Making Ends Meet on a Minimum Wage
One chapter in Suffer the Children describes the difficulties of living on a minimum-wage in America today. The Massachusetts Institute of Technology living wage calculator estimates that a family with two adults and two children living in our previous home county in western Pennsylvania needs to have a yearly income of $33,257 to pay its basic expenses. That requires an hourly wage of $16, which is more than double the current minimum wage. A typical American family of four, the MIT site reports, must “work more than three full-time minimum-wage jobs (a sixty-eight-hour work week per working adult) to earn a living wage.”
A new book, The Financial Diaries: How American Families Cope in a World of Uncertainty, reinforces our argument. Its authors, Jonathan Morduch and Rachel Schneider, studied 235 lower and middle-income families for a year and scrutinized every dollar they earn and spend. They concluded that the standard advice to work diligently and save as much as possible does not work for the many families who must cope with several months each year when they have limited income, even if they have one or more jobs.
“This idea that people are misspending money, or are lazy,” asserts Morduch, who teaches economics and public policy at New York University, is “crazy.” He insists that we must protect hourly workers better and provide a stronger safety net to assist lower-middle-class families that have meager income for a few weeks or months each year. After carefully monitoring and interviewing these 235 families, Morduch reports that most of them had multiple jobs and many saved effectively when they had adequate income. The problem was “bad months” when they had reduced income and consumed their savings.
To illustrate this problem, Morduch and Schneider discuss the case of Becky and Jeremy, a couple in their 30s who live in Ohio with their four kids. Jeremy repairs the large trucks that traverse the nation’s highways, which are much more likely to need to be fixed in the summer or winter. During those six months, Jeremy often makes $3,400 a month after taxes. His work as a mechanic is greatly reduced, however, during the spring and fall, and his pay declines to as low as $1,200 a month. That amount is considerably below the poverty line for a family of six. This led them to borrow money from relatives and not pay some bills, producing more debt and distress. Jeremy eventually took a job that paid him less income but guaranteed him 40 hours of work each week and a steady paycheck.
The problem of an inconsistent work schedule is faced by many other hourly workers such as waiters, grocery store clerks, and fast food workers. Most other people with low-income jobs say them would make the same choice Jeremy did. In a 2015 Pew poll, 92% of respondents said they preferred financial stability over moving up on the income ladder.
The conclusions of The Financial Diaries are reinforced by a study conducted by the JP Morgan Chase & Co. Institute. In examining a random sample of 100,000 Chase bank accounts in 2015, researchers discovered large fluctuations in how much money people earned each month.
Murdoch warns that the working poor often use credit cards or payday loans to help them get through the tough times and insists that they need better options. In working with the Christian Assistance Network for five years, we dealt with many clients like Jeremy and Becky. These clients could normally pay their bills, but then a crisis would arise because of reduced hours at work or an unexpected car or medical expense, and soon they were in danger of having their utilities shut off or even being evicted from their apartments. We were often amazed by how well many of them managed their limited income. For those who struggled with budgeting, we offered an 11-week series of classes called Faith and Finances.
To improve the lives of low-income Americans, we also need to help them take advantages of public and private resources that are available to them and increase these services and benefits. We can also assist the working poor by developing personal relationships with them, encouraging them to participate in churches and community organizations, including them in public decisions that affect their lives, mentoring adults and children, and improving their educational and economic opportunities. Finally, we need to substantially increase the minimum wage.