final term project

Running head: MONEY MATTERS: THE STRUGGLES OF LIVING ON MINIMUM WAGE 1

Money Matters: The Struggles of Living on Minimum Wage

Julie Longwell

Seton Hill University

MONEY MATTERS: THE STRUGGLES OF LIVING ON MINIMUM WAGE 2

Abstract

The purpose of this research is to look at the issue surrounding the marginalized group of

minimum wage workers. By being informed of the issue at hand, Americans are able to better

understand and help resolve the problem of low minimum wages. In a wealthy nation like

America, no full time worker should be living in poverty. By research obtained through online

resources, an interview, and personal volunteering experience, the issue regarding full time

minimum wage workers living in poverty is explored. Lastly, this paper analyzes and critiques

possible solutions to problems faced by minimum wage workers. Altogether, this report provides

insight into the issue affecting millions of American workers


The Minimum Wage Worker

“No person can maximize the American Dream on the minimum wage” (Jealous 2013).

This powerful statement written by Benjamin Todd Jealous, the CEO of the NAACP, rightly

brings up the main issue surrounding minimum wage. The prosperity associated with the

American dream is difficult to achieve with low minimum wages. The marginalization of

minimum wage workers continues to be both an economic and social issue separating the social

classes in the American society today. As the cost of living increases in America, minimum

wage workers are given an unfair disadvantage of achieving prosperity due to the Federal

minimum wage not keeping up with inflation. While the rich are getting richer, minimum wage

workers are struggling to survive on small wages.

Identification

According to U.S. Bureau of Labor Statistics, in 2013 minimum wage workers made up

58.8 percent of all wage and salary workers. In other words that is 75.9 million workers working

for $7.25 an hour. However, the U.S. Bureau of Labor Statistics can be misleading by not

showing statistics of workers making slightly more than the federal minimum wage. According

to the article “Low-wage Workers Are Older Than You Think,” the writers explain “These data

do not provide an accurate picture of who would see a raise if the minimum wage were increased

because they exclude all workers from the 19 states with higher state minimum wages, along

with all workers making slightly above the current federal minimum wage but below the

proposed minimum, all of whom would see a raise if the minimum wage were increased”

(Cooper & Essrow, 2013). Workers under age twenty-five make up about half of the minimum

wage workers in American (Characteristics of, 2014). Many people think that the majority of


minimum wage workers are young. This is true if you are looking at the data collected based on

the Federal minimum wage of $7.25, since depending on the state, minimum wage may be

slightly higher than the federal minimum wage. In reality, there are a far greater number of older

workers struggling to make a living on minimum wage than people realize.

According to the article, “Will the real minimum-wage worker please stand up?” data that

both includes federal and state minimum wages shows that 53.1 percent of workers are White,

25.2 percent are Hispanic, and 14.8 percent are Black workers. Speaking in regards to a higher

minimum wage, the research director at the Economic Policy Institute, Douglas Hall says, “The

people who will benefit most are by and large white women who work full time and whose

families live on less than $40,000 a year” (White, 2014). Since many people have an idea of their

own about the type of person living in poverty, people may find it surprising that it would be

white women most affected by the increased minimum wage.

According to U.S. Bureau of Labor Statistics, in 2013 the states with the highest percent

of minimum wage workers were Idaho and Tennessee. Washington, California, and Oregon had

the lowest percentage of minimum wage workers in the United States. However, this data is

based on the federal minimum wage of $7.25 and included in the data is a note saying “It should

be noted that some states have minimum wage laws establishing standards that exceed the

federal minimum wage” (Characteristics of, 2014).

Although these are just a few characteristics of minimum wage workers, anyone who is

sixteen or older and is making either the federal minimum wage of $7.25 an hour or is making

their state minimum wage is considered a minimum wage worker. According to the Unites States

Department of Labor website, “In cases where an employee is subject to both the state and

federal minimum wage laws, the employee is entitled to the higher of the two minimum wages”


(“Wages,” n.d.).

The Issue

Minimum wage workers are finding it difficult to support a family due to the high cost of

living. A single parent working full time at minimum wage trying to support a family of three

makes $15,080 a year, putting them well below the poverty line. President Obama has expressed

his dismay by saying, “In the wealthiest nation on Earth, no one who works full-time should

have to live in poverty.” Even though minimum wage has increased over time, it has not kept up

with inflation. In 1968, a minimum wage worker would have made about a third more than a

minimum wage worker today (Light, 2013). This has also increased the gap between the lower

class and upper class. An article entitled, “Hardworking Americans should not be living in

poverty” includes data regarding income growth in the United States. “The federal minimum

wage hasn't kept up with inflation, but CEO pay has risen 725% over the last 30 years and 80%

of all real income growth has gone to the richest 1% of Americans” (Henry & Ownens, 2012).

While the rich are enjoying immense prosperity, minimum wage workers are struggling to stay

above the poverty line and achieve the prosperity associated with the American dream.

The first idea to set a minimum wage in the United States came about during the Great

Depression. The U.S. Supreme Court, however, continually turned down the idea saying the laws

would be unconstitutional by interfering with the employers free right to negotiate a wage

contract with employees (Glass, 2011). In 1938, the federal government passed the law entitled

Fair Labor Standards Act. This established a minimum wage of $0.25 per hour, which was the

first time employers were legally required to pay their workers a minimum set wage per hour.

Since 1938 the minimum wage has been raised twenty-two times. The wage has been increased


to keep up with inflation occurring over time. Minimum wage had the highest purchasing power

in 1968 when it was equivalent to $10.69 in today’s economy (Elwell, 2014). Since being raised

in 2009, the federal minimum wage has lost about 5.8 percent of its purchasing power due to

inflation (Desilver, 2013). In other words, by minimum wage not being adjusted for inflation,

American minimum wage workers wealth is decreasing as time goes on.

The Solution

A short run solution to help minimum wage workers living in poverty would be to

increase the federal minimum wage. Many studies have been done to determine what would

occur if the minimum wage were to be increased. While economists have different theories

regarding the effects on employment, most agree that raising the minimum wage would reduce

poverty in the United States. If the minimum wage were to be raised to $10.10, which is what the

Democratic Party is proposing, 4.6 million people would no longer be living in poverty

(Konczal, 2014). As discussed in an analysis released by the non-partisan Congressional Budget

Office, a minimum wage increase to $10.10 would cost 500,000 jobs to be lost. Job loss would

be due to employers reducing the number of employees to make up for the increase in wages

(Davis, 2014). However, other economists believe that a higher minimum wage has little or no

effect on unemployment. For example in a report by John Schmitt, which includes research

ranging from the 1990s to 2013, “The most likely reason for this outcome is that the cost shock

of the minimum wage is small relative to most firms' overall costs and only modest relative to

the wages paid to low-wage workers” (Schmitt, 2013). While the debate on the consequences of

raising the federal minimum wage is ongoing, the trade-off is clear. “People who keep their jobs

get more money; those who lose their jobs, or fail to get new ones, suffer” (Hassett and Strain,


2013). Although society cannot help everyone, by raising the minimum wage, the government

would be giving workers the opportunity to get out of poverty.

In order to have a long-term solution for keeping minimum wage works out of poverty,

society needs to offer better assistance to hardworking, honest workers. By rewarding honest

minimum wage workers and penalizing those abusing the system, the government is giving hard

workers more money and the opportunity to better their lives. This is due to the fact that those

being penalized for abusing the system would free up more money for those who are not.

According to a study done by the University of California Berkeley Labor Center and University

of Illinois, 52% of families of fast food workers receive assistance from government programs.

On the other hand 25% of families in the workforce as a whole are receiving assistance from

government programs (Housel, 2013). While this is a high percentage of workers using

government aid, many people are finding that it pays more not to work. A study by the Cato

institute found that a mother with two children in New York could receive government assistance

worth $38,004. Since welfare benefits are not taxed and wages are, someone in New York would

have to earn $21 per hour to be better off than they would be on government assistance (Tanner,

2013). While many hard working Americans rely on government assistance, there are many that

realize that they make more off government aid by not working. “Welfare currently pays more

than a minimum-wage job in 35 states, even after accounting for the Earned Income Tax Credit”

(Avik, 2013). When asked if she has ever witnessed someone abusing the low-income housing

system, Ellen Parker, Quality Control Supervisor for Housing Choice Voucher Program

Department for the Allegheny County Housing Authority, responded “Yes, unfortunately too

much. Rent is based upon a person’s income. Therefore, when a tenant gets a job and their

income goes up, so would their rental portion. So, some tenants just don’t report when their


income is raised. When we find out, we charge them with fraud and require them to pay back

what they would have paid if they had turned it in in the first place” (Ellen Parker, personal

communication, April 4, 2014). Since there is a long waiting list to get a voucher for section

eight housing, honest working minimum wage workers are the ones that are left to compete for a

voucher with those who are abusing the system. By enforcing harsher penalties for government

assistance fraud, society is giving honest minimum wage workers the chance to utilize

government assistance, which will allow them to work and earn a better lifestyle.

Analysis

The solution of raising the federal minimum wage to get full time working Americans out

of poverty utilizes the legislation, regulation mechanism of Uhl’s Mechanism Model. By

regulating what employers can pay employees, the government is working towards improving

the consumer’s well being. Due to competitive market processes, some companies pay their

workers above minimum wage because they believe it greatly benefits their workers, which in

return will benefit the consumer’s well being. For example, the CEO of Costco Wholesale

Corporation, Craig Jelinek, not only supports the federal minimum wage increase, but also

implements the high starting pay to his workers. Costco’s starting hourly pay is $11.50, while the

average employee wage is $21 per hour (Short, 2013).

The long-term solution of regulating government assistance utilizes the legislation,

regulation mechanism of Uhl’s Mechanism Model. By the government establishing a better

system to detect and punish fraudulent behavior in government programs, the government is

improving the consumer well being. Not only are the users of these government programs

affected by better regulation, taxpayers are also being affected. Since it is taxpayer’s money


being used to fund these programs, it is wise for them to know whom their money is helping.

Debates and speeches about a better regulated government assistance program is not only

helping to move the process along, but also it is an investment in human capital. It helps to

educate both the taxpayer and consumer about who uses, misuses, and ways to better assist those

who truly need government assistance, such as those minimum wage works who fall below the

poverty line.

Critique

Due to politics, the solution of raising the federal minimum wage will not be an easy task.

President Obama and his administration support the increase of the federal minimum wage.

However, even with the President’s support, it would still take years for the bill that would

increase wages to pass through congress. In an email, a White House official wrote, "The

President has long supported raising the minimum wage so hardworking Americans can have a

decent wage for a day’s works to support their families and make ends meet” (Jamieson, 2013).

An increased minimum wage would not only be economically feasible, it would also adhere to

the Catholic social teaching dignity of the human person principle. According to the United

States Conference of Catholic Bishops website, “The Catholic Church proclaims that human life

is sacred and that the dignity of the human person is the foundation of a moral vision for society”

(“Life and Dignity,” n.d.). By following this principle, it shows that something needs to be done

for minimum wage workers to live a life without poverty. When a person is working full time

and still cannot afford basic necessities, it may be giving them the impression that their hard

work is not paying off.


Although it could be done, it would take both time and money to better regulate the

government assistance programs. When asked how section 8 housing could be better regulated to

prevent misuse of the people abusing government aid, Ms. Parker responded “The government

has already put in place that what we report on each tenant is matched to what the IRS has in its

system. That’s how we find out people did not turn in their income. It is about 4 months behind

though. It would be better if it matched within 30 days as opposed to 4 months” (Ellen Parker,

personal communication, April 4,2014). In order for the minimum wage workers to receive the

assistance they need, the government needs to stop giving money to the people who are abusing

the programs. This change would require more employees and systems put in place to better

monitor those on government assistance. Ultimately regulated programs would improve the

common good as while as carry out the Catholic social teaching preferential option for the poor

principle. This principle is the idea that a nation can tell a lot about its society by looking at how

they treat their most vulnerable citizens. By people abusing the system and using up the aid

provided, it leaves the most vulnerable in need “The richer class have many ways of

shielding themselves, and stand less in need of help from the State; whereas the mass of the poor

have no resources of their own to fall back upon, and must chiefly depend upon the assistance of

the State” (Option for the Poor, n.d.). By utilizing this solution and principle, we are allowing

those truly in need to get the help they need and deserve.

In conclusion, hard working minimum wage workers are suffering in one of the world’s

wealthiest nations. While the cost of living continues to rise, it is unfair to expect workers to

survive on a wage that has not kept up with inflation. Even though President Obama and

members of the Democratic Party are devising a bill to raise the minimum wage, it may take

years before it gets approved. As these debates are occurring between Democrats and


Republicans, millions of minimum wage workers are struggling to support their families in these

hard economic times. Through an increased minimum wage and better-regulated government

assistance, hard working Americans are able to live above poverty and get one step closer to

achieving the prosperity associated with the American Dream.


Works Citied

Characteristics of Minimum Wage Workers, 2013. (2014). U.S. BUREAU OF LABOR

STATISTICS. Retrieved 19 April 2014, from http://www.bls.gov/cps/minwage2013.pdf

Cooper, D., & Essrow, D. (2014). Low-wage Workers Are Older Than You Think: 88 Percent of

Workers Who Would Benefit From a Higher Minimum Wage Are Older Than 20, One

Third Are Over 40. Economic Policy Institute. Retrieved 20 April 2014, from

http://www.epi.org/publication/wage-workers-older-88-percent-workers-benefit/

Davis, S. (2014). CBO report: Minimum wage hike could cost 500,000 jobs. Usatoday.com.

Retrieved 20 April 2014, from

http://www.usatoday.com/story/news/politics/2014/02/18/cbo-minimum-wage-jobs/

5582779/

DeSilver, D. (2013). 5 facts about the minimum wage. Pew Research Center. Retrieved 20 April

2014, from http://www.pewresearch.org/fact-tank/2013/12/04/5-facts-about-the-minimum-

wage/

Elwell, C. (2014). Inflation and the Real Minimum Wage: A Fact Sheet. fas.org. Retrieved 19

April 2014, from http://www.fas.org/sgp/crs/misc/R42973.pdf

Glass, A. (2014). National minimum wage law enacted, June 24, 1938 - Andrew Glass.

POLITICO. Retrieved 20 April 2014, from

http://www.politico.com/news/stories/0611/57629.html

Hassett, K., & Strain, M. (2014). Why we shouldn't raise the minimum wage - Economics - AEI.


Aei.org. Retrieved 20 April 2014, from http://www.aei.org/article/economics/fiscal-

policy/labor/why-we-shouldnt-raise-the-minimum-wage/

Henry, M., & Owens, C. (2014). Hardworking Americans should not be living in poverty. CNN.

Retrieved 20 April 2014, from http://www.cnn.com/2012/07/25/opinion/henry-owens-

minimum-wage/

Jamieson, D. (2013). Obama Gets Behind Democrats' $10.10 Minimum Wage Proposal. The

Huffington Post. Retrieved 20 April 2014, from

http://www.huffingtonpost.com/2013/11/07/obama-minimum-wage_n_4235965.html

Jealous, B. (2014). You Can't Survive on $7.25. The Huffington Post. Retrieved 20 April 2014,

from http://www.huffingtonpost.com/benjamin-todd-jealous/you-cant-survive-on-

725_b_3084976.html

Konczal, M. (2014). Economists agree: Raising the minimum wage reduces poverty. Washington

Post. Retrieved 20 April 2014, from

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/01/04/economists-agree-

raising-the-minimum-wage-reduces-poverty/

Life and Dignity of the Human Person. (n.d.). Usccb.org. Retrieved 20 April 2014, from

http://www.usccb.org/beliefs-and-teachings/what-we-believe/catholic-social-teaching/life-

and-dignity-of-the-human-person.cfm

Option for the Poor and Vulnerable. (n.d.). Usccb.org. Retrieved 20 April 2014, from

http://www.usccb.org/beliefs-and-teachings/what-we-believe/catholic-social-teaching/

option-for-the-poor-and-vulnerable.cfm


Parker, Ellen. (2014). Personal interview.

Roy, A. (2013). On Labor Day 2013, Welfare Pays More Than Minimum-Wage Work In 35

States. Forbes. Retrieved 20 April 2014, from

http://www.forbes.com/sites/theapothecary/2013/09/02/on-labor-day-2013-welfare-pays-

more-than-minimum-wage-work-in-35-states/

Schmitt, J. (2014). Why Does the Minimum Wage Have No Discernible Effect on Employment?.

cepr.net. Retrieved 19 April 2014, from http://www.cepr.net/documents/publications/min-

wage-2013-02.pdf

Short, K. (2013). 11 Reasons to Love Costco That Have Nothing To Do With Shopping. The

Huffington Post. Retrieved 20 April 2014, from

http://www.huffingtonpost.com/2013/11/19/reasons-love-costco_n_4275774.html

Tanner, M. (2013). When Welfare Pays Better than Work. Cato Institute. Retrieved 20 April

2014, from http://www.cato.org/publications/commentary/when-welfare-pays-better-work

U.S. Department of Labor - Find It By Topic - Wages - Minimum Wage. (2014). Dol.gov.

Retrieved 20 April 2014, from http://www.dol.gov/dol/topic/wages/minimumwage.htm

White, M. (2013). Will the real minimum-wage worker please stand up?. DeseretNews.com.

Retrieved 20 April 2014, from http://www.deseretnews.com/article/865574821/Will-the-

real-minimum-wage-worker-please-stand-up.html?pg=all


Community Service

IRS Volunteer Income Tax Assistance

Westmoreland Community Action-Greensburg, PA

Supervisor: Denise Baker 724-834-1260 Ext. 170

January 24, 2014 – April 11, 2014, Every Friday from 4-8 pm

My experience as a volunteer income tax preparer has helped me better understand the

struggles that minimum wage workers face. As a tax preparer, I prepared income taxes for

people who made $52,000 or less. I also answered questions and informed taxpayers about

basic tax laws. While completing these tasks, I also had the opportunity to talk with the

taxpayers I was helping. Often times, I would be doing taxes for someone who was making

minimum wage and was told about their struggle to find housing and afford basic necessities.

Since working with minimum wage workers and seeing their W-2s, I have found it appalling

that we are expecting people to live on such small wages. Even though there is tax breaks for

low-income workers, many minimum wage workers are still living paycheck to paycheck.

An older woman in particular said that she was working for minimum wage and found that it

would be more beneficial money-wise to just collect social security instead of being taxed on

the low income she was earning. I kept this woman’s story in mind when I was researching

solutions for minimum wages. I found it hard to believe that our government programs offer

greater benefits to unemployed people than it does to minimum wage workers. I am thankful

to have had the opportunity to partake in such a wonderful volunteer program. Not only have

I enjoyed helping taxpayers with their taxes, I have also learned a lot about people and their

struggles regarding low income.

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