Thursday, December 29, 2011

The Working Poor and Livable Wage

Susan Brannon
28 December 2011
The required Federal Minimum wage keeps the average American family of four living in poverty. According to the Working Poor Families Project study, as of in December 2010 Nearly one in every three American families is classified as the working poor, that is 45 million people including 22 million children.  These are the people who can barely make it from month to month, they are two income providers and blue collar workers.  The wages and hours are decreasing and the monthly bills keep going up.

The Bureau of Labor Statistics defines the working poor as " people who has spent 27 weeks in the past year either working or looking for work whose income is below the poverty level. "
When the minimum wage was first introduced nationally in 1938,it was considered "a livable wage" for an American family of four. but the reality compared to the inflation rate is that the sustainable "value" has been going down.The problem is that the required minimum wage amount is not high enough compared to the real monetary value has kept the American people living below the poverty level since 1938.

One would think that the set minimum wage would be a number to keep people above water and enough to put food on the table, but this has not been the case. For example, in 1968 the minimum wage was $1.60 per hour but in real value compared to inflation it should have been $10.04 per hour to survive. From 1996 to 2006 the minimum wage remained at $4.25 per hour for 10 years without any adjustments. This was a time period of good economic times, yet inflation continued to rise and family's were quickly discovering that they needed two jobs per household in order to maintain their standard of living.

The current minimum wage is $7.25 per hour but in real value terms, it should be $10.39 per hour in order to obtain a livable wage. If inflation does not rise sharply in 2012, $10.39 per hour with a 40 hour work week, should be enough to pay the rent, food, gas and utilities, but not much more.  Of course this also depends on the cost of living in your city and state.

The situation gets a bit more complicated considering our current economical problems. Simply comparing the real value vs minimum wage is not enough to get the real picture on the situation with the working poor in America.  Corporations and small businesses are feeling the pinch of the faltering economy and in order to reduce their costs, they increase the amount of workers and reduce the work hours for each worker. This process reduces the business cost of providing benefits to the workers.  They must maintain a profit in order to remain in business.  The result is that the average blue collar worker has found themselves working 20 hours a week without benefits and must another job to make the difference.  Many working poor families are now holding four part-time jobs to make their monthly payments. According to the Working Poor Families Project:
  • More than half of the U.S. labor force (55 percent) has “suffered a spell of unemployment, a cut in pay, a reduction in hours or have become involuntary part-time workers” since the recession began in December 2007.
  • Income inequality continued to grow with the richest 20 percent of working families taking home 47 percent of all income and earning 10 times that of low-income working families.
In most states part-time employees generally have limited or no company benefits, such as health benefits, vacation and sick time, paid holidays, and unemployment compensation. Part time employees are not protected under the Fair Labor Standards Act (FLSA) in turn, more and more workers are surviving without medical insurance, paid holidays and sick leave.

I thought I would include here some more statistics that show what the working poor are now facing:
  • As 2007 began, only 26 million Americans were on food stamps, but now 42 million Americans are on food stamps and that number keeps rising every single month. (Wall Street Journal
  • Since 2001, over 42,000 U.S. factories have closed down for good. (The American Dream
  • In 2009, total wages, median wages, and average wages all declined in the United States. (
  • Half of all American workers now earn $505 or less per week. (
  • In 1976, the top 1 percent of earners in the United States took in 8.9 percent of all income.  By 2007, that number had risen to 23.5 percent. (New York Times
  • Since the year 2000, we have lost 10% of our middle class jobs.  In the year 2000 there were about 72 million middle class jobs in the United States but today there are only about 65 million middle class jobs.  Meanwhile, our population is getting larger. (Zerohege)
As of October 2011, 46 million people in America are receiving food stamps and 50.7 million people do not have medical insurance. Now many families need to pay for their own medical insurance and doctor bills and many times with a very high deductible. This makes the total picture a bit different than before because the real "livable wage" should be calculated including the cost of medical, retirement and sick time because of the lost benefits for the blue collar worker.  I figure the real livable wage should be at least be double the amount that is calculated by recent studies from the given $10.39 per hour to $20.80 per hour.  If a blue collar part time worker can receive $20.80 per hour, then he/she should be able to pay the bills and pay for their medical care and save towards retirement.

If you are a member of the working poor, I wish that I had better news for you but as it looks things are not going to get any better and millions of Americans will be joining you soon.