Workers are continuing to fight for a national $15 minimum wage, but a new book suggests even that won’t be enough. What will?
We still see reminders of a worker shortage these days, even a couple of years after the COVID pandemic. For a few years now, we’ve been hearing that a $15 minimum wage is the right thing to do. But would that be enough to get people to actually show up?
During a recent visit to family, I drove by one of my favorite burger restaurants. This particular one has several locations in the Columbia area, but I was surprised to see one of them dark. I couldn’t believe they had shut down, so I drove into the parking lot to read a sign on the door. They temporarily closed the location, the sign read, because of a worker shortage. This particular chain doesn’t pay $15 per hour as a minimum wage. I happen to know they offer a $12 minimum wage.
My state of South Carolina does not have a mandated minimum wage. That means that employers must follow the federal minimum wage, which currently stands at $7.25 per hour.
That $12 wage isn’t $15 per hour. But it’s a damn sight better than $7.25. And still, they have rolling closures of some of their restaurants because they can’t find enough workers.
Many of the people who work at the restaurant appear to be high school or college students. I’d be willing to bet that if you asked them what their career goal is, none would say they intend to be a worker in that restaurant for life. I’d almost be willing to bet that not one of them even intends to stay in the restaurant business.
So what’s a reasonable salary? If an employer is only required to pay $7.25 and they up their pay to $12, that seems like an impressive gesture. That’s a 65% increase over the federal minimum wage.
If South Carolina (or the federal government) were to pass a $15 minimum wage, does everyone believe that workers would suddenly jump at the chance to work there when $12 wasn’t enough?
How much actually is enough?
I saw an interview the other day on CBS Mornings with author Rick Wartzman. His book Still Broke tells the story of Walmart’s efforts to better compensate its workers. Walmart now pays an average minimum of $17 per hour.
Let’s stop right there for a second.
When is the last time you visited a Walmart? How many checkout lanes were open? How many of those checkout lanes were staffed by human beings rather than self-checkout machines? The last few times I’ve been there, the self-checkout aisles outnumbered human cashiers by at least three to one.
Did you try to find an employee to ask a question about something while you shocked? Did you actually see many of them? I saw two in the clothing section, two in the electronics section, and one other one walking past the health and beauty section.
I also encountered one employee standing toward the exit. Her role was to look at your receipt and then compare it with what’s in your shopping bags. (If they don’t trust me to self-checkout without a security inspection, then hire more cashiers and let them do it.)
Wartzman argues that $15 per hour isn’t enough. Even $17 per hour, he says, won’t cut it.
At $15 per hour, a 40-hour workweek translates into a $31,200 salary. If you look at Walmart’s average minimum, workers making $17 per hour bring home an annual salary of $35,360.
Wartzman argues that we as a nation don’t have time for “incrementalism” any longer. He says the nation needs Congress to pass a $20 federal minimum wage law.
“You can say $20 an hour is radical,” Wartzman told CBS. “What’s radical to me is to be in the richest country on Earth and have people who get up and work hard every day struggle to the degree they are.”
Battle of the numbers
Wartzman says a $17-per-hour minimum wage translates to just under $29,000 per year. When I said $17 per hour meant a salary of $35,360, I used the most basic mathematical formula: I multiplied the wage by 40 (the number of hours in a week) and then multiplied that by 52 (the number of weeks in a year). Yes, that assumes two weeks of paid vacation, which Walmart may or may not offer its full-time employees. (I’ve never worked for Walmart, so I don’t know if they do.)
But let’s assume they do offer paid vacation among their various benefits.
Wartzman’s figure, it seems comes from multiplying the $17 wage by the hours worked by Walmart employees. Therein lies another problem here: Not all jobs are full-time jobs. Employers can’t afford to hire only full-time employees, particularly at wages like that. To do so, they have to spring for benefits for all of those employees. The employees themselves end up having to pay for parts of their benefits, like health insurance. (When companies offer 100% free health insurance, that’s often a sign that you will face a much larger health deductible. One way or another, you’ll probably pay for healthcare.)
So, yes, minimum wage jobs won’t necessarily be full-time jobs. The higher you raise minimum wage doesn’t solve the whole problem. Minimum wage earners may still have to work a second job to make enough money.
For much of my early days, I worked a part-time job in addition to a full-time job.
Fuzzy math: What’s a livable wage?
An MIT study back in 2019 determined that the livable wage was $16.54 per hour. That amounted to an income of $68,808.
At $16.54 per hour, someone working 40 hours per week for 52 weeks per year would make literally half that. That’s because the study looked at a livable wage based on a family of four with two working adults and two children.
The same study suggested that for a single mother with two children earning the current federal minimum wage of $7.25, she’d have to work 138 hours per week to reach a livable salary. That’s essentially working 24 hours per day, six days a week.
You’ll spend more with kids. That’s a no-brainer. If you’re single, your expenses will be less. But if you have more than two children, you’ll have more bills.
If you live in certain areas of the country, your cost of living will drop because of differences in housing costs.
In 2021, MIT’s update to its livable wage found an alarming jump. The minimum wage in 2021 would need to jump from $16.54 in 2019 past 2020’s $21.54 wage all the way up to $24.16. Again, that’s for a family of four with two working adults and two children.
Just Capital attempts to break down the living wage based not only on the number of adults and children in the household but also by the area cost of living. In a household with one single, working adult, the living wage could be $13.56 in Monroe County, Tennessee, with a low-cost standard of living. In a mid-cost area, the minimum wage needed would be $15.96. But in a high-cost area like Marin County, California, that single person would need to make $30.81 per hour.
Those figures change dramatically when you have a four-person household with two adults and two children in which only one adult works. The living wage would start at $31.42 per hour in the low-cost area and jump to $59.60 per hour in a high-cost area.
When you look at a four-person household with two working adults and two kids, livable wages would range from $18.75 to $40.16.
Those figures tell you that a nationwide $15 minimum wage won’t solve the problem. No matter what’s reasonable in some places, it still won’t be reasonable in others.
Where do you draw the line for employers?
You can rely on employers to “do the right thing” and pay their workers more. At the same time, you can rely on prices to go up as minimum wage goes up.
After all, that money the employees are taking home has to come from somewhere. Many companies aren’t going to just cut their profit margin out of charity, although some have essentially been forced to bump up their wages because of the labor shortage.
When prices go up, you know what happens: the livable wage would have to go up as well. When basics like groceries go up in price, that affects a family’s bottom line.
As employers have to pay higher wages, they’re going to look for other ways to cut expenses. In some cases, that will mean a cut in hours. Some employees will lose full-time status — and with it, full-time benefits — as a result. They might find themselves having to take a second job to make ends meet.
No one wants to work two jobs (or three). But sometimes, you have to do what you have to do to pay the bills.
Beyond that, everyone should have a goal to improve their position (and their salary). If you start off at a job making $12 and you never get a raise, you find a better job. An entry-level job is just that: entry-level.
So what’s the magic price at which everyone can afford to hire enough people and that prices don’t skyrocket to the point that workers have to make even more money? There isn’t one. It depends on where you are and what the local job market can handle.
I do know one thing: I suspect those demanding a $15 minimum wage better make sure they’re showing up wherever businesses offer at least that much as a minimum. Otherwise, they’re shooting themselves in the foot ahead of arguing that they need $20 or $25 an hour. I worry that if they won’t work for $15 an hour, they won’t have the empathy they’ll need to get that minimum raised higher than that.