A minimal wage of $ 15 would assist thousands and thousands of households in small and medium-sized cities change into self-sufficient
On March 11, President Joe Biden signed the US $ 1.9 trillion rescue plan. However, it did not include an earlier House-approved provision to raise the federal minimum wage to $ 15 an hour.
According to the Congressional Budget Office, the $ 15 minimum wage would have increased the incomes of low-wage workers and reduced poverty. In his absence, a national wage increase policy agenda is still urgently needed.
For now, at least, raising the minimum wage will remain a bottom-up exercise led by local and state decision-makers. In a new report, we argue that raising the lower wage limit can not only help reduce poverty (a worthy goal for yourself), but can support self-sufficiency for individuals and families – the ability to meet the cost of living without taking on to be dependent on public subsidies.
To understand the landscape of struggling individuals and households, our report asked a simple question: Do individuals and families earn enough to make ends meet in the communities where they live?
We have found that wages for a large part of the US population are insufficient to support themselves. As of 2019 (the latest available data), 37% of U.S. households – 38 million total – were not earning pre-tax and pre-transfer wages that allowed them to make ends meet, including 14 million households with children. Due to historical racist injustices and structural inequalities, 47% of black households and 50% of Latin American or Hispanic households struggle to make ends meet.
A local perspective is crucial here as the proportion of households struggling to make ends meet varies significantly across the United States due to differences in labor market conditions and the cost of living. Over 40% of households have struggled to make ends meet in places like Miami, Las Vegas, Orlando, Florida, and Los Angeles. In contrast, the fighting proportion of households in Pittsburgh, Boston, and Seattle was closer to 25%.
To understand more precisely how the minimum wage or other measures could alleviate these challenges, we estimate a threshold value for “family-maintaining wages” for each metropolitan area, which would help to bring half of the households in trouble into self-sufficiency. Looking at all households, including those without children, the family-supporting wage thresholds range between USD 12 in Brownsville, Texas, and USD 23 in San Jose, California (Table 1). Among 53 subway areas with a population of 1 million or more, the typical family-support wage threshold is around $ 14.70 an hour – close to that for regions like Nashville, Tennessee and Birmingham, Ala.
While wages and the cost of living differ, any metropolitan area has more problems with individuals and families than jobs that pay family-support wages. Our interactive data lists these numbers for 192 metropolitan areas in the United States and suggests that higher wage floors can not only reduce poverty and improve income for low-wage workers, but also make a meaningful difference in economic self-sufficiency – especially for households without children.
Indeed, an important finding of our analysis is that the effects of a higher minimum wage on family self-sufficiency are highly dependent on the composition of the family. Imagine a thought experiment where the entire nation sets a minimum wage of $ 15. Single parent households make up 19 million of the country’s troubled households – about half of those households – but represent more than three-quarters of households who could become self-sufficient on a $ 15 wage (Figure 1). On the flip side, 14 million – or 40% – of all struggling households are families with children, but they make up only 14% of households that would be self-sufficient on a $ 15 wage.
The geographic variation is even more noticeable. Because the cost of living is significantly lower in smaller communities, households in small metropolitan areas, micropolitical areas, and rural areas with a minimum wage of $ 15 are more likely to become self-sufficient (Figure 2). Of the warring households who could make ends meet on a minimum wage of $ 15, only 45% are in very large metropolitan areas of over 1 million people – smaller than the 57% of warring households they account for.
Even within these large and very large metro areas, there are significant differences. In the most expensive locations in the country – San Jose, California, San Francisco, Honolulu, Washington, DC, and New York – less than 10% of warring households would become self-sufficient on an hourly wage of $ 15 (Table 2). Many of these cities and their states have already adopted measures to increase their minimum wages. By comparison, more than two-thirds of troubled households in Madison, Wisconsin, Lansing, Michigan and Pittsburgh would become self-sufficient on $ 15 an hour. Many of these metropolitan areas contain large universities and likely reflect the significant number of student households living (temporarily) on low wages.
Part of the debate about raising the federal minimum wage has identified concerns about different regional effects – in particular that a minimum wage of $ 15 would prove too costly for businesses in low-cost regional economies. From the perspective of workers and families, however, it is in the same smaller, more affordable cities where a higher minimum wage could put the majority of families in difficulty into self-sufficiency. In many metropolitan areas in particular (including some large metropolitan areas), an hourly wage threshold of between $ 12 and $ 13 an hour would drive half of troubled households – most of which are childless households – into self-sufficiency.
Ultimately, economic self-sufficiency – whether households can make ends meet on their wage income alone – is only one measure for assessing the effectiveness of measures such as increasing the minimum wage. But for the tens of millions of Americans who struggle to afford the cost of living in their local communities, it is arguably the metric that matters most.