While the concept of a living wage has become an issue of increasing importance to both employers and employees in recent years, the number of workers actually earning a living wage has been steadily decreasing at the same time - though that decrease has not been experienced across industries and/or geographies in equal measure.
It may once have been easy to confuse minimum wage standards with living wage standards. In fact, the federal minimum wage was initially devised in part to ensure a living wage, those standards long ago diverged with cost of living significantly outpacing minimum wage increases on balance since the 1950s.
That said, the chasm between minimum wage and living wage seems to have become all the more stark in recent years, especially during the pandemic recovery when workers paid well above minimum wage found themselves unable to keep up as cost of living climbed faster than rising wages despite (and because of?) the historically labor-friendly labor market.
Inflation has largely been under control for the better part of a year now, with the last 9 months holding steady below 4% annualized, but cost of living remains high and the minimum wage remains exactly where it has been for the last 15 years - 7 dollars and 25 cents an hour.
That $7.25 an hour in 2009 would be worth $10.58 today accounting for inflation, etc. Meanwhile, as of 2022, the average living wage in the US according to MIT was just over $25 dollars an hour at the time, or $27.53 in today’s dollars.
With more workers than ever failing to secure a living wage, the repercussions of this situation are likely to be felt far beyond those who are personally affected, though not all industries are contributing equally to the issue nor are all cities/states/regions responding passively to the growing problem.
According to data from Revelio Labs, more than one third of workers (36%) employed by the top one thousand companies in the US are paid less than a living wage, defined here as a wage sufficient for two full-time workers to support themselves as well as two dependents. Even worse, nearly 1 out of 5 of those employees (19.2%) does not make enough money to meet basic needs.
As the following graphic illustrates, among the 10 largest industries in terms of total number of employees (which collectively account for 10% of the US workforce), the industries involving technology development dominate the upper end of the scale, with the software, computer services, technology hardware, and pharmaceuticals/biotech industries all paying more than 80% of their employees at or above the living wage threshold.
On the other extreme, both the restaurant and leisure as well as the retail industries pay living wages to fewer than 40% of their employees, while the commercial support services, medical equipment, banking, and industrial goods industries all pay living wages to about 70% to 80% of their employees.
Even when taking into account geographic variance in cost of living, the big picture doesn’t change much, although the following graphic seems to indicate a somewhat less favorable view of the tech industry’s propensity toward paying living wages when factoring for local cost of living, with the total percentage of employees that are paid a living wage in the software and pharmaceuticals/biotech industries dropping by between 3% and 4%, respectively.
Mostly, however, the information best illustrated by this graphic may simply be that industries like tech and media tend to gravitate toward areas with a relatively higher cost of living while the more industrial industries tend to be located in areas with a relatively lower cost of living compared to the national average.
According to the National Conference of State Legislatures, Washington DC currently has the highest minimum wage among ‘states’ at $17 per hour, followed by Washington state at $16.26, then California and New York at $16 each.
Beyond the 5 states that have no internally legislated minimum wage and are therefore subject only to the federal minimum wage standard (Alabama, Louisiana, Mississippi, South Carolina, Tennessee), there are 15 states that have set their minimum wage to the current federal level of $7.25 per hour - Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, New Hampshire, North Carolina, North Dakota, Oklahoma, Pennsylvania, Texas, Utah, Wisconsin, and Wyoming.
Average minimum wage across the remaining states is about $13 per hour.
There are 9 states that currently have enacted increases to their current minimum wage thresholds that have not been enacted yet:
It’s been almost 12 years since fast food workers launched the Fight for 15 movement to push for better pay (specifically $15 per hour) as well as better/safer working conditions. Currently, the US average living wage is about $27 per hour - nearly double the lofty (and obviously unachieved) goal that $15 per hour represented little more than a decade ago.
In the 85 years since the federal minimum wage was first introduced, it has been raised at least 23 times - most recently in 2009 - with an increase on average more than once every 4 years, but never in the past had more than 10 years passed in between increases, which makes the current 12 year pause all the more noteworthy. Perhaps even more concerning is that the previous record gap between federal minimum wage threshold increases was between 1997 and 2007, which indicates a troubling trend.
Some states are evidently trying to take up the mantle in lieu of waiting for further federal action, but even among the states with the highest planned minimum wages, those thresholds fall significantly short of the living wage standard.
It is also worth noting that all of the states that currently have minimum wage increases set on the books also already have a statewide minimum wage threshold that is meaningfully higher than the current federal standard.
With 40% of states effectively mirroring the federal minimum wage standard, this problem will likely only worsen in the near term and become exacerbated on a regional basis, until some kind of federal solution is enacted.
Still, whenever Congress eventually gets around to increasing the federal minimum wage again, based on current conditions there is virtually zero chance that the increase will close much of let alone all of the gap between the minimum wage and living wage in a given area.
Of course, failure to raise minimum wage standards to meet base standard of living expectations does no preclude other factors and/or market forces from reversing the trend toward larger proportions of the workforce earning unlivable wages, but whatever those factors may be they have yet to emerge, and the long-term implications of these conditions remain unclear.
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