The last phase of the increase to the Minimum Wage will happen this Friday. In 2006 there was a big push to increase the Minimum Wage at the state level, since the Federal Government hadn’t done so for more than 10 years. This effort was so popular that even in ruby red Virginia a Minimum Wage bill independent of the Federal law almost got through the Virginia General Assembly. State elected officials on both sides of the isle realized then that asking someone to live off of $5.15 per hour was unacceptable when the cost of living had eroded the livability and the purchasing power of the Minimum Wage. But, what is the acceptable standard that a person should be paid for their labor and does the increase in the Minimum Wage help or hurt the overall economy?
In an opinion article distributed statewide by John Sweeney of the national AFL-CIO and Doris Crouse-Mays of the Virginia AFL-CIO, the last phase of increasing the Minimum wage from $5.15 to $7.25 per hour will put just a little more than $2,000 per year in the pockets of 120,000 minimum wage earners in Virginia. That’s an infusion of $5.5 billion of consumer spending that happens immediately, according to the Economic Policy Institute.
Money spent by low wage earners doesn’t have the chance to see the inside of a savings account. It goes right back into the economy in order for people to survive that earn money at or just above this income level. They will see their yearly earnings go from $10,712 per year in 2006 to $15,080 per year of gross income. For an individual earning this minimum wage of $7.25 per hour in 2009, it will put them over the Federal Poverty threshold of $10,830 per year. If there are two people in the household, that level increase to $14,570 and for a household of three it goes to $18,310. Even at these levels, an individual and a family of two or three still have to rely on the social safety nets of the Federal Government.
One of those social safety nets is the Federal Food Stamp Program (or SNAP-Supplemental Nutrition Assistance Program). In order for an individual to be eligible for $200 per month of SNAP, their gross monthly income must be less than $1,127 and their net monthly income must be less than $876. For a family of two, monthly gross and net income must be less than $1,517 and $1,167 respectively to get $367 in SNAP. A family of three, monthly gross and net income must be less than $1,907 and $1,467 to get $526 in SNAP. Do Food Stamps help the economy? A recent study by the North Carolina Tax and Budget Center concluded that the $1.6 billion in SNAP payments were directly tied to generating more than $2.8 billion in economic activity.
Federal Housing Assistance through HUD (United States Department of Housing and Urban Development) is calculated at 50% of the median income for the area a person lives. So, if you live in a place like Northern Virginia, Richmond, Hampton Roads, and Charlottesville, there is no way that an individual can live off of $7.25 per hour even with $200 extra per month of SNAP and still expect to have a roof over their head.
So again, what is the acceptable standard that a person should be paid for their labor? If you take in these three parts: actual pay for work at the new Minimum Wage, SNAP payments, and any rental/housing assistance that exceeds 30% of an individual’s income, a person would need to be making a minimum wage of around $10 per hour to lessen the need to rely on Federal Social Safety Nets. So to answer the question of an acceptable minimum standard for a person’s labor, the Minimum Wage should be higher and at $7.25 per hour it is still insufficient to be able to afford to live in the United States.
The last question, if the increase in the Federal Minimum Wage will hurt the overall economy, the answer is no. It actually helps and the results of the North Carolina Tax and Budget Center also prove that money distributed to needy families for food assistance also helps to lift overall economic activity. Another way to look at increasing the Minimum Wage is that any increase of money put in the hands of low income earners benefits the entire economy and generates economic growth upward, which cannot be said for more money being put back in the hands of the wealthiest among us.