Minimum wages are going up, but typical workers still don't make enough to get by in any U.S. state
Twenty-three states and Washington, D.C., raised their minimum wage in January. Four more states are poised to do so later this year. Depending on location, new wages range from $9.95 per hour in Montana to $16.10 per hour in D.C.
While the federal minimum wage has remained stagnant at $7.25 per hour since 2009, many states have continually raised theirs. "States began instituting their own, higher minimum wages during periods of federal inaction," says Ben Zipperer, an economist at the Economic Policy Institute. "So the longer the gap between federal minimum wage increases, the more likely some states went ahead and raised their own state-level minimum."
Still, the vast majority of single people working fulltime and making a local minimum wage aren't earning enough to get by.
CNBC Make It compared state minimum wages with the average living wage for one adult with no dependents according to MIT's Living Wage Calculator, and found that no state offers a minimum wage that is in line with the living wage.
We then compared those to income brackets for nonfamily households from the Census Bureau to see how many individuals are making near or below the living wage in each state.
In Kansas, for example, where the minimum wage is $7.25 per hour and the living wage is $15.69, about 48% of nonfamily households fall within or below the income bracket that includes that living wage. They account for approximately 17% of the state's population.
These comparisons aren't perfect, but they give a sense of how many single people could be struggling to make ends meet.
With so much information readily available about what it would take to survive in each state, why haven't wages kept up with the cost of living? Here are a few of the reasons.
Those setting minimum wages are 'probably using house rents from 2012'
When it comes to how states calculate their minimum wages, many use a cost of living index.
Multiple components fall into this basket. The Living Wage Calculator, for example, includes food, housing, transportation, childcare, medical needs, taxes, pets and household expenditures like cleaning products, as these are statistically what Americans pay for the most.
In terms of cost, MIT calculates many of these based on publicly available data from sources like the Bureau of Labor Statistics and the Department of Housing and Urban Development and updates them annually.
But when it comes to how policymakers calculate the cost of living, "you will be amazed to see they're probably using house rents from 2012," says Suman Banerjee, associate professor of finance at the Stevens Institute of Technology. They're likely using other outdated figures, too.
There are multiple reasons for this, such as the fluctuating effects of inflation on the cost of goods, the slow pace of legislative change and lobbyist influences. Whatever the reason, the problem is "mainly the lag factor" in calculating what is currently an appropriate price for each component, says Banerjee.
Give a low-wage worker $100 and 'everything will be consumed'
Big-picture economic theory plays into minimum wage decision-making, too. Some legislators believe it's key to ensure some people are making much more than they need so they can invest in projects like building business.
Conversely, ensuring some are making just as much as they need (or, in many cases, less than they need) means they're constantly buying existing goods and services.
The argument is that when it comes to someone who makes $1,000 a month, "if you give him $100, everything will be consumed" because that person needs to spend it all to cover their basic needs, says Banerjee. "But if you give that same $100 to the guy who makes $10,000 a month, possibly that $100 will be saved."
That is, in order to ensure money is still being pumped into the economy, it behooves policymakers to ensure some people are being paid low enough wages that they don't have a choice but to spend it.
'You have several states with a long history of very cruel racism'
At least when it comes to some of the southern states, the country's history with slavery plays into current minimum wages, too.
States like Alabama, Mississippi and Tennessee don't technically have a minimum wage, so it defaults to the national $7.25 per hour. In Georgia, the minimum wage for employers that don't fall under the Fair Labor Standards Act is $5.15.
"There was an enormous amount of value to labor, but it wasn't monetized because slaves didn't get paid," says Amy K. Glasmeier, professor of economic geography and regional planning at MIT and creator of the Living Wage Calculator, of the U.S. work history. Even when they legally had to start paying everyone, they kept wages low.
Today, "you have several states with a long history of very cruel racism still opposing paying workers, disproportionately workers who are Black or Hispanic, higher wages," says Zipperer. "And that takes the form of not having a minimum wage or just following the federal guidance or having extremely low sub minimum wages."
'Low pay in this country is a very widespread problem'
Cities can also set their own minimum wages. While Illinois' minimum wage is $13 per hour, Chicago's is $15.40, for example. While Oregon's is $13.50, Portland's is $14.75.
Plus, when it comes to state living wages per the Living Wage Calculator, they're weighted averages. They take into account how many people live in each county and their living expenses, then calculate an average that reflects that. But on the ground, there's more variation about what residents require.
The minimum wage in California is $15.50, for example, which does cover Trinity County, where the living wage for a single person with no dependents is $15.41. But it doesn't cover Alameda County, where the living wage for a single person with no dependents is $22.35.
When it comes to the Census Bureau data, it's important to keep in mind that "nonfamily household" doesn't just mean single people with no dependents. It also means unrelated and unmarried individuals who live together (like roommates).
"I think the crux of it is that low pay in this country is a very widespread problem," says Zipperer. There are many reasons why states won't hike theirs minimums accordingly, more even than those outlined above. "The simple answer is, there are a lot of powerful people who don't want that to happen," he says.
Methodology
To approximate the percentage of individuals making less than the living wage, CNBC Make It used estimates from MIT's Living Wage Calculator for the annual incomes of single people with no dependents. We then compared those estimates to the 12-month earnings section of the U.S. Census Bureau's 2021 American Community Survey for nonfamily households.
The Census Bureau breaks annual earnings data into deciles and publishes the percentage of people who are in each of those 10 income brackets. To estimate the percentage of single people earning close to or below the living wage, we matched MIT's living wage estimates for each state to the corresponding Census Bureau income bracket.
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