What is the right National Minimum Wage?
There’s much discussion here, and elsewhere, about increasing the minimum wage. Many castigate Clinton because she’s not ready to make the national minimum wage $15, while Sanders supports it. From her point of view, the right number is $12, with local increases where cost of living is higher. From his point of view, $15 is the absolute minimum necessary for self-support, so nothing less is acceptable.
Who is right?
I don’t know. But I do know that $15 in San Francisco is one hell of a lot less money than $15 in Biloxi, Mississippi, so I decided to look around a bit.
Here’s what I found.
A lot of the data to follow comes from the website governing.com. I have no idea who is behind it, if it is some evil right-wing resource or the product of leftist angels. I’m just looking at data. The data is interesting, because it gives median wages broken down into median, 25th percentile, and 75th percentile. That lets us look at not just the average numbers, but also the inequality in each state.
Alabama:
In Alabama, the real median hourly wage is $14.40. One thing we see here is that all of Alabama has seen a downturn. We can also note that in Alabama, there’s a bottom, but not much of a top. An increase in the minimum wage to $15/hour would actually raise the average for the entire state, without a very wealthy class to absorb the change.
In Alabama, small businesses employ about half of the state’s private workforce. (source). And these are not Koch Brothers “small businesses.” 34% of Alabama employees work in businesses with less than 100 employees. Only 4.7% of people in Alabama describe themselves as “self-employed,” and that is decreasing.
According to MIT’s “living wage calculator,” the hourly living wage for one adult is $10.17 and the poverty wage is $5.00. The “living wage” for two working adults with two children is $13.64.
The cost of living index, with average of 100, in Alabama, according to bestplaces.net, was 90, with housing costs at 74.
Personally, I find it hard to imagine Alabama, with an average wage below $15/hour and nobody at the top end of the spectrum to absorb the changes, shifting to a $15/hour wage without real damage to the small businesses trying to make payroll each week.
Alaska:
Alaska, on the other hand, has done pretty well lately. We not only see a leap in wages since 2008, we also see a very high average wage, $20.92/hour.
In Alaska small business employ more than half the state’s private workforce, and 38% of them are in businesses with less than 100 employees. Also, Alaska has a very large number of people who describe themselves as self-employed, 11.3%. They’re not paying themselves any wage - they’re keeping profits and eating losses.
The living wage for one adult in Alaska is $11.17, while the poverty wage is $7.00. Living wage for 2 working adults with two children is $15.80.
Alaska has a high cost of living index, at 135, with everything well above average.
Can Alaska handle a $15/hour minimum wage? It looks like a perfect candidate. There is not a huge spread between the top 25% and the bottom 25%, and the average is already above $20/hour.
The point, though, is that these first two states, Alabama and Alaska, are so very different. I posit that it is incorrect to assume that one solution fits both of them.
Arizona
Arizona is really interesting. In 2008-2009, there was a huge increase in wages, and there was no difference between the top and the bottom 25%. Since then, there has been a dramatic change depending upon where you fall on the economic spectrum.
The average hourly wage in Arizona is $16.34. Looking at the chart, the bottom 25% is probably not far off the $15/hour average. In Arizona, less than half of the people working in private business work for small businesses and just 2.2% identify as self-employed. 31% work for companies with less than 100 workers.
In Arizona, living wage for an adult is $10.47 and poverty wage is $5.00. Wage for two working adults with two children is $15.40.
Arizona’s cost of living index is just above average, at 102.
Arkansas:
It would truly suck to be poor in Arkansas. There, you are really not just at the end of the parade, your following the elephants and hardly getting paid for the shoveling.
The average wage in Arkansas is $13.79, but as you can see from the chart, the people in the bottom 25% are getting far less than that.
About half of the people are Arkansas are employed by small businesses, 35% in business with fewer than 100 employees, and the self-employed are just 2.3% and dropping.
MIT’s site produced no data for Arkansas’ cost of living. Another site, bestplaces.net, gave it a cost of living rating of 84, with 100 as average. Everything was below average, but the housing costs, at 64, were far below average.
California
In California, the rich get richer, and both the poor and the middle class have taken a dive.
Average wage in California is $18.63, but it looks like all the action is happening at the top.
California’s workforce is huge, and 6.5M people, half the workforce, are in small businesses.
The living wage in California for one adult is $12.34, poverty is $5.00, and living wage for two working adults with two kids is $15.79.
Cost of living is astronomical, at 151, with housing taking a huge chunk at a rating of 237 (remember, 100 is average).
Is California a good candidate for a $15/hour minimum wage? Perhaps. But there can be no doubt places like San Francisco can absorb that and far more.
Okay, I’m going to pick out a few more. Let’s look at …
Indiana
Wheeeeeeeee!!!!!!!!! Down we go!
But if you’re at the bottom, you’re going down fastest, and it hasn’t stopped.
Average wage here is $15.26, so the bottom 25% is getting far less than that. That’s what happens when your manufacturing base disappears.
MIT has no data for Indiana, but the cost of living index is just 86, with housing very low at 68.
97.2% of all firms with employees are small businesses, with most of the growth in companies with 20-99 employees.
Massachusetts
There is a big spread between the top 25% and the bottom 25% in Massachusetts, and its has been growing for a decade or more. Average wage is $20.88, but some people make a lot more, and some a lot less.
In Mass.,the living wage for one person is $12.60, while the living wage for two working adults with two kids is $16.58.
The cost of living index is a rather high 137, with housing ringing the bell at 185.
Michigan
Has any place taken a beating like Michigan?
Wow! Look at that chart. Ugly.
Wages have been dropping forever. Average is now down to $16.52 (it was $18.28 a decade ago). And it looks like everybody is around $15-$18, on average.
Cost of living there has an index number of 89 with housing (69) dragging down otherwise average
Let’s finish with …
West Virginia
It looks like there isn’t a big spread there and things have improved a bit since 2008. But the average wage is $13.73, living wage is $9.90, and living wage for 2 adults with 2 kids is $13.54.
Cost of living index is 86, with housing at 65.
West Virginia is a cheap place to live.
Conclusion
I don’t know that I have any deep or meaningful conclusion.
I just observe that states are different. A one-size-fits-all solution might fit on a bumper sticker, but I doubt it fits in every state or every city.
I also suspect that a $15/hour minimum wage wouldn’t be enough in San Francisco, but might do real damage to the small businesses in Alabama and West Virginia.
I offer this for discussion, because I truly believe information is more important than sound bites.
Let’s see where it gets us