Minimum Wage vs. Living Wage: Your Presidential Candidate’s Stance

Is the “Fight for 15” enough?

The minimum wage was designed to be a living wage so that a person working full time could at least afford the bare minimum to live: food, clothing, and shelter. Established in 2009, the current federal minimum wage is $7.25 per hour. Some states are on track to gradually increase to $15 per hour while some states have no minimum wage. Yet, $15 per hour still falls short of a living wage in every state in America.

The Democratic 2020 presidential candidates supports a federal minimum wage of $15 per hour, except for Andrew Yang who argues instead for a universal basic income and leaving minimum wages up to the states. With the “Fight for 15” campaign a controversial issue since it began in 2012, and with so many candidates appearing to support it, we’re breaking down exactly where they stand and whether it’s actually good for U.S. workers.

Fact #1: Increasing the minimum wage to a living wage is key to reducing income inequality and poverty, raising living standards, and to sustaining economic growth. While raising the minimum wage to $15.00 per hour would definitely benefit workers, it is important to note that even $15/hr falls short of a living wage in every state in the U.S. (click here for more information)

Fact #2: Nearly every remaining Democratic presidential candidate in the 2020 primaries supports a federal $15.00 per hour minimum wage and is running on the principle that the federal government needs to ensure that every person working 40 hours a week can earn a living wage, with the exception of Andrew Yang. (click here for more information)

Fact #3: The minimum wage was enacted in order to protect workers and the economy by establishing a living wage. While not everyone agrees with a federal minimum wage, or a $15/hr increase, studies show that the benefits of a living wage still exist today. (click here for more information)

Fact 1: Increasing the minimum wage to a living wage is key to reducing income inequality and poverty, raising living standards, and to sustaining economic growth. While raising the minimum wage to $15.00 per hour would definitely benefit workers, it is important to note that even $15/hr hour falls short of a living wage in every state in the U.S.

  1. The minimum wage of $7.25 has not been raised since 2009. Failure to regularly raise the minimum wage has made it increasingly difficult for the average worker to keep up with the rising costs of living.
    1. This is the longest period in history that the federal minimum wage has remained stagnant. When the minimum wage remains stagnant, inflation erodes its buying power.
    2. In 2009, $7.25 was equivalent to $8.70 in today’s dollars. Over the last 10 years, its purchasing power has declined by 17 percent.
    3. When adjusted for inflation, the minimum wage hit its peak in 1968 at $11.79 per hour. Since then, productivity in the U.S. has significantly increased.  Were the minimum wage to have been raised at the same rate as the U.S. growth in productivity, today’s minimum wage would be over $20.00 per hour today.
    4. In 1938 the average full time worker earning a minimum wage with no overtime and no 2nd job paid 62% of their paycheck towards rent. Today, that same worker cannot afford rent, paying 14% more in rent than they earn.
      1. In 1938, the average home rent was $27/mo ($324/yr). The minimum wage was $.25/hr ($520/yr). 
      2. Today, the average home rent is $1,465/mo ($17,580/yr). The minimum wage is $7.25/hr ($15,080/yr).
  2. Five states have no minimum wage and two states have set their minimum wage to less than the federal law of $7.25/hr. While states can enact their own minimum wage laws, they still must adhere to the Fair Labor Standards Act (FLSA) minimum requirement.
    1. Among the states with the lowest minimum wage, five states have no minimum wage requirements at all: Alabama, Louisiana, Mississippi, Tennessee, and South Carolina. 
    2. Arguably worse than the five states with no minimum wage are the two states with minimum wages that are less than the federal minimum wage: Georgia and Oklahoma. 
    3. There are 12 states that have set their state minimum to the federal minimum wage with no plans to increase them. 
    4. Seven states have already enacted state policies to raise the minimum wage to $15/hr by 2025 or sooner.  Those states include California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, and New York. 
    5. There are some notable exceptions to the federal minimum wage. 
      1. Workers with disabilities: Employers can pay workers with disabilities below the minimum wage in order “to prevent curtailment of opportunities for employment for workers with disabilities.”
      2. Tipped employees who regularly make over $30.00 a month in tips are paid $2.13 per hour.
      3. Employees under 20 years of age, part of the Student Learning Program, and full-time students may also be paid less than the federal minimum wage.
  3. A living wage in the states with the lowest cost of living (Arkansas and Mississippi) would be $22.50/hr. The more expensive states could be upwards of $35/hr (California, New York, Massachusetts, Maryland).
    1. MIT established a living wage calculator to estimate the cost of living in your community or region based on typical expenses. This tool helps individuals, communities, and employers determine a local wage rate that allows residents to meet minimum standards of living.
  4. A $15/hr minimum wage in 2024 will be the equivalent of roughly $13/hr today. This is barely enough for a single, childless individual working fulltime to afford basic needs.
    1. The EPI’s family budget calculator shows that as of today, there is not one county in the U.S. where even a single individual without children can have a secure standard of living while working full-time, year-round at $12.98 per hour.
  5. Increasing the federal minimum wage to $15/hr passed the U.S. House in 2019. If enacted, this will gradually raise the federal minimum wage to $15/hr by 2025, as well as index future increases to median wage growth in order to help lift millions of workers out of poverty.
    1. The U.S. House of Representatives passed the Raise the Wage Act of 2019 (sponsored by Sanders and Scott) six years after the “Fight for $15” strikes first called for a $15/hr minimum wage.  
    2. Increasing the federal minimum wage to $15/hr would lift wages for 33.5 million workers by 2025.
    3. It would increase the pay of 17 million workers earning less than $15.00 per hour.
    4. Another 10 million workers earning above $15/hr might also see their pay increase.
    5. It would lift 1.3 million people out of poverty by 2025, thus reducing the necessity for many to rely on public assistance.

Fact #2: Nearly every remaining Democratic presidential candidate in the 2020 primaries supports a federal $15.00 per hour minimum wage and is running on the principle that the federal government needs to ensure that every person working 40 hours a week can earn a living wage, with the exception of Andrew Yang.

  1. All of the Democratic Presidential candidates, with the exception of Andrew Yang, support raising the minimum wage to $15/hr. However, not all of them have clarified how an increase in the minimum wage should be implemented. 
    1. For example– 
      1. whether the $15/hr minimum wage would apply to all working bodies of the workforce (i.e. tipped vs. untipped employees)
      2. whether this amount would be adjusted for inflation and how rapidly the $15.00/hr  minimum wage would be enacted. 
    2. While most of the issues will be decided by Congress, it is important to know what the presidential candidates will push for on this issue if elected.
  2. On January 16, 2019, Senator Bernie Sanders and Representative Bobby Scott, along with 181 co-sponsors in the House and 31 Senate co-sponsors (including presidential candidates Elizabeth Warren, Kamala Harris, and Amy Klobuchar) introduced the Raise the Wage Act of 2019.
    1. Six years after the first Fight for $15 strike, the U.S. House of Representatives passed the Raise the Wage Act of 2019.  If enacted, it will gradually raise the federal minimum wage to $15/hr by 2025 across the U.S., as well as index future increases to median wage growth.  
    2. The bill will also:
      1. guarantee tipped workers are paid at least the full minimum wage by phasing out the subminimum wage for tipped workers and ensure the right to retain any tips they receive
      2. end wage certificates for workers with disabilities, which allows states to pay disabled workers less than the current federal minimum wage
      3. repeal lower pay for new workers under the age of 20
  3. Sanders called on Senate Majority Leader, Mitch McConnel, not only to call a vote on his co-legislation in the Senate, but to explain to his fellow Kentuckians why he thinks $7.25/hr is an acceptable minimum wage for workers in his state. 
  4. Elizabeth Warren has called for the Senate to vote on the Raise the Wage Act of 2019 through social media posts. 
  5. Andrew Yang opposes the minimum wage due to his belief that a mandated minimum wage will hasten automation, causing employers to find cheaper alternatives to paid employees to do jobs. 
    1. Instead of raising the minimum wage, Yang proposes to “cut out the middle-man and just give people money,” which is a reference to his Universal Income Plan. 
      Yang has also suggested that minimum wages should be left to individual States to decide.

Fact #3: The minimum wage was enacted in order to protect workers and the economy by establishing a living wage. While not everyone agrees with a federal minimum wage, or a $15/hr increase, studies show that the benefits of a living wage still exist today.

  1. The “minimum wage” was designed to be a “living wage” in order to ensure that people working full time have purchasing power (able to buy necessities), and to “create a minimum standard of living to protect the health and well-being of employees.” 
    1. A  living wage can be defined as the minimum income necessary for a worker to meet their basic needs–including food, housing, transportation, and childcare. 
    2. The Fair Labor Standards Act  (FLSA 1938) was part of President Franklin Roosevelt’s New Deal. It established rules to protect U.S. workers from being exploited by employers by establishing protections regarding minimum wage, overtime pay, a regular workweek of 44 hours, and record keeping.
      1. The FLSA was later amended by Congress to 40 hours per week. 
      2. It  also banned child labor by making it illegal for children under the age of 14 to work (exceptions were made for the agricultural industry and some family businesses.)
      3. In 1963, an amendment to the FLSA, called the Equal Pay Act, prohibited differences in pay based on sex.
      4. “The purpose of minimum wage laws is to stop employers from exploiting desperate workers. The minimum wage should provide enough income to afford a living wage. That is the amount needed to provide enough food, clothing, and shelter.” 
      5. “In theory, Congress makes periodic amendments to the FLSA, increasing the federal minimum wage so that even the lowest-paid jobs in the economy still pay enough for workers to meet their needs, and helping ensure that low-wage workers benefit from economy wide improvements in productivity, wages, and living standards.” –David Cooper, Economic Policy Institute 
  2. The key difference between minimum wage and a living wage is that the minimum wage is set by national law and can fail to meet a state’s cost of living.
    1. “The goal of the living wage campaign is to make sure the minimum wage is equivalent to the true cost of living.”
  3. Opponents of minimum wage increases argue that it will cause the price of labor to go up, lead to higher unemployment, and incentivize more automation. 
    1. “Producers will also have an incentive to eliminate entry-level jobs.” 
    2. “As the price of labor goes up, producers will have an incentive to use machines to replace labor. Such replacements are already underway: Google ‘Robot Hamburger’ machines is already being developed to replace  labor in fast food restaurants
    3. The Congressional Budget Office (CBO) warns that raising the minimum wage to $15/hr by 2025 “could boost pay for 17 million people” but cut 1.3 million jobs. 
      1. The report says a hike to $15/hr would “reduce business income and raise prices,” passing increased labor costs onto the consumer and “reduce the nation’s output slightly.”
      2. The CBO also compared raising the minimum wage to both $12 and $10 per hour by 2025 and found similar, “but more muted, effects on wages and employment.”
      3. Chief economist for the Labor Department under the Obama administration, Scott and Heidi Shierholz, told CNBC that CBO’s “methods in assessing job losses were flawed,” and “substantially overstates the costs” of a $15/hr increase.
  4. In a report published in June 2017, UC Berkley concluded that raising the minimum wage does not hurt low-wage employment, despite projections by the Congressional Budget Office.
    1. Several cities have already enacted their own minimum wage increases. 
    2. Economists at UC Berkeley studied the effect of Seattle’s 2015 gradual minimum wage increase to $15. 
  5. UC Berkeley analyzed pay data for millions of households in more than 750 counties and concluded that “the US can easily absorb a $15 minimum without significant job losses, even in low-wage states.”
    1. They focused on the impact of raising pay in areas with the largest share of minimum wage workers.
    2. Previous research has mostly focused on cities and states that have already raised the minimum wage, where workers tend to earn more money.
    3. This is the only major pay study that relies on county-level income data, making its conclusions more precise. Previous research has focused almost exclusively on state-level data.
  6. Benefits to raising the minimum wage include:
    1. Raising the minimum wage on a regular basis helps families keep up with the price of inflation.
    2. Putting more money in the hands of people who will readily spend it helps the economy.
    3. Increased wages and spending raise demand and in turn, create more jobs.
    4. Workers stay with employers longer (instead of seeking better-paying work with other companies)’ thus reducing businesses’ turnover, hiring, and training costs.
    5. Lower unemployment and higher wages increase tax revenues.
    6. When workers earn higher wages, they rely less on government assistance.
  7. Benefits to raising the minimum wage to $15/hr include:
    1. would put $7.7 billion into the pockets of families 
    2. would lift “1.3 million people out of poverty by 2025,” thus reducing the necessity for many to rely on public assistance.
    3. an “average annual wage increase of $600 for workers at or near the poverty line, which would have an ongoing ripple effect whereby their wages would go straight back into the economy to buy consumer products, allowing businesses to do better.”
    4. “Americans are already paying for the public cost of poverty wages – through Medicaid, food stamps, subsidized housing and child care.” 
  8. Two-thirds of Americans (67%) support raising the minimum wage to $15/hr, including 41% who say they strongly favor such an increase.

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