Money Basics

Living on Minimum Wage

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How would your life change if you were living on minimum wage?

That’s the question that inspired today’s article. Before writing, I assumed I’d need to “trim some fat,” but that my thrifty budgeting habits would largely be adaptable to a significantly lower income.

I was very wrong.

Reminder – The Purpose of Minimum Wage

Minimum wage legislation first appeared in the late 1800’s, but wasn’t enacted on a U.S. Federal level until Franklin Roosevelt’s New Deal.

The purpose of minimum wage was to end sweatshop labor (and similar practices) that had emerged and expanded in the post-Industrialization era. Large numbers of young and/or disadvantaged workers were paid at a level that “did not allow for the necessities of life.

There’s an emphasis placed on living on minimum wage. You’ve got to be able to live.

A minimum wage would allow for those workers to afford the necessities of life. We each have our own definition of a “necessity.” But, to me, I think of shelter, nutrition, sanitation, education, medical care…

Perhaps this is already controversial? What’s your list of the “necessities of life?” Am I bananas?

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Bare (bear?) necessities

Modern Minimum Wage

The Federal minimum wage currently stands at $7.25 per hour. But many states, including my New York, have higher minimum wage rates that supersede the Federal rate. Here in New York, I could make $11.80 per hour.

Could I work a minimum wage job that would pay for my necessities of life? What does living on minimum wage look like?

Me, Living on Minimum Wage

As with any analysis, it’s important to define your assumptions.

Let’s say I work 50 hours a week and assume an average of 4.33 work weeks per month. I never take a vacation—I can’t afford to. That totals 216 hours per month. At $11.80 per hour, my gross pay would be $2550 per month.

But then I have to pay taxes, deductions, and all that jazz. Using a flashy online tax calculator, I came up with the following:

Deduction/Expense$ / month
Federal Tax$182
State Tax$74
Social Security$152
Medicare$36
Medical Insurance$70
Dental Coverage$20
Vision Insurance$10
401(k)$130
Total$674

So out of the $2550 I’d earn every month, only $2550 – $674 = $1876 gets to my bank account. That’s what funds my budget. That’s what I get to spend.

My Typical Monthly Budget

Housing is an easy place to start.

My mortgage—including homeowner’s insurance and real estate taxes—is $1050 per month. Right away, that eats up 56% of my monthly income. Yikes. I’ve got $826 left to spend.

Heat, electricity, and water—those sum up to $150 per month. That leaves me with $676 left.

What about other simple expenditures?

In the last year, I’ve averaged $274 per month on groceries, $111 per month on gas, and $53 per month on car insurance. That leaves me with $238 left to spend.

I spent ~$700 on medical needs last year (~$60/month), over $1500 on car maintenance ($125/month), and $1000 on simple house maintenance ($83/month).

I’m already in the red.

I’ve spent more than I’ve earned. I’m going into debt. I haven’t put any money away into an emergency fund. Nor any money on clothing, on books, or any other simple consumer products. I haven’t spent any money on “fun.” I don’t even have Internet.

“Well that’s unrealistic!”

I’m sure I’ve made some questionable assumptions here.

  • My housing expenses are too high, taking up well over 60% of my total costs. Although, $1050 per month is a steal in many U.S. cities.
  • Should I continue spending >$300 per month on my car? I could probably get away with biking to work, taking a bus to the store, etc.
  • I’m “only” working 50 hours per week. I could work more, earn more, and provide some slack in my system.
  • What about a roommate? I would split all housing costs, recouping about $600 per month. That money would go a long way in this tight budget.

But what about the other unrealistic assumptions?

  • I haven’t considered kids. Is the ability to raise children a “necessity of life?” I’d argue yes, at least on this planet. You see, life goes on via procreation. And while I’m not a parent, I’ve heard that raising children takes time (more hours worked, anyone?) and money.
  • All work and no play makes Jesse a dull boy. There’s plenty of free entertainment out there, but is it realistic to have a “fun budget” of zero dollars?
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Some Opinions

I can hear the naysayers. After all, I’m suggesting that the government’s free market interference (by mandating a minimum wage) hasn’t gone far enough.

“You lived your life. You made your bed. Now sleep in it!”

“You can’t incentivize someone for lacking skills! They shouldn’t be able to live like kings and queens.”

“Get another job! Go to school at night! Raise yourself up by your bootstraps!”

Right. The problem is that my budget couldn’t afford the boots. Seriously. I couldn’t afford any clothing. Yes, it’s a metaphor. But I physically do not own the bootstraps with which I could pull myself up.

I don’t have time to make my hypothetical bed. I can’t go to school at night because I’m working—I couldn’t afford school anyway. And I can’t get reasonable student loans because my credit score is so low because I’m slipping down the steepening slope of debt. Even if I could, those loans might haunt me for life.

I urge to you not be one of these people:

America is the wealthiest nation on Earth, but its people are mainly poor, and poor Americans are urged to hate themselves. To quote the American humorist Kin Hubbard, ‘It ain’t no disgrace to be poor, but it might as well be.’ It is in fact a crime for an American to be poor, even though America is a nation of poor. Every other nation has folk traditions of men who were poor but extremely wise and virtuous, and therefore more estimable than anyone with power and gold. No such tales are told by the American poor. They mock themselves and glorify their betters.

Kurt Vonnegut

You’re Probably Close to Minimum Wage

Unless you’re a multi-millionaire, you have a lot more in common with minimum wage workers than with Fortune 500 CEOs.

Or let me put it this way. Let’s say you’re a teacher earning $50,000 per year. I have two questions for you.

  1. What are the odds something bad happens in your life, after which you’re forced to work for minimum wage?
  2. What are the odds something great happens in your life, after which you’ll never have to worry about money again?

Americans, like human beings everywhere, believe many things that are obviously untrue. Their most destructive untruth is that it is very easy for any American to make money.

Kurt Vonnegut

The math is easy. Scenario 1 is more likely.

A $50K salary falls near the 70th percentile of U.S. income. You’re already better than average. My hypothetical minimum wage salary would fall around the 30th percentile. And a CEO-like salary of $300K per year is in the 97th percentile (which, believe it or not, is not even close to the “super-rich”)

The odds of joining the few super-rich are far outweighed by the odds of joining the many poor. Don’t fall for the destructive untruth that money is easy to come by.

Parting Thoughts

I’m reminded of a great quote from the late Paul Wellstone, a U.S. Senator from Minnesota:

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“We all do better when we all do better.”

Paul Wellstone

If you have the power, I’d recommended making decisions whereby we all do better.

Living on minimum wage is stifling. I don’t think the necessities of life are within reach. But a rising tide would raise all ships. We’d all do better if we all did better.

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Need a place to stick your pitchfork and torch? Leave me a comment below!


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About Jesse Cramer

I’m Jesse. I’m an engineer, a new owner of an old home, and an avid reader/writer. If you’d like to comment, ask a question, or simply say hi, leave me a message here, on Twitter (@BestInterest_JC) or on Reddit (u/BestInterestDotBlog). Many of my posts have been directly influenced by my readers. It’s the most fun part of writing this blog. And as always, thanks for reading the Best Interest.
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8 thoughts on “Living on Minimum Wage

  1. Just to play devil’s advocate. What about the argument that a minimum wage increases unemployment by incentivizing automation and increasing business insolvency? If minimum wage is so great, why not just increase it to $100/hour and we all live like kings?

    1. It’s got merit, AZ. Thanks for bringing it up.

      My response is Yangian.

      Automation is coming, minimum wage be damned.

      We have to find a way to get people the “bare necessities of life,” else we’re going to continue slipping down the slope of economic inequality.

      Maybe that come thru the “Freedom Dividend”…a Rose by another name.

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