Living On Minimum Wage – Is It Possible?

 

 In the summer of 2014, a number of prominent politicians made an unusual choice. For a week, they all voluntarily set aside their generous salaries and tried to live at just $ 7.25 per hour – the federal minimum wage.

No, they were not crazy. They took the Live the Wage Challenge.

This challenge has been created as part of a campaign to raise the federal minimum wage, which has not risen since 2009. The campaign encouraged politicians, bloggers and others to live on a minimum wage for a week and write about it. The organizers have set up a discussion on Twitter at #LiveTheWage so that people can share their experiences. Their goal was to show people firsthand how difficult it is to live at $ 7, 25 per hour and to encourage them to support the wage increase.

Everyone who accepts the challenge says they have learned from experience. They usually say it has helped them understand how difficult it is to reach the minimum wage. But they also learned to distinguish between wishes and needs – to recognize which of their expenses were really needed, and which extras they could save if needed. In the end, they came closer to the experience for the little luxury that they once took for granted.

Rules of the challenge

Rules of the challenge

 

The official website for the challenge, which has now been aborted, outlined both the purpose of the challenge and the rules for taking it. In a nutshell, you get $ 77 a week for every adult in your household to pay for everything except your housing costs.

Here’s how the website explained that figure:

  • Weekly income . The challenge gives you a weekly budget of $ 290 based on 40 hours of work at $ 7.25 per hour. The Live the Wage website did not explain what to do if you were from a two-income household, but most couples who took the challenge simply multiplied this number by two by pretending they both earned a minimum wage.
  • Taxes . Withdraw from your $ 290 salary to $ 35.06 before tax. According to the website, this was the average amount that minimum wage workers pay in taxes every week, including federal and state income taxes and social security taxes.
  • Housing costs . The website gave $ 176.48 a week as the average amount that a minimum wage worker pays for housing. However, it did not explain where this figure comes from or what it contains. An article about the challenge in TIME suggests that rent and utilities (monthly bills for gas, electricity and telephone services) should be treated as part of the weekly housing costs of $ 176.48, not part of the weekly budget of $ 77, which is money that remains after housing costs are deducted.
  • Final budget . The deduction of taxes and accommodation costs from a weekly wage of $ 290 is based on $ 78.46 a week. It is not clear why the organizers of the challenge chose to round that figure down to $ 77 a week – perhaps it was to have it evenly divided by seven, resulting in a budget of $ 11 per day. This amount must cover all non-housing costs, including food, healthcare, transportation, childcare and entertainment.

 

Stories from the challenge

 

Stories from the challenge

The original sponsors of the minimum wage challenge were three democratic politicians: representative Tim Ryan of Ohio, representative of Jan Schakelowsky of Illinois, and Ted Strickland, the former governor of Ohio. They accepted the challenge in the week of July 24, 2014, the fifth anniversary of the last increase in the minimum wage. Several other politicians joined them, along with a few bloggers, including myself.

Some people who took up the challenge tried to support a family with their apparent minimum wage, while others had only themselves. Some have continued throughout the week, others have exceeded the budget and almost all have encountered problems they did not expect.

Mixed results

Most politicians who took the Live the Wage challenge failed to stretch their minimum wage over the entire week. Strickland’s $ 77 ran on Thursday evening, the fifth day of the challenge. Schakelowsky, in a report of her experiences on a blog of the US Department of Labor, says that she and her husband “didn’t make it all the way through,” although she doesn’t say how long they lasted. And Ryan was short with two days to go and spent his last $ 4 – plus a little more – on a bag of trail mix immediately after his return to his Washington office.

Bloggers who tried the challenge were slightly more successful. Christine Owens wrote her limit for raising the minimum wage as a result of a friend’s birthday lunch. Joshua Mbanusi, at the anti-poverty organization MDC, extended the challenge in several weeks and followed weeks one and three but exceeded the budget for week two. As far as I am concerned, I have kept money throughout the week, although it was largely because I was lucky that I did not encounter any unexpected expenses.

Unfortunately I could not find any stories there of people who took the Live the Wage Challenge as single parents. All participants who had children to support also had two incomes. But in reality about 1 in 10 employees with a minimum wage is a single parent, according to data from the Economic Policy Institute. As the stories show, this challenge is a struggle, even for families with two working parents; presumably it would be even harder for single parents.

Biggest challenges

Different people had different reasons not to take up the challenge. In almost all cases it was an unexpected expense that brought them above their budget, but those expenses fell into different categories.

The tricky areas include the following:

  • Transportation . Schakowsky says that “a large part of her budget” goes to a 140-mile car trip for her granddaughter’s birthday party – although she only counts the cost of gas and not maintenance or insurance. Mbanusi writes that he has only bought $ 10 in gas at a time, instead of filling his tank, and a $ 24 bill for routine maintenance has almost scrapped his budget for week one. And Strickland describes what time to turn up for a meeting because he had to walk from his apartment – in a 90 degree heat – instead of taking a taxi.
  • Food . Almost everyone who takes up the challenge says that eating healthy food was a problem. Only a few say they were really hungry, but most people say their diet was less varied and less healthy during their minimum wage week. Strickland says he couldn’t afford most fresh fruit and vegetables and had to rely heavily on cheap staples such as bread, bologna, bananas, and peanut butter. Schakowsky reports that she and her husband “stretched a package of romaine and a few tomatoes to last the week.”
  • Healthcare . Mbanusi says his budget was derailed in the second week when he had to pay $ 40 for an appointment with a doctor he had made weeks earlier. Ryan notes that the first major stumbling block in his week was a $ 25 reimbursement for vitamin D drops and a few other items for his newborn baby. Strickland, in an interview on the left-hand website ThinkProgress, says he was lucky to have medication at home when he had a cold early in the week; otherwise he says, “I don’t think I could have bought that Afrin nasal spray.”
  • Children and pets . For Ryan, the cost that canceled his budget was the summer camp of his 10-year-old daughter. Schakowsky says she has learned that “pets are luxury,” because one of her biggest expenses was caring for her dog, Lucky, who is disabled.
  • Laundry . A surprising stumbling block in Schakowski’s report of her week was the cost of the laundry. She says that not only could she and her husband not pay to collect their dry cleaning, they could not even save the quarters of an hour to do laundry in the coin-operated machines of their building.

 

Lesson learned

Although most people who have tried the challenge could not beat it, most still say it was a valuable experience. Here are some of the lessons people say they learned by spending a week on minimum wages:

  • Gratitude . Several participants said the challenge made them realize how happy they are just to be able to pay their bills weekly and not have to worry about how to pay for random expenses, such as a car repair or an appointment with a doctor. For example, Strickland says in a report of his minimum wage week for Politico Magazine that his experience with the cold medicine made him realize that for many employees even small expenses can prevent the budget from extending to the extent that it needs to be stretched. “
  • Empathy . Most participants in the challenge said they discovered how stressful it is to live on a budget that cannot be beat and what a toll it takes on your mind and body. Several of them say that this was the first time in their lives that they were hungry. By living this way for just a week, they realized how hard it must be to do all the time and made sure they found ways to help people who were struggling.
  • The difference between wishes and needs . Most of the participants talk about the little treats she skipped during the week: a dinner party with friends, a drive-in film with the children, a cold beer after work, a cup of coffee. Even in the supermarket, they noticed that they classified certain items, from steaks to sports drinks, as luxury that they could not afford.
  • How to depend on others . Being able to turn for help and friends makes a big difference when you are in a difficult financial position. Although the rules of the challenge say not to accept free meals in the homes of friends, several participants admit that they did, and it greatly reduced the pressure on their budget. One of my biggest discoveries about this challenge was how much easier it is to do as a couple, because there are so many costs that you can reduce by sharing them, from food, to gas, to internet services. I concluded that a person who makes a minimum wage would have a much easier time living with adult relatives or having a roommate to share the cost of living.
  • The value of a dollar . With a budget of just $ 77 a week, every dollar is crucial. In her Ministry of Labor blog, Schakelowsky says the challenge has literally taught her what a dollar can do: “It can buy a can of tuna or baked beans or a box of pasta.” Other participants in the challenge talk about stretching their dollars as much as possible by using discount coupons, driving less and relying on free entertainment.
  • The importance of good planning . Many participants discovered that when money is so tight, planning is essential. They learned to take their money, to plan their meals, to keep track of everything they ate and to make their working hours coincide with bus schedules. Schakowsky says that a salary with a minimum wage “leaves no room for mistakes”, because even small mistakes, such as forgetting your lunch, can derail your budget.
  • The benefits of foot strength . During our week on minimum wage, my husband and I used our car only once to stock up the groceries for the week. He rode to work on his bike every day and did all my other shopping on foot. Strickland also says that he ran as much as possible during his minimum wage week to keep his transportation costs low.
  • The cheapest way to eat . Of all the people who accepted the challenge, I was the only one who ate no differently during the week. There are two reasons for this: first, my husband and I are almost vegetarians, and second, we have our own vegetable garden that supplies us with fresh vegetables in the summer. This meant that the only groceries we needed to buy were: flour, cheese, oatmeal and milk, plus a bag of fresh apples from the farmers market. With this plus the products from our garden, we were able to eat our usual healthy food and even refused a trip to Starbucks on the weekend.

 

Problems with the challenge

 

Problems with the challenge

 

Although the Live the Wage challenge is useful as a learning exercise, it is also unrealistic in various ways. The limitations of the challenge include:

  • Less stress . Living for just a week with a minimum wage cannot mimic the stress of life that way week after week. The people taking up the challenge know that it is only for a week, and they also know that there are no real consequences, even if they do not make it through the week. If an emergency situation breaks out, they can always just take out their credit cards and consider the challenge unsuccessful.
  • Inability for budget . Many of the expenses that employees have are not paid on a weekly basis. The challenge takes money for housing, which is usually a monthly expense, but it does not take incidental costs such as clothing or insurance or maintenance for cars into account. In real life, employees know that these are ultimately expenses, so they must reserve money for them in advance. In the challenge, however, the only costs that count are weekly.
  • No way to plan for emergencies . In a long-term budget, you can schedule expenses that are made only occasionally, such as car repairs or doctor visits, by placing a few dollars each week. But if the Live The Wage Challenge is one of these releases, you must immediately pay the full cost of your $ 77 budget. Many participants say that such emergencies give them too little money to get through the rest of the week.
  • No adjustments for location . For the minimum wage challenge you have to work with a budget of $ 7, 25 per hour, even if the actual minimum wage in your country is higher. So if you live in a state where the cost of living is high, you must pay above-average prices for everything without an above-average minimum wage to make up for it.
  • No way to change wooPanglo charges . The challenge gives $ 176.48 of your $ 290 salary for housing, based on a number of theoretical “average” costs. It does not give you the option to reduce your housing costs, which is one of the most important things you can do if you really have a minimum wage. Most people interviewed in this New York Times article about living with the minimum wage say they live with family members, share a house with a friend, or rent a room at a friend’s house.

A more realistic way to find out if you can really survive on the minimum wage in the long term is to use this interactive tool through The New York Times. It starts with calculating your annual income based on the actual minimum wage for your state. Then you close all your expenses for the year, including taxes, housing, healthcare, food and transport. This shows you how much you can save – or how much debt you would accumulate – over the course of a whole year, and what cuts you should make to keep your budget under control.

 

Last word

 

Despite the shortcomings, most participants seem to think that the Live the Wage challenge is a valuable experience. Ryan, discussing the challenge on his Facebook page, acknowledged that it couldn’t match the stress of real life on minimum wages, but he said it still helped him understand his voters and their needs. Schakowsky says it convinced her that living on a minimum wage is not only difficult but also impossible. And I have learned how well our frugal lifestyle holds up against the hardships of a real budget for a bare tire and which of our money-saving strategies are the most useful.

Do you think you could live on a minimum wage? Have you ever had to do it?

 

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