Minimum Wage

“How can 22% of the US Children be living in poverty, while we have a 5% unemployment rate, and a federal minimum wage?”

Saw this facebook post earlier, and it just irked me a bit. 

Per the federal poverty guidelines a family of 4, is poor if they make below $24,250. A husband and wife making “federal” minimum wage where one parent works full time and the other works part time (20 hours a week), would make $21,750. So they would be both poor and gainfully employed.

Oh and that is assuming all states pay “federal” minimum wage (yes you guessed it not always  the case). In Georgia the minimum wage is $5.15. There a husband and wife who both work 40 hours a week at a “state” minimum wage job would make $20,600, and would be considered poor per the federal standards. That seems mind boggling. In my opinion, at its baseline two gainfully full-time employed individuals should not be poor.

The question though is why I or anyone else should care.

Moral Argument

First, there is some moral notion that a family of 4 where 2 parents work full time should at least make enough to not be poor. I mean the numbers to be considered not poor are $24,250 a year for a family of 4… 

Even if the moral point does not persuade you, there is also the economic piece.

Economic Argument

Second there is the economic piece. In today’s system, the employer who pays them $5.15 an hour, is in essence getting a subsidized employee, paid for by federal and state taxes, which are of course paid for by you and me. To make up for the shortfall you and I (tax payers) pay for the minimum wage employees healthcare subsidies, food subsidies, etc… while the employer is rewarded with greater profits. Here is one example of how that would work...

Food Stamp Subsidy - cost to Employer ($0) cost to taxpayer ($6,230 per year) 

Average per month per person food stamp subsidy in Georgia is $129.78. Multiply that by four (family of four) and then by 12 (annual) and you get $6,230 per year for a family of four.

Medicare Spending - cost to Employer ($0) cost to taxpayer ($12,404)

Estimated Medicaid spending per adult in Georgia in 2011(likely higher now) per year was $4174 and per child was $2,028. In our scenario annually that would be $12,404 (2 adults and 2 kids).

Not taking other subsidies into account that means that per family of four you and I provide subsidies of $18,634 per year. This I would argue is providing a subsidized work force to those employers that pay such a low wage. 

There are an estimated 103,000 people in Georgia that get paid at or below minimum wage. Assuming that a meager 5% of the 103,000 fit the scenario we have described above of two working adults with two kids, we can take the number down to 5,150. Based on two working adults per family we could cut that number in half to 2,575 families. For the 2,575 families with an annual family subsidy of $18,634, we provide $47,982,550 in profits to the shareholders of those employers by way of subsidies. That is of course only for the people that fit the four person family model, that live in Georgia and does not take into account the other subsidized employees in Georgia or nationwide, that we provide for these employers.