Basics Out of Reach on Minimum Wage Paycheck

by Donna Jablonski – Reposted from the AFL-CIO NOW Blog

Let’s say you’re earning the $7.25-an-hour minimum wage. How many hours would you have to work to equal what a year of college costs? How about a year of family health insurance premiums?

The Center for Economic and Policy Research has crunched the numbers and they’re not pretty.

In 2010, a minimum wage worker would have had to put in 923 hours to cover the $6,695 annual tuition at a public four-year college, the report’s authors John Schmitt and Marie-Eve Augier found. Compare that with a minimum wage worker earning $2.90 an hour in 1979—he or she would have had to work 254 hours to make the $738 annual tuition back then.

Even if a minimum wage worker had an employer-provided family insurance policy (increasingly unlikely, since the share of low-wage workers with employer health coverage has fallen from 42.9 percent in 1979 to 25.9 percent in 2010), the premiums would be unmanageable. Family health insurance premiums that would have taken a minimum wage worker 329 hours to earn in 1979 would have taken 2,079 hours in 2011. After paying for family health coverage, a minimum wage worker would have just one hour’s worth of wages last year left over to spend on anything else after working 40 hours a week for 52 weeks in a year.

As the authors said:

Some economists emphasize the rapid decline over the last century in the relative price of agricultural products and manufactured goods (such as televisions and air conditioners). These analyses, however, inevitably ignore or downplay the large relative increases in the price of crucial services such as education and health care. Minimum wage workers today may be able to buy DVD players that did not exist in 1979, but at the current level of the minimum wage, they are also far less able to cover college tuition or health insurance premiums.

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