Monday, March 16, 2015

Put your money where your mouth is: Take the $5 Minimum Wage Challenge

Over the weekend, I challenged my colleagues to live off $5 per day in an attempt to bring awareness to the difficulty of living off minimum wage. 

The math behind the challenge is simple: a minimum wage earner working 40 hours per week would have a base pay of $290.  After taxes, that amount would drop to approximately $231.00.  If we take national averages, we can assume the average family spends 13 to 17 percent of their household budget on food.  For a minimum wage earner, that's a mere $30 to $40 per week.

I'm prepared to live off $5 per day for the rest of the legislative session, and I hope my colleagues will join me. Yet, in the few days since we've launched this challenge, we've heard plenty of negative feedback:

One of the most popular arguments against an increase in the minimum wage is the claim that the minimum wage will cost Alabama jobs.  

The fact of the matter is that economic data has shown an increase in the minimum wage will create an estimated 1,800 new jobs for Alabama.  Yes, the critics are correct: it will increase the labor costs to businesses.  But it will also put more money in the pockets of consumers to spend at the very companies that often pay minimum wage, thus increasing the company's revenue to offset the cost of increased labor payments.

When a minimum wage earner makes a little more money, that worker doesn't put the money in an IRA.  They spend it on food, school supplies, household necessities and other consumer goods.  This puts money right back into the economy--into our businesses through purchases and into our schools and government via taxes.

Walmart knows this, which is why they're voluntarily increasing their employees' wages. Where do middle-to-low wage earners purchase the majority of their consumer goods? Walmart.  

We also hear people claim that "minimum wage isn't supposed to be a living wage--it's supposed to be a starting point for you to work your way up."  

I would love to see people work their way up from a minimum wage job, but it's entirely more difficult to "pull yourself up by your bootstraps" if you're going to bed hungry and can't keep utility bills paid.  Minimum wage will always be a tight budget to support a family, but it should definitely be enough to support the one hard-working person who earns it.

The truth is that many of the same people who oppose an increase to the minimum wage are the same people who oppose social service programs to help offset the difference between a low minimum wage and affording basic needs.

We can't have it both ways.  We either need to reward hard work with fair pay, or we need to be comfortable with allowing the government to help people make ends meet.  

Through pushing this legislation over the past two years, I've met a lot of people who are adamantly opposed to increasing the minimum wage who have never had to support themselves from a minimum wage job. 

To those people, I encourage you to accept the minimum wage challenge and live off a $5 food budget each day.  

If you can't accept the challenge, at least have an honest, non-judgmental conversation with someone who is currently struggling to make ends meet.  If you talk to them, you'll realize that many of the hardest working people in Alabama are also the poorest--and it's time we give them a break. 


  1. Let's look at someone who has 10 full time employees on minimum wage and makes a 5% profit, which some would love to get 5%, on $1,000,000 of sales at the end of the year. Every dollar of minimum wage increase is an increased cost of $430 dollars per week in labor and taxes. Thats $22,360 increased per year with ZERO increase in profit because all you did was make labor more expensive. So the $50,000 profit just turned into a $27,640 profit. That cuts the owner's return in half, and that's just from a single dollar raise. Another dollar would virtually eliminate ALL profit.

    The only way this person keeps those 10 jobs and the business in the community is to make their product/service more expensive. If everything that we buy gets more expensive, then what did you accomplish by raising the wage?

    1. In this business model, is there any chance that the increase in purchasing power for those workers would yield higher sales for the business, thus driving up the margin for profit? The wage expenses don't exist in a vacuum--consumer purchasing has an impact, too.