Why Seeing If You Can Live on the Minimum Wage Is a Red Herring

Before criticizing someone, you should walk a mile in their shoes....or so goes the proverb. Since our life experiences are so different, it is impossible to have the same exact conditions as another, even if you went through similar situations. The idea behind this proverb is to develop a sense of understanding of what another person is going through before you even begin to judge them. I don't disagree with the concept: we should try understanding where others are coming from. At the very least, you develop a fuller understanding of an argument or situation. This idea of a more empathetic understanding comes into play when people advocate for a higher minimum wage. It usually comes in the form of "You should try living on $7.25/hour to understand what it's like. Maybe that way, you'll change your mind."

To further illustrate this point, minimum wage advocates show how expensive it is for a minimum wage worker to afford a one-bedroom apartment. According to the National Low Income Housing Coalition, the average national housing wage for a modest one-bedroom apartment is $17.90, whereas the minimum wage worker makes $7.25. This means that a minimum wage worker would either have to work more than 40 hours a week or pay more than the recommended 30 percent of their income to afford housing.

Not being able to afford housing can be a problem because the financial strain of abject poverty can and does adversely affect physical and emotional health. Having workers provide enough for their families is a socially desirable outcome. Advocates make a fair point....at least to a point. At the same time, I think it is better to contextualize the problem before letting emotions take over by calling for a higher and higher minimum wage. Most of the data for today's analysis will be coming from the Bureau of Labor Statistics' (BLS) March 2018 report on the characteristics of minimum wage workers in 2017. I would like to take a look at this report and some other facets to get at the prevalence of the problem, demographics of minimum wage workers, and see what can be done.

1. How many minimum wage workers are there? Workers that make minimum wage or less than minimum wage account for 2.3 percent of hourly wage workers, which is a total of 1.85 million workers (BLS, Table 1). When looking at the number of workers as a percent of the civilian labor force (2017 average of 160,310,000), minimum wage workers only account for 1.2 percent of the overall workforce.  
2. Has the number of minimum wage workers increased or decreased? You'll be happy to know that the number of minimum wage workers has decreased from 7.9 percent of the hourly wage worker labor market in 1979 to 2.3 percent in 2017 (BLS, Table 10). This positive historical trend shows that "living on minimum wage" is becoming less prevalent of a problem. 
3. How many minimum wage workers are under 25? I ask this question because there is a high probability that those who are under 25 are living with their parents while working part-time jobs to supplement income. This age demographic accounts for 48.8 percent of minimum wage workers, which is a disproportionately high amount (BLS, Table 1). When filtering out this age demographic, the total of minimum wage workers decreases to 947,000 workers. Without factoring in anything else, an absolute maximum of 0.59 percent of workers are affected.
4. What percent of minimum wage workers are working part-time? I ask this question because it acts as a proxy of how many minimum wage workers are straining to make ends meet. 68.4 percent of minimum wage workers work less than 40 hours a week, whereas only 2.9 percent of minimum wage workers (or 53,650 minimum wage workers) work more than 40 hours a week (BLS, Table 9). This statistic also works in the backdrop of the fact that the percent of overall workers holding more than one job dropped from 6.1 percent in 1997 to 4.9 percent in 2017.

These facts illustrate that the vast majority of minimum wage workers, much less overall workers, have to wonder what it is like to live on minimum wage. Anyone who uses the exercise of "what is it like to live on minimum wage" to invoke your sympathy is cherry-picking to advance an agenda, plain and simple. To further my point of this exercise being a red herring, let us consider that the earned income tax credit (EITC) is a better policy alternative to fight poverty because minimum wage targets low-wage workers instead of low-wage households. Aside from poorly targeting low-income households, there is also increased unemployment of low-skilled labor, less job opportunities for low-skilled labor, higher cost of doing business, and higher consumer prices as a result of higher minimum wage.

I also think this is a red herring because it asks the wrong question. I brought this point up when looking at heating subsidies (LIHEAP), which is that if we throw money at the problem, we are masking the root issues. If we continue to increase wages, costs of productivity increase, which just means we'll keep having this conversation about minimum wage until the end of time. Instead of talking about a living wage, we should ask ourselves how to make living more affordable. The three major items that have increased in price considerably in the past twenty years are housing, health, and education. How can we make these three items less expensive? A major driver of high housing costs is limited housing supply caused by government regulation. Remove the land use regulations and there will be cheaper housing. The single largest culprit towards the increasing cost of education is federal loan subsidies. Health care is more complicated, but we should also focus on ways to bring health care costs down. Although asking "What Is It Like to Live on Minimum Wage" makes for an interesting policy analysis, it is asking the wrong question that adds nothing to a conversation that could actually help people escape low-wage jobs.