By Reed MacMillan
The topic of “jobs” was addressed by President Trump, in his February 21st CPAC speech. He said, “It’s time for all Americans to get off of welfare and get back to work. You’re going to love it. You’re going to love it. You are going to love it.” Many people on welfare are already working, which highlights the fact that what American workers need is the ability to earn a living wage. This blog briefly considers the idea of a living wage, and who earns one.
In a 2015 Washington Post article, by Emily Badger, titled “When work isn’t enough to keep you off welfare and food stamps” the author cuts to the chase about many people’s assumption that poor people have not bothered to find work. She disproves this assumption by citing research from the UC Berkeley Center for Labor Research and Education, which has found that 73 percent of people who benefit from major public assistance programs in the U.S., live in a working family where at least one adult earns the household some money.
Below, is a graphic from the UC Berkley Center for Labor Research, that shows the percentage of workers who work, but who also receive some form of public assistance in several key categories.
These data reveal the difficulty of getting people into work that allows them to make a living wage vs. simply getting “back to work.” When workers cannot make a living wage, should we try and encourage them to exit these professions and find other professions that allow them to survive without public assistance? Who would replace them? Are there enough teenagers or part-time workers to take these jobs if the current labor force progresses to new professions? Or, should we expect people who eat McMuffins, place their children in daycare, or who have home care assistance, to pay more for these services? Or, should the owners of these small businesses give more of their own profits to their workers and live more modestly? All of these are very difficult questions to answer because they ask us to look at our own values and what we think is important.
I believe that most Americans are in favor of all workers earning a “living wage.” In this blog, I provide a look at a living wage calculator built by an MIT Professor and some data from the Bureau of Labor and Statistics. In subsequent blogs, I will try and consider some of the potential consequences of aspiring to a living wage for all workers.
A living wage provides sufficient income to cover the minimum necessary costs to live including: shelter, food, clothing, medical expenses, child care, personal necessities, and also should include transportation to and from work, and a way to go to the grocery store or to medical appointments. Dr. Amy K. Glasmeier at MIT first developed a living wage calculator in 2004. The MIT calculator takes into account parameters including whether the family has one or two workers, and how many children are in the family. All calculations use geographically specific data, and the data sources and assumptions are clearly documented. You need two formulas to calculate the living wage. The first is to calculate the basic needs budget. Once you have that, you need to calculate the tax burden on this budget. Both formulas follow:
Basic needs budget
Food cost + child care cost + (insurance premiums + health care costs) + housing cost + transportation cost + other necessities cost
Living wage calculation
Basic needs budget + (basic needs budget * (taxes))
To get a sense of how this works, let’s look at some of the data from Hartford, CT. If you click on the Hartford, CT link in the prior sentence, you can observe that: The more members in a family, the higher the wage needs required to achieve a living wage. Whereas, in Hartford, a single adult can survive on $11.00 per hour, a single adult with one child needs to earn $25.55 per hour, and a two adult household with one child, and only one adult working, needs slightly less at $22.59 per hour. Logically, we can assume the single parent household with a child has more child care requirements than the one with a parent who stays home. Now, look at the bottom row of the same table, and you can see that the minimum wage in Connecticut is $9.15 per hour. Not even a single person with no dependents can achieve a living wage on $9.15 an hour.
It is also useful to look at data from the Bureau of Labor Statistics. By looking at the May 2015 Occupational Employment and Wage Estimates, you can get a quick idea of which professions could make a living wage in Hartford, CT.. Scroll down past the major occupational groups by category number to the table that lets you sort by any header category. If you click on the header row titled Median hourly wage, you can sort the professions in ascending or descending order according to their median wage.
The MIT calculator told us that a family of three with one stay at home parent need to earn $22.59 per hour to make a living wage. You might be surprised to learn how few occupational categories satisfy this requirement. Starting with our lowest earning category 35-201, which is for food preparation and serving workers, including fast food, who earn an average hourly wage is $9.09, you will have to scroll all the way down to category 13-1121 to approach this hourly wage, arriving at the meeting, convention, and event planners who earn $22.52 per hour. You will have passed by many many people in your community.
Some of the occupations which do not earn a living wage include: librarians ($22.10), brick masons ($22.32), real estate brokers and sales agents ($21.93), precision instrument repairers ($21.94), rail yard engineers ($22.01), and healthcare support workers ($17.20). I think we might agree that these categories of work are important to all of us and that we need people to do this work. Don’t they deserve a living wage? Also, can we really blame the fact that they do not earn a living wage on outsourced work or the global economy? How does renegotiating trade deals help these workers? Our current unemployment rate is 4.8% yet approximately 73% of those on public assistance are already working.
So, to put a finer point on it — for the remaining 4.8% unemployed workers in our economy, hopefully the new Republican policies will help them roll off of welfare onto a job that provides them a living wage. Having good skills and no children, may make it easier for them to survive and thrive.
Those who like the sound of “workers getting off of welfare,” will also need to like the sound of “Paying more for products and services.” This is likely the easiest way to reduce worker’s reliance on the public assistance that helps them achieve a living wage.
We’re all going to love it, I’m sure!
(One final note for data geeks: The Bureau of Labor Statistics has a vast variety of detailed data that are worth studying, even briefly, to gain a clearer picture about the pain points within the American workforce.)