When you think about the minimum wage in Seattle, NYC or California, the number is $15. But Seattle already will have a $13 minimum wage until 2017 while NYC’s minimum wage will rise to $15 in three years. In California, Governor Brown said that his state would raise its hourly minimum wage to $15 by 2022.
Talking about low income workers, a group at MIT says the minimum wage is the wrong focus. Instead they’ve been researching a living wage.
The Living Wage
Defining the living wage as what it takes to pay for a family’s necessities, the Living Wage group compares what a family needs to what the minimum wage actually pays for. Then they use some basic math to show us that a minimum wage earner might even have to work more hours than exist to afford the family’s necessities. The necessities they use for their numbers are the typical basics: food, housing, transportation, medical care, child care, taxes.
But it does depend on where you live.
The following Living Wage calculations for San Francisco, Peoria and Sunflower County assume the adult works 2080 hours a year. In the first row, the living wage dollar total is what the adult needs to earn an hour to support his or her family. At the Living Wage website, for hundreds of counties, they also detailed hourly wages for larger and smaller family sizes, they specifically itemized living expenses, and they listed what different professions earned. (Once you start looking at their data, it is tough to stop.)
Our Bottom Line: A Price Floor
Economists can illustrate the minimum wage or a living wage with a horizontal line they call a price floor. Floors are always above equilibrium because they prevent the price (wage) from moving down to equilibrium where they naturally gravitate because quantity demanded equals quantity supplied.
Below, you can see the horizontal line that represents a floor. Depending on the difference between the quantity supplied of workers at that wage (QS) and the quantity demanded (QD) for them, there might or might not be many unemployed laborers.
The impact of a $15 minimum wage or a higher living wage takes us into uncharted territory that economists have begun to explore. As the research starts to emerge, we will be taking a look.