How to Institute a Living Minimum Wage

Why we need to do it, and why it’s not as difficult as you think

No business which depends for existence on paying less than living wages to its workers has any right to continue in this country… By living wages I mean more than a bare subsistence level — I mean the wages of decent living.
- Franklin D. Roosevelt

A living wage is — or ought to be — the right of every American worker. The entire moral and philosophical underpinning of a wage-labor economy is that working —and thereby contributing to society — earns workers the right, not just to subsistence, but to a fair share of the prosperity they help to create.

Sadly, as many of us know all too well, work in 21st century America comes with no such guarantee. The federal minimum wage was set at a measly $7.25 per hour thirteen years ago — and has steadily decreased in value ever since. Today, adjusted for inflation, $7.25 only has the purchasing power that $5.25 had in 2009.

Many places that have legislated a $15 per hour minimum wage are having it gradually increase, often by $1 per year. But that means that, by the time the wage reaches $15, more inflation will have occurred and another wage increase may be needed.

The ‘Fight for $15’ movement began in 2012. Put another way, that means that, in 2012, the fact that the minimum wage was less than $15 per hour was already enough of a problem to touch off protests. However, to use an example, Illinois has been gradually increasing its minimum hourly wage to $15 for several years now. It is currently $12 and is slated to reach $15 on January 1, 2025… thirteen years after it was first called for. Many of our leaders tout the $15 per hour minimum wage, but at this late date, it is really nothing for them to crow about.

The average inflation observed from 1960–2022 has been 3.8% per year. Using this figure, we can see that in order for the minimum wage in 2025 to be worth what $15 per hour would have been worth in 2012, it would actually need to be $19 per hour, and $15 per hour in 2025 is likely to only be worth what $11 per hour was back in 2012. And this is not even taking into account the full impact of the massive inflation we’ve seen in the last half of 2022.

In short, the amount of time it is taking minimum wage increases to be effectively realized is causing those wage increases to be canceled out. This makes it clear that change has to come both faster and more often.

Not only do we need minimum wages that are higher, we need minimum wages that keep up with prices. We need a guaranteed living minimum wage.

But — what is a living wage? This is a criticism that is often leveled at the idea. Critics of living wages will challenge proponents to precisely define an “acceptable” standard of living and then smirk condescendingly when, of course, we cannot. I say ‘of course’ because… of course we can’t precisely define a living wage — whether off-the-cuff or after years of study. There are too many variables that vary too widely based on time, place, or any one of hundreds of other foreseeable and unforeseeable circumstances. That’s not even touching on the many disagreements we would still run into even if we could somehow navigate the complexity of this issue.

How do I get around this? In short, I don’t. It’s true, we cannot precisely define or offer conclusive proofs of exactly what is and is not a component of a basic living wage and in what precise quantity with what precise features.

And… so what?

For what other standard of living is this type of precise analysis demanded? Can anyone show me the mathematical or logical proof whereby the exact (or even approximate) amount of wealth or types or quantities of possessions that Elon Musk “deserves” or “needs” was derived? Can you do it even for wealthier ‘normals’, like say, a corporate lawyer or stockbroker? I’ll bet you can’t. And I’ll bet you’ve never even seriously considered doing it.

The only time “Econ-bros” demand that a person’s potential standard of living be precisely defined to ensure they don’t get “too much” is when that person is underprivileged. When they are rich or well-connected or a celebrity — or, hell, even just upper middle class — the sky’s the limit and nobody bats an eye when they get a raise.

Such questions are nothing but red herrings. They have nothing to do with practicality or feasibility, and everything to do with petty prejudice and the ugly, hateful contempt with which many in this country view the working class. Remember, we’re talking about full time workers here. Why must we ensure they don’t get a penny more than rock bottom? Our priority should be to ensure that those who work are receiving an amount that they can live on.

And no, before someone tries to “clap back” with the usual hogwash about minimum wage being a “starter wage” for teenagers, minimum wages are intended for adults. They are intended for supporting families, they are supposed to be lived on. Walmart and McDonalds don’t close during school hours or at night, and the majority of their positions are staffed and must be staffed by grown adults. So don’t waste my time or anyone else’s with this plainly ridiculous nonsense.

That said, in order to set a minimum wage, we do need some concrete standard. But how to achieve this, without going down the aforementioned rabbit hole?

Simple — we just have to look at it from a different angle.

Rather than wracking our brains and arguing back and forth over precisely what a rock-bottom living wage is, why not instead define what a living wage definitely isn’t?

One thing a living wage definitely isn’t is a wage that does not enable the person earning that wage to afford basic housing. And how can we define ‘basic housing’? Well, we’re in luck, because the U.S. Department of Housing and Urban Development (HUD) does it for us. HUD calculates fair market rents (FMRs) for each county in each state, based on the number of bedrooms. A “fair market rent” is considered a rent which represents the 40th percentile in that county, so a low-midrange rent.

This is where we admittedly get a little bit subjective, but all policy is based (whether directly or indirectly) on values. And I believe that it is reasonable to expect that a person who works a full-time job should be able to afford a below-average one-bedroom apartment in the same county they work in. That’s not an extravagance or a luxury. It absolutely qualifies as “basic housing”.

Why a one-bedroom? Because while some people may be able to find a roommate or live with family, not everyone can necessarily do so reliably or consistently. That means that having access to roommates or a family home is a privilege, and not something on which access to basic housing should be conditioned.

Now, you may be familiar with the widely accepted maxim that a person can afford to spend no more than 30% of their gross income on housing. Or, to put it another way, a person can afford an apartment which costs 30% or less of their gross income.

Full time is 40 hours per week, or 160 hours per month. A person working full time therefore earns 30% of their gross monthly income by working for 48 cumulative hours.

Put it all together and we arrive at a concrete standard for a living wage: a living wage is, at a bare minimum, a wage which enables a person to pay fair market rent on a one-bedroom apartment in the same county where they work, without spending more than an amount equal to 48 working hours’ worth of their gross earnings each month.

Or to put it more simply: the minimum hourly wage in each county in the United States should be no less than 1/48th of the current fair market monthly rent for a one-bedroom apartment in that same county.

There are more potential benefits to this policy than I can detail here, but a few of them present themselves right away:

First, and most importantly, it would guarantee to every worker in this country a fair and livable wage.

Second, it would require minimal upkeep — the wage would rise and fall automatically based on a relevant and reasonable standard, without the perennial need for rancorous civil and political debates.

Third, it would provide a concrete incentive (so far absent) for state and local governments to — finally — get serious about the nationwide shortage of affordable housing. When governments zone for and encourage (or even subsidize) the construction of affordable housing, and place sensible limits on the ability of landlords to wantonly inflate prices; average rents would decrease — and with them, the minimum wage would fall.

Finally, it would likely encourage more geographically balanced growth and investment. Businesses would have an incentive to locate itself in counties with a lower minimum wage, bringing goods and services, as well as demand for infrastructure investment, to so-far disinvested and underdeveloped communities. Over time, heavily urbanized areas would see less congestion and lower barriers to entry, while less developed areas would see growth and more local opportunities — and people would eventually be able to spread out without having to sacrifice their access to high-end goods and services, further reducing congestion as well as lessening strain on urban infrastructure such as transportation.

In short, this would be a massive improvement over the status quo with minimal government interference in the market.