By providing unemployed Americans with an increase in their benefits, the federal government reopened the debate on minimum wage by adding an additional $600 to unemployed which allowed some Americans to live within the range of a living wage. The government saw the need for the increase to help stabilize the economy and help promote spending, and yet has not commited to a living wage when the country is not in crisis.
Economists have debated the merits of a minimum wage and a living wage throughout the years. Advocates call for a $15 an hour minimum wage increase from the current $7.25. The call for an increase in the national minimum wage got louder when the government added $600 a week to state unemployment to stave off an economic recession. $600 a week is $15 an hour based on a 40-hour week before taxes. Once taxes and healthcare are factored in, it’s probably closer to $20 an hour.
Because of COVID, governors shut down the businesses in their states except for essential services, which put millions of people out of work. The essential business employees were eligible for the initial stimulus payment, but not any of the unemployment funds provided for those who lost their job because of COVID-19.
In July companies like Amazon, Kroger, and Albertsons ended the pandemic hourly increase they were providing essential workers, which amounted to a $2 per hour hazard pay increase. $15 is the minimum rate at which Amazon will hire someone. During the pandemic increase, their baseline was at $17 with the $2 increase. The companies could support the increase for their hourly workers without further affecting their financials, as Walmart and Amazon reported better than expected 2020 Q2 financials. This was also the result of no competition from local retail options.
Debt plays a significant role in living expenses. A mortgage on a primary residence falls under basic living expenses and debt. Car ownership can be another form of debt that falls under basic living. In most rural places, public transportation is non-existent in many areas. However, credit card and other forms of debt are not part of the living wage model.
In 2020, the Department of Health and Human Services set the federal poverty level at $26,200 for a family of four. That’s equivalent to about $12.60 per hour for a full-time worker. A living wage must at least be greater than the poverty level.
In North Carolina, the average cost for a three-bedroom single family home is $1,063. The fair market rent for a three-bedroom home in Lenoir County is $980. Fair Market Rent is determined each fiscal year by HUD and is used to set payment standards for federal housing assistance programs in North Carolina. The MIT Living Wage model states that in Lenoir County, two working adults who have no children, should make at least $8.85 per hour, and if they have one child, they should each make $13.12 per hour. With two children, each adult should make $15.28 per hour and if there are three children in the home, they should make $17.78 per hour.
With the federal poverty level at $26,200 for a family of four, and the MIT Living Wage calculator at $63,564 a year for a family of four with two working parents, it’s a rational argument that the minimum wage should fall somewhere between the two numbers. The federal minimum wage is at $7.25 an hour and has been since 2009. Two adults making minimum wage in a household will have a combined income of $30,160 at a full 40 hours per week, and they both work every day without missing time.
Full-time employment is between 30-40 hours a week, while part-time employment is usually less than 30 hours a week. At 30 hours per week, which still falls within the full-time range, with two adults working, they would bring home $22,620 before taxes, which places them below the poverty line.
The argument for increasing a minimum wage to that of a living wage would affect locally owned and operated businesses more than it would the corporate entities that can absorb the cost of increasing their employees pay, as Amazon and Walmart briefly did during a pandemic.
In 2020, most businesses in Lenoir County were closed from March 27 through the end of May. Without the ability to generate revenue, it forced local businesses to send their employees home. The federal government aided the displaced employees by providing them a combined income of $62,400, plus what they would have received from state unemployment, which falls in the guidelines of the living wage. Employers throughout the region are struggling to get people to come back to work because we gave them a living wage.
The government chose to enhance unemployment benefits to absorb the economic impact of COVID-19 by paying many Americans a living wage, some for the first time. The government needs to catch up with its own opinions on what Americans need for a strong economy and revisit the minimum wage debate.