What If a Higher Minimum Wage Still Isn’t Enough to Live On?

More than 360,000 Texans make $7.25 an hour or less, according to the U.S. Bureau of Labor Statistics. Only five states have a higher percentage of minimum wage workers than Texas.

Big corporations like Walmart and McDonalds recognize that, for many workers, $7.25 an hour isn’t enough to live on. Both companies have announced they’ll increase their workers’ pay this year.

But what happens when wages go up, and they’re still not enough to live on?

By Joy DiazAugust 13, 2015 5:02 pm|

From Kut.org.

Ideally, a person working full time should be able to afford a place to live, to pay for food and to have some means of transportation.

Ideally, full-time employment would equal self-sufficiency.

“Fundamentally, we need to come up with a new methodology for determining what it takes for people to actually make ends meet,” says Celia Cole, who heads up a non-profit called Feeding Texas.

In 1969, and later in 1981, the rule became that 30 percent of a person’s income should go to housing, 30 percent to food and the rest to other expenses – and government assistance programs got tied to that metric.

When people in subsidized housing get a bump in their pay, their rent goes up as well.

“Their rent is always based on the same formula: So it’s essentially roughly 30 percent of their monthly income regardless of whether they make seven dollars an hour or 20 dollars an hour, it’s always 30 percent of their monthly income,” says Sylvia Blanco with Austin’s Housing Authority, the group that manages the city’s housing vouchers.

That rent increase she’s referring to happens gradually: Rent goes up two years after a salary bump. There’s also a program that residents can sign up for where they can put what they would have paid in higher rent into a savings account they can access later.

Cole says that for people on public assistance, the consequences of getting a bigger paycheck can be mild – as in the case of the housing authority – or devastating, as in the case of Medicaid.

“Medicaid is different – it’s not a cash, or the equivalent of cash benefit. It is – ‘if you make under X, we give you health insurance and you can go ahead and access it, and if you make over X you don’t get health insurance,’” she says.

Karen Hanshew and her six-year-old daughter Mikaela just experienced something like that.

Hanshew, 39, is a single parent. She has a steady job waiting tables, and she babysits on the side for extra cash.

“Recently I found out – now, I know we have the Obama Healthcare Act – the affordable healthcare act – but, what I didn’t know was there was a penalty for not having insurance. And I’m like, if I can’t afford the insurance, how am I going to afford the penalty. I’m like what?” Hanshew says.

When she applied for Medicaid, Hanshew submitted her most recent pay stub – one that included wages for the extra shift she’d picked up at the restaurant that month.

“And I was over by like 30 cents,” she says. She submitted a second pay stub, one without overtime hours, in order to qualify for insurance. And that time, she did.

It was a close call for Hanshew.

Cole says for others, an extra dollar or two an hour means the loss of needed assistance.

“I mean, the top one percent may be able to afford health care on their own. But, nobody else can. None of us! The idea that somebody making 30 cents more than they were the previous month suddenly can afford to pay for health insurance is outlandish,” Cole says.

Food stamps (also known as SNAP), housing benefits, even childcare benefits are tied to a person’s income. Some economists and advocates for minimum wage workers say raising pay to a “living wage” is the right thing to do.

But advocates like Cole say, to be done right, we also need to rethink the metrics for assistance programs, so a small boost in income doesn’t come with a big penalty.