On What Wages Should Be: This is about making $78 per hour! Assume that Americans decided to make a real commitment to working families. A commitment to raise wages to allow for people to get the education they need, take advantage of life opportunities, have adequate healthcare, retire with dignity and get back to being happy in life. There are lots of reasons we should want to make this a national priority. Broad prosperity would rocket the productive capacity and overall wealth of our nation. Personal opportunity would unlock creativity that can help solve some of our most vexing problems. Easing our economic anxieties would also stabilize our politics and allow for a more equitable society for us all. As the saying goes, “it’s the economy, stupid”.
This is a far stretch from where we are now. The AFL-CIO calculates that had the federal minimum wage kept pace with workers' productivity since 1968 the inflation-adjusted minimum wage would be $24 an hour. But that’s “minimum wage”. What does it really take to have a path to the American Dream?
Massachusetts Institute of Technology (MIT) has an online “living wage” calculator that breaks down what they define as a living wage, by state and region (
https://livingwage.mit.edu/
). MIT’s definition of a “living wage” is “what one full-time worker must earn on an hourly basis to help cover the cost of their family’s minimum basic needs where they live while still being self-sufficient.” This is a step above “minimum wage”, but not “stable and secure”.
Smart Asset, an online financial advice site (https://smartasset.com/data-studies/salary-needed-live-comfortably-2024) uses a more comprehensive definition of a living wage. Their “50/30/20 budget recommends that for sustainable comfort, 50% of your salary should be allocated to your needs, such as housing, groceries and transportation; 30% toward wants like entertainment and hobbies; and 20% toward paying off debt, saving or investing.” This gets us to the real “Dream” wage numbers.
To get a fair picture of what wage levels we need to be shooting for, we need to compare “high”, “medium” and “low” cost of living areas. Let’s look at a family of four, with two adult wage earners. The target to be able to “make it” in America today ranges from about $43/hr to $80/hr for EACH wage earner! How close are your earnings? Here are the numbers
City/Region Minimum Living 50/30/20
Wage/hr Wage/hr Budget/hr
Houston, TX (Low) $7.25 $24.54 $42.94
St Louis, MO (Med) $12.30 $26.16 $56.71
Boston, MA (High) $15 $38.42 $78.37
According to the U.S. Bureau of Labor, the average U.S. annual salary in Q4 of 2023 works out to an average wage of $29.20 per hour per person. It’s pretty obvious that to attain the “American Dream” wage standard will require more than doubling the current wages in this nation.
The purpose of this post is to put some reality around wage levels in our nation. It also tells a story of why Americans feel they’re falling behind, economically. We don’t earn enough and we can’t save enough. We’re so far from keeping up with the “Joneses”, many of us can’t even see them anymore.
Our goal should be to reshape how our economy rewards us and curbs profiteering. There are a host of policies that can reduce the need for some of the wage increase, by reducing the cost of living. Examples would be affordable and accessible healthcare and education. Limits on price gouging can help with the cost of basic needs. A truly progressive tax system would also relieve pressure on working families. Lots of ways to skin this cat.
This kind of discussion, of what it really takes to broaden prosperity in this nation, is long overdue. Recognizing how far we are from what we’re actually yearning for, brings clarity and allows us to measure progress. I’m a shithouse economist at best. But we have some fine minds in this nation that can calculate the value of the various direct and indirect wage-related policies available to us. Our leaders will have concrete policy choices. Then we can figure out which of them are truly trying to move American’s forward, and which ones are blowing smoke.
ihg 4-26-24 If you like these commentaries, join my blog for free at: https://ikegittlen.substack.com/ and share. Let’s see what we can build together.
Another good piece of work Ike!
I live in NW PA in the state's 49th Senate District. Our current senator is claiming he has always backed a minimum wage increase. I have to say this is not a lie. But what he does not say is that he backs an increase from $7.25 to $10.00 per hr. What is evident is that he does not respect work; he does respect taking advantage of workers. And to think it is Democrats who put him over the finish line!