Obama stated that deficit of opportunity is a bigger threat than our fiscal deficit and the growing income inequality in the US is the “defining challenge of our time.” Americans and the leaders of our country are concerned about economic recovery and stability. Moreover, stagnant (and dropping) wages combined with globalization and de-unionization, strip workers of the bargaining power and economic power they once possessed. No one should work full time and live in poverty. Raising the minimum wage for workers will not only help close the income gap, but also get local economies moving, benefit millions of families, and improve the overall health of our citizens and country.

Indicators of an Insubstantial Minimum Wage

Over the past 50 years, we have seen a $5.65 increase in the nominal federal minimum wage from $1.60 in 1968 to $7.25. However, in real value, that $1.60 minimum wage in 1968 was actually $10.69, almost 50% more than the current minimum wage.  In comparison, workers making minimum wage are nominally per hour making almost one-third of the average private-sector earner (who makes $20.31/hr). This vast inequality affects 28 million workers, of which 19 million would see a direct increase in their wages from an increased minimum wage. Right now, a full-time minimum-wage worker makes $14,500 a year which leaves families far below poverty lines for families of 2, 3, and 4. 

Five years and counting

So why hasn’t the federal minimum wage changed in five years? A lot of the stagnation has to do with the public perception of those in poverty, the fear of “big government”, and the belief that higher wages are bad for the economy. For most of history, there has been a distinction between the deserving and undeserving poor, or that poverty is a matter of choice. Reagan once stated that (in terms of homelessness) some people choose to sleep on grates. This school of thought holds that those in poverty are there not because of government failings, but rather because of poor choices. Viewing the cause of poverty as an intentional or inadvertent action taken by citizens.  In essence, this reasoning blames the victim for their misfortune and poverty. Others may fear government intervention citing simple economic theory as reasons for why regulation of wages fails workers, but we have seen that living wages are in fact better for the community. Dan Mitchell, a senior fellow at Cato Institute has said “Businesses are not charities and that they only create jobs when they think a worker will generate net revenue. Higher minimum wages, needless to say, are especially destructive for people with poor work skills and limited work experience.”  This sentiment has been a common one within the opposition of raising the wage. The rhetoric of missing a rung on the ladder, free-market economies, and exaggerated minimum wage examples like $50 or $100 are employed to diminish the importance of a wage mandate. However, the rhetoric used comes mainly from those who are not making the minimum wage, or leaving in poverty, but from elites. Those with the power and resources to help solve poverty would not benefit from changing the structural and institutional causes of it, and might even jeopardize their power. [9] 

Connecting Poverty & the Minimum Wage

A stagnant minimum wage is failing workers and failing the United States by stripping millions of people of the bargaining and economic power they once possessed, it has contributed to the collapse of the working class, and has far-reaching negative consequences. In the US, nearly 50 million people are considered poor. In March, Sen. Bernie Sanders said, “Unfortunately, despite our great wealth, more of our citizens are living in poverty than ever before and we have the highest rate of childhood poverty of any major country in the industrialized world. We have a moral responsibility to end childhood poverty in America.” More than 1 in 5 children in America live in households that lack consistent access to adequate food because their parents don’t make enough money. Michael Reisch, a professor of social justice at the University of Maryland, has said that “Poverty not only diminishes a person’s life chances, it steals years from one’s life.”  Frequently news stories appear discussing the alarming effects of poverty on health including increased occurrences of cancer, high rates of obesity, high levels of stress, and more. In fact, a recent study has shown that even those who “pull themselves up by their bootstraps” cannot escape the long-term, ill-health effects of poverty. Raising the minimum wage would provide a sound foundation to build a system that could begin to reverse and end the deleterious effects of poverty.

Based on the Fair Market Rent for a two-bedroom unit, raising the wage to $10.10 could help minimum-wage workers ($7.25/hr) afford more than 6 months of rent. Workers making $10.10 an hour rather than $7.25 would afford families 36 weeks of groceries. Raising the wage to $10.10 could help minimum-wage workers afford 103 tanks of gas each year (1 tank = 15 gallons, which is the average for a mid-size car.). Raising the wage to $10.10 could, over a year’s time, help minimum-wage workers afford the equivalent of 3.5 years of electricity.

The government has a duty to invest in the well-being of its citizens, raising the federal minimum wage would benefit workers and in turn their families. After five years of stagnation, where the minimum wage hasn’t been adjusted to living costs, and an unprecedented, widening income inequality gap, it is time for a more comprehensive, up-to-date labor and wage policy. A policy that holds corporations more accountable and better protects employees.