27 June 2012

Minimum Mitigation

This much money. Hour after hour.
The Minimum Wage

Here in these United States (of America), we have in effect a minimum wage that guarantees that everyone gets paid at least a certain minimum amount of money per hour. According to the federal government, that amount is required to be at least $7.25/hour except for under certain conditions. Some states have specified even higher minimums, and my state of California happens to be one of them. At 10.35% over the federal minimum, CA offers a whopping $8/hour minimum to anyone serving a Whopper.

Living Wage

In contrast to the minimum wage, some places also have what is called a "living wage". What that actually means is that the powers that be have been able to say that the regular minimum wage isn't high enough to support a family on, so a higher amount needs to be paid. That higher amount is then known as a living wage, but in actuality is just a higher minimum wage. Arguably, that then means any state or city minimum wage higher than the federal minimum is by default a living wage as well.

Raise It Up?

The issue of whether or not the minimum wage is too high or too low is a magnet for tense discussions from both sides. Human rights activists, labor unions, etc. all usually line up on the side of raising it, with the argument that people "deserve" a certain level of living and it is unfair to deprive them of that. On the other side, business usually lines up with a couple economists in tow going on about how wage costs will "hurt small business" and also "decrease competition". That is a debate that will rage for as long as employment exists, with no definitive answer ever coming forth. In a business, I believe in treating people with respect and level of pay really is part of that. Similar to what Henry Ford did in his factories, I would pay above-average for positions within any company I were ever to start. He did that primarily to attract workers, but for the benefit of it driving business for the company itself.

Life on the Minimum Wage

So, exactly how much money is the minimum wage anyway? The picture at the start of this post is a visual representation of what the federal minimum wage is. That amount is the minimum total compensation to be paid directly to a worker for every hour (s)he performs work. With that being said, most people do not see every single cent they work for. Taxes can take out a bit of a chunk, then a myriad of other charges could also find their way in between an employee and his money before it ever even leaves payroll. Once it arrives home, is there enough left over to live on? It depends. Many people will probably howl in protest, but life is certainly possible at $10k $7k/year. Will it be lavish? Not at all. But, it will be living. The expectation of living a king's lifestyle on a pauper's salary is laughable at best, and it really needs to be examined at the societal level.

Destroy Debt

Although the minimum wage is livable, there's no reason that anyone who is earning it has to be content with it. There are too many things one could do to boost income to even begin listing them here. Even more important than boosting income, cutting debts can have the biggest effect on the budget! Without a control on debt, no amount of earnings will ever be sufficient. If any debt is carried, retiring it is urgent. Paying it off is equivalent to getting a raise equal to the interest rate. Credit cards offer borrowing at astronomical rates and car loans are similar to those with low credit scores, which is the the probable unfortunate reality for anyone who earns minimum wage and has debt. Which is why again, debt MUST be eliminated to move forward with life.

Advancing

At the minimum wage, anyone working 30 hours a week is considered at the federal poverty level. Many states consider the poverty level to be even higher than federal. With the poverty level come special privileges. People at that level can sign up for food stamps SNAP, Medicaid, Section 8, and a myriad of other public assistance programs that vary based on state. There are generous tax breaks as well. With all those provisions, advancing should be decently easy for a low-income person. With food, shelter, and healthcare all covered by society, what more is necessary for life? A major portion of income can thus be directed at eliminating debt if necessary, then focusing on building reserves. It is possible to live on a full-time minimum wage salary and get positive cash flows of a couple hundred dollars monthly without even using public assistance. With assistance and/or the willingness to work extra, someone on minimum wage could easily amass a small fortune in short order. That small fortune could quickly provide a tidy sum of income and a solid financial footing to build from into the middle-class. The only downside to that is it might soon disqualify them for public assistance.

What It All Means

While I am mentioning in this post how life is possible on minimum wage, it doesn't mean that everyone shouldn't strive to rise above it. If possible, do it. While more money may not bring happiness, it will make life easier in some instances. Not having to worry about trivial expenses can make life much more peaceful and allow for calmer life in general. In future posts, I'll do more to outline how life on minimum wage is possible and how one can even benefit from it. Also at a later date, I'll explore other options for raising income.

More Reading:
Check 'em out!

US Wage Statistics for 2010 - Social Security Administration

Reader Case Study: MW with Baby on the Way - Mr. Money Mustache

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