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Is a $15 an Hour Minimum Wage Adequate?

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Social movements calling for raising the minimum wage to $15/ hour with yearly adjustments for increases in the cost of living deserve support. However, earning $15/ hour will not guarantee a decent standard of living.

An individual working forty hours a week at $15/ hour for an entire year earns $31,200, an income that is more than two and a half times the 2014 official poverty threshold of $12,316 for one adult. One might readily conclude that this individual is doing well since $15/ hour is also more than twice the federal minimum wage of $7.25/ hour.

However, were the minimum wage raised to $15/hour, a big boost for many workers, one might still face great difficulties getting by financially, at least in some parts of the United States.

Using 2014 tax rates, after paying taxes, a single California privately employed full-time worker making $15/hour who rents and has no dependents or deductions would be left with $25,319 to live on.1 This is slightly less than $2,110/month.

In an expensive city such as San Francisco, the cost of rental housing alone is likely to eat up more than half of this monthly net income. After paying for basic necessities, there would presumably be little, if any, money left over. One might have to find a second job or go into debt to get by.   The loss of one’s job could be devastating.

A single person working full-time at $15/hour with additional financial burdens such as debts to pay or others to support would face a dicier situation.

Proposals for raising the minimum wage to $15/hour have received most traction in cities with the highest cost of living. When $15/hour has been embraced, it is usually phased in over a few years. For example, San Francisco’s minimum wage won’t reach $15/hour until 2018.

The current minimum wage in San Francisco stands at $12.25/hour. This means that many people working full-time there have to get by, after deducting taxes, on $1,765/month. This leaves one with $345/month less in disposable income than the one cited who makes $15/hour!

How any politician with at least a six or more figure income, especially those running for president, could not embrace a minimum wage of at least $15/hour shows how insensitive and coldhearted they are to the needs of people different than themselves. As inadequate as $15/hour may be, advocating for anything less is shameful.

Notes.

1. This worker’s 2014 federal taxes (that consist of income, social security, and medicare taxes) comes to 16.3% of gross income and 24.2% of taxable income. In 2010, Mitt and Ann Romney together paid a lower rate of federal taxes. Their comparable rate of tax on their gross income of $21,661,344 was 13.9%, 2.4% lower than the worker cited here. ( Romney 2010 tax return) The rate of taxation on their taxable income in 2010 was 17.6%, 6.6% lower than the 2014 rate paid by the person cited here making $15/hour. The rate of federal taxation paid by the Romney couple was lower because most of their income was not earned from working, but came from investments that are taxed at a lower rate than earned income. Most investment income came to be taxed at a lower rate than earned income beginning with legislation enacted during the last part of the Clinton administration.

Rick Baum teaches Political Science at City College of San Francisco.

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