I was a little bored this afternoon, and I decided to see how long I could hold out if I were forced to work for minimum wage while keeping my current standard of living. Big surprise, it turns out I would be eating into my emergency fund almost as soon as I took the “pay cut”. So that got me wondering, just how far do you have to stretch a dollar to live off of minimum wage in today’s economy? I crunched some numbers to see just difficult it is to get by when you’re forced to live off a low income.
Ground rules
For the purpose of this exercise, I’m going to pretend I’m single (sorry, sweetie!) and in good health. For my location, I randomly chose Hartford, CT. Minimum wage in Connecticut is currently $7.65 an hour. Forty hours a week at $7.65 an hour works out to $306 a week, or roughly $1224 a month. So do you think it’s possible to put a roof over your head, feed yourself, buy clothing and find transport for a little over a grand a month? Let’s find out.
Housing
Finding housing is a challenge. I’ll be honest, I pay more in rent per month than what minimum wage pays each month. So I was surprised when I found a studio apartment for $395, which includes heat. When you’re living in New England, heat included with your rent is a huge deal. But that still leaves electric ($50), phone ($30), and water ($20). So with housing out of the way, how much does that leave us for the rest of the month?
$1,224 (Income)
$495 - (Housing)
$729
Food
Figuring out what you should spend on food when money is tight is tough. Right off the bat, eating out is out of the question. But what do you spend on groceries? One the one hand, you can eat beans and rice every night, or you can try and spice up your meals with vegetables and meat. Ground beef and chicken is still cheap, and large bags of frozen vegetables go a long way. I would make a conservative estimate that groceries for absolute bare necessities would run about $30 a week, or about $120 a month.
$729 (Remainder)
$120 - (Food)
$609
Clothing
I’ll be realistic here. Most people earning minimum wage probably don’t go on shopping sprees every month. But that doesn’t stop people from wearing through shoes, pants, shirts, sweaters, and jackets. I’m going to set aside an extremely conservative $25 a month to spend on clothing in a consignment shop.
$609 (Remainder)
$50 - (Clothing)
$559
Transportation
Transportation is tricky. If you live in a large enough metro area, you can probably get by without a car and simply rely on the bus or subway to get around. But if you live in a more rural area (such as our example Hartford, CT), you’re going to need a car. I would hesitate to take on a car payment at this level of income, but the reality is that if you are earning around $14,000 a year, you probably don’t have any savings to purchase a car outright. Most likely, you’ll drive a high mileage car that you’re paying around $100 a month in loan payments. Tack on insurance ($20 a month), and gas ($200 a month), and you’re looking at $320 a month for transportation.
$559(Remainder)
$320 - (Transportation)
$239
Miscellaneous
Now that we have the four core requirements to surviving on your own, what about miscellaneous expenses? Little nickel and dime expenses add up, and they add up quick. It doesn’t take much to spend your $239 remainder every month on non-budgeted expenses. What happens if your car breaks down? Or if you need to see a doctor? Even buying supplies for your home can wipe out your finances. And forget about spending cash on entertainment, the money just isn’t there for that.
Living on minimum wage is living below the line of poverty. While raising the minimum wage would theoretically improve the quality of life for many, it’s a double edged sword. If you raise the minimum amount employers can pay employees, stores and companies will have to raise the prices of their goods and services to compensate. So effectively, an increase in minimum wage would erase workers wages through greater expenses.
Minimum wage doesn’t work, but how do we fix it?
No comments:
Post a Comment