Running head: MONEY MATTERS: THE STRUGGLES OF LIVING ON

MINIMUM WAGE
Money Matters: The Struggles of Living on Minimum Wage
Julie Longwell
Seton Hill University

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Abstract
The purpose of this research is to look at the issue surrounding the marginalized group of
minimum wage workers. By being informed of the issue at hand, Americans are able to better
understand and help resolve the problem of low minimum wages. In a wealthy nation like
America, no full time worker should be living in poverty. By research obtained through online
resources, an interview, and personal volunteering experience, the issue regarding full time
minimum wage workers living in poverty is explored. Lastly, this paper analyzes and critiques
possible solutions to problems faced by minimum wage workers. Altogether, this report provides
insight into the issue affecting millions of American workers

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The Minimum Wage Worker
No person can maximize the American Dream on the minimum wage (Jealous 2013).
This powerful statement written by Benjamin Todd Jealous, the CEO of the NAACP, rightly
brings up the main issue surrounding minimum wage. The prosperity associated with the
American dream is difficult to achieve with low minimum wages. The marginalization of
minimum wage workers continues to be both an economic and social issue separating the social
classes in the American society today. As the cost of living increases in America, minimum wage
workers are given an unfair disadvantage of achieving prosperity due to the Federal minimum
wage not keeping up with inflation. While the rich are getting richer, minimum wage workers are
struggling to survive on small wages.

Identification
According to U.S. Bureau of Labor Statistics, in 2013 minimum wage workers made up
58.8 percent of all wage and salary workers. In other words that is 75.9 million workers working
for $7.25 an hour. However, the U.S. Bureau of Labor Statistics can be misleading by not
showing statistics of workers making slightly more than the federal minimum wage. According
to the article Low-wage Workers Are Older Than You Think, the writers explain These data
do not provide an accurate picture of who would see a raise if the minimum wage were increased
because they exclude all workers from the 19 states with higher state minimum wages, along
with all workers making slightly above the current federal minimum wage but below the
proposed minimum, all of whom would see a raise if the minimum wage were increased
(Cooper & Essrow, 2013). Workers under age twenty-five make up about half of the minimum
wage workers in American (Characteristics of, 2014). Many people think that the majority of

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minimum wage workers are young. This is true if you are looking at the data collected based on
the Federal minimum wage of $7.25, since depending on the state, minimum wage may be
slightly higher than the federal minimum wage. In reality, there are a far greater number of older
workers struggling to make a living on minimum wage than people realize.
According to the article, Will the real minimum-wage worker please stand up? data that
both includes federal and state minimum wages shows that 53.1 percent of workers are White,
25.2 percent are Hispanic, and 14.8 percent are Black workers. Speaking in regards to a higher
minimum wage, the research director at the Economic Policy Institute, Douglas Hall says, The
people who will benefit most are by and large white women who work full time and whose
families live on less than $40,000 a year (White, 2014). Since many people have an idea of their
own about the type of person living in poverty, people may find it surprising that it would be
white women most affected by the increased minimum wage.
According to U.S. Bureau of Labor Statistics, in 2013 the states with the highest percent
of minimum wage workers were Idaho and Tennessee. Washington, California, and Oregon had
the lowest percentage of minimum wage workers in the United States. However, this data is
based on the federal minimum wage of $7.25 and included in the data is a note saying It should
be noted that some states have minimum wage laws establishing standards that exceed the
federal minimum wage (Characteristics of, 2014).
Although these are just a few characteristics of minimum wage workers, anyone who is
sixteen or older and is making either the federal minimum wage of $7.25 an hour or is making
their state minimum wage is considered a minimum wage worker. According to the Unites States
Department of Labor website, In cases where an employee is subject to both the state and
federal minimum wage laws, the employee is entitled to the higher of the two minimum wages

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(Wages, n.d.).

The Issue
Minimum wage workers are finding it difficult to support a family due to the high cost of
living. A single parent working full time at minimum wage trying to support a family of three
makes $15,080 a year, putting them well below the poverty line. President Obama has expressed
his dismay by saying, In the wealthiest nation on Earth, no one who works full-time should
have to live in poverty. Even though minimum wage has increased over time, it has not kept up
with inflation. In 1968, a minimum wage worker would have made about a third more than a
minimum wage worker today (Light, 2013). This has also increased the gap between the lower
class and upper class. An article entitled, Hardworking Americans should not be living in
poverty includes data regarding income growth in the United States. The federal minimum
wage hasn't kept up with inflation, but CEO pay has risen 725% over the last 30 years and 80%
of all real income growth has gone to the richest 1% of Americans (Henry & Ownens, 2012).
While the rich are enjoying immense prosperity, minimum wage workers are struggling to stay
above the poverty line and achieve the prosperity associated with the American dream.
The first idea to set a minimum wage in the United States came about during the Great
Depression. The U.S. Supreme Court, however, continually turned down the idea saying the laws
would be unconstitutional by interfering with the employers free right to negotiate a wage
contract with employees (Glass, 2011). In 1938, the federal government passed the law entitled
Fair Labor Standards Act. This established a minimum wage of $0.25 per hour, which was the
first time employers were legally required to pay their workers a minimum set wage per hour.
Since 1938 the minimum wage has been raised twenty-two times. The wage has been increased

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to keep up with inflation occurring over time. Minimum wage had the highest purchasing power
in 1968 when it was equivalent to $10.69 in todays economy (Elwell, 2014). Since being raised
in 2009, the federal minimum wage has lost about 5.8 percent of its purchasing power due to
inflation (Desilver, 2013). In other words, by minimum wage not being adjusted for inflation,
American minimum wage workers wealth is decreasing as time goes on.

The Solution
A short run solution to help minimum wage workers living in poverty would be to
increase the federal minimum wage. Many studies have been done to determine what would
occur if the minimum wage were to be increased. While economists have different theories
regarding the effects on employment, most agree that raising the minimum wage would reduce
poverty in the United States. If the minimum wage were to be raised to $10.10, which is what the
Democratic Party is proposing, 4.6 million people would no longer be living in poverty
(Konczal, 2014). As discussed in an analysis released by the non-partisan Congressional Budget
Office, a minimum wage increase to $10.10 would cost 500,000 jobs to be lost. Job loss would
be due to employers reducing the number of employees to make up for the increase in wages
(Davis, 2014). However, other economists believe that a higher minimum wage has little or no
effect on unemployment. For example in a report by John Schmitt, which includes research
ranging from the 1990s to 2013, The most likely reason for this outcome is that the cost shock
of the minimum wage is small relative to most firms' overall costs and only modest relative to
the wages paid to low-wage workers (Schmitt, 2013). While the debate on the consequences of
raising the federal minimum wage is ongoing, the trade-off is clear. People who keep their jobs
get more money; those who lose their jobs, or fail to get new ones, suffer (Hassett and Strain,

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2013). Although society cannot help everyone, by raising the minimum wage, the government
would be giving workers the opportunity to get out of poverty.
In order to have a long-term solution for keeping minimum wage works out of poverty,
society needs to offer better assistance to hardworking, honest workers. By rewarding honest
minimum wage workers and penalizing those abusing the system, the government is giving hard
workers more money and the opportunity to better their lives. This is due to the fact that those
being penalized for abusing the system would free up more money for those who are not.
According to a study done by the University of California Berkeley Labor Center and University
of Illinois, 52% of families of fast food workers receive assistance from government programs.
On the other hand 25% of families in the workforce as a whole are receiving assistance from
government programs (Housel, 2013). While this is a high percentage of workers using
government aid, many people are finding that it pays more not to work. A study by the Cato
institute found that a mother with two children in New York could receive government assistance
worth $38,004. Since welfare benefits are not taxed and wages are, someone in New York would
have to earn $21 per hour to be better off than they would be on government assistance (Tanner,
2013). While many hard working Americans rely on government assistance, there are many that
realize that they make more off government aid by not working. Welfare currently pays more
than a minimum-wage job in 35 states, even after accounting for the Earned Income Tax Credit
(Avik, 2013). When asked if she has ever witnessed someone abusing the low-income housing
system, Ellen Parker, Quality Control Supervisor for Housing Choice Voucher Program
Department for the Allegheny County Housing Authority, responded Yes, unfortunately too
much. Rent is based upon a persons income. Therefore, when a tenant gets a job and their

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income goes up, so would their rental portion. So, some tenants just dont report when their
income is raised. When we find out, we charge them with fraud and require them to pay back
what they would have paid if they had turned it in in the first place (Ellen Parker, personal
communication, April 4, 2014). Since there is a long waiting list to get a voucher for section
eight housing, honest working minimum wage workers are the ones that are left to compete for a
voucher with those who are abusing the system. By enforcing harsher penalties for government
assistance fraud, society is giving honest minimum wage workers the chance to utilize
government assistance, which will allow them to work and earn a better lifestyle.
Analysis
The solution of raising the federal minimum wage to get full time working Americans out
of poverty utilizes the legislation, regulation mechanism of Uhls Mechanism Model. By
regulating what employers can pay employees, the government is working towards improving
the consumers well being. Due to competitive market processes, some companies pay their
workers above minimum wage because they believe it greatly benefits their workers, which in
return will benefit the consumers well being. For example, the CEO of Costco Wholesale
Corporation, Craig Jelinek, not only supports the federal minimum wage increase, but also
implements the high starting pay to his workers. Costcos starting hourly pay is $11.50, while the
average employee wage is $21 per hour (Short, 2013).
The long-term solution of regulating government assistance utilizes the legislation,
regulation mechanism of Uhls Mechanism Model. By the government establishing a better
system to detect and punish fraudulent behavior in government programs, the government is

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improving the consumer well being. Not only are the users of these government programs
affected by better regulation, taxpayers are also being affected. Since it is taxpayers money
being used to fund these programs, it is wise for them to know whom their money is helping.
Debates and speeches about a better regulated government assistance program is not only
helping to move the process along, but also it is an investment in human capital. It helps to
educate both the taxpayer and consumer about who uses, misuses, and ways to better assist those
who truly need government assistance, such as those minimum wage works who fall below the
poverty line.
Critique
Due to politics, the solution of raising the federal minimum wage will not be an easy task.
President Obama and his administration support the increase of the federal minimum wage.
However, even with the Presidents support, it would still take years for the bill that would
increase wages to pass through congress. In an email, a White House official wrote, "The
President has long supported raising the minimum wage so hardworking Americans can have a
decent wage for a days works to support their families and make ends meet (Jamieson, 2013).
An increased minimum wage would not only be economically feasible, it would also adhere to
the Catholic social teaching dignity of the human person principle. According to the United
States Conference of Catholic Bishops website, The Catholic Church proclaims that human life
is sacred and that the dignity of the human person is the foundation of a moral vision for society
(Life and Dignity, n.d.). By following this principle, it shows that something needs to be done
for minimum wage workers to live a life without poverty. When a person is working full time

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and still cannot afford basic necessities, it may be giving them the impression that their hard
work is not paying off.
Although it could be done, it would take both time and money to better regulate the
government assistance programs. When asked how section 8 housing could be better regulated to
prevent misuse of the people abusing government aid, Ms. Parker responded The government
has already put in place that what we report on each tenant is matched to what the IRS has in its
system. Thats how we find out people did not turn in their income. It is about 4 months behind
though. It would be better if it matched within 30 days as opposed to 4 months (Ellen Parker,
personal communication, April 4,2014). In order for the minimum wage workers to receive the
assistance they need, the government needs to stop giving money to the people who are abusing
the programs. This change would require more employees and systems put in place to better
monitor those on government assistance. Ultimately regulated programs would improve the
common good as while as carry out the Catholic social teaching preferential option for the poor
principle. This principle is the idea that a nation can tell a lot about its society by looking at how
they treat their most vulnerable citizens. By people abusing the system and using up the aid
provided, it leaves the most vulnerable in need The richer class have many ways of
shielding themselves, and stand less in need of help from the State; whereas the mass of the poor
have no resources of their own to fall back upon, and must chiefly depend upon the assistance of
the State (Option for the Poor, n.d.). By utilizing this solution and principle, we are allowing
those truly in need to get the help they need and deserve.
In conclusion, hard working minimum wage workers are suffering in one of the worlds
wealthiest nations. While the cost of living continues to rise, it is unfair to expect workers to

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survive on a wage that has not kept up with inflation. Even though President Obama and
members of the Democratic Party are devising a bill to raise the minimum wage, it may take
years before it gets approved. As these debates are occurring between Democrats and
Republicans, millions of minimum wage workers are struggling to support their families in these
hard economic times. Through an increased minimum wage and better-regulated government
assistance, hard working Americans are able to live above poverty and get one step closer to
achieving the prosperity associated with the American Dream.

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Works Citied
Characteristics of Minimum Wage Workers, 2013. (2014). U.S. BUREAU OF LABOR
STATISTICS. Retrieved 19 April 2014, from http://www.bls.gov/cps/minwage2013.pdf
Cooper, D., & Essrow, D. (2014). Low-wage Workers Are Older Than You Think: 88 Percent of
Workers Who Would Benefit From a Higher Minimum Wage Are Older Than 20, One
Third Are Over 40. Economic Policy Institute. Retrieved 20 April 2014, from
http://www.epi.org/publication/wage-workers-older-88-percent-workers-benefit/
Davis, S. (2014). CBO report: Minimum wage hike could cost 500,000 jobs. Usatoday.com.
Retrieved 20 April 2014, from
http://www.usatoday.com/story/news/politics/2014/02/18/cbo-minimum-wagejobs/5582779/
DeSilver, D. (2013). 5 facts about the minimum wage. Pew Research Center. Retrieved 20 April
2014, from http://www.pewresearch.org/fact-tank/2013/12/04/5-facts-about-the-minimumwage/
Elwell, C. (2014). Inflation and the Real Minimum Wage: A Fact Sheet. fas.org. Retrieved 19
April 2014, from http://www.fas.org/sgp/crs/misc/R42973.pdf

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Glass, A. (2014). National minimum wage law enacted, June 24, 1938 - Andrew Glass.
POLITICO. Retrieved 20 April 2014, from
http://www.politico.com/news/stories/0611/57629.html
Hassett, K., & Strain, M. (2014). Why we shouldn't raise the minimum wage - Economics - AEI.
Aei.org. Retrieved 20 April 2014, from http://www.aei.org/article/economics/fiscalpolicy/labor/why-we-shouldnt-raise-the-minimum-wage/
Henry, M., & Owens, C. (2014). Hardworking Americans should not be living in poverty. CNN.
Retrieved 20 April 2014, from http://www.cnn.com/2012/07/25/opinion/henry-owensminimum-wage/
Jamieson, D. (2013). Obama Gets Behind Democrats' $10.10 Minimum Wage Proposal. The
Huffington Post. Retrieved 20 April 2014, from
http://www.huffingtonpost.com/2013/11/07/obama-minimum-wage_n_4235965.html
Jealous, B. (2014). You Can't Survive on $7.25. The Huffington Post. Retrieved 20 April 2014,
from http://www.huffingtonpost.com/benjamin-todd-jealous/you-cant-survive-on725_b_3084976.html
Konczal, M. (2014). Economists agree: Raising the minimum wage reduces poverty. Washington
Post. Retrieved 20 April 2014, from
http://www.washingtonpost.com/blogs/wonkblog/wp/2014/01/04/economists-agreeraising-the-minimum-wage-reduces-poverty/
Life and Dignity of the Human Person. (n.d.). Usccb.org. Retrieved 20 April 2014, from

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http://www.usccb.org/beliefs-and-teachings/what-we-believe/catholic-social-teaching/lifeand-dignity-of-the-human-person.cfm
Option for the Poor and Vulnerable. (n.d.). Usccb.org. Retrieved 20 April 2014, from
http://www.usccb.org/beliefs-and-teachings/what-we-believe/catholic-socialteaching/option-for-the-poor-and-vulnerable.cfm
Parker, Ellen. (2014). Personal interview.
Roy, A. (2013). On Labor Day 2013, Welfare Pays More Than Minimum-Wage Work In 35
States. Forbes. Retrieved 20 April 2014, from
http://www.forbes.com/sites/theapothecary/2013/09/02/on-labor-day-2013-welfare-paysmore-than-minimum-wage-work-in-35-states/
Schmitt, J. (2014). Why Does the Minimum Wage Have No Discernible Effect on Employment?.
cepr.net. Retrieved 19 April 2014, from http://www.cepr.net/documents/publications/minwage-2013-02.pdf
Short, K. (2013). 11 Reasons to Love Costco That Have Nothing To Do With Shopping. The
Huffington Post. Retrieved 20 April 2014, from
http://www.huffingtonpost.com/2013/11/19/reasons-love-costco_n_4275774.html
Tanner, M. (2013). When Welfare Pays Better than Work. Cato Institute. Retrieved 20 April
2014, from http://www.cato.org/publications/commentary/when-welfare-pays-better-work
U.S. Department of Labor - Find It By Topic - Wages - Minimum Wage. (2014). Dol.gov.
Retrieved 20 April 2014, from http://www.dol.gov/dol/topic/wages/minimumwage.htm

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White, M. (2013). Will the real minimum-wage worker please stand up?. DeseretNews.com.
Retrieved 20 April 2014, from http://www.deseretnews.com/article/865574821/Will-thereal-minimum-wage-worker-please-stand-up.html?pg=all

Community Service
IRS Volunteer Income Tax Assistance
Westmoreland Community Action-Greensburg, PA
Supervisor: Denise Baker 724-834-1260 Ext. 170
January 24, 2014 April 11, 2014, Every Friday from 4-8 pm
My experience as a volunteer income tax preparer has helped me better understand the
struggles that minimum wage workers face. As a tax preparer, I prepared income taxes for
people who made $52,000 or less. I also answered questions and informed taxpayers about
basic tax laws. While completing these tasks, I also had the opportunity to talk with the
taxpayers I was helping. Often times, I would be doing taxes for someone who was making
minimum wage and was told about their struggle to find housing and afford basic necessities.
Since working with minimum wage workers and seeing their W-2s, I have found it appalling
that we are expecting people to live on such small wages. Even though there is tax breaks for
low-income workers, many minimum wage workers are still living paycheck to paycheck. An
older woman in particular said that she was working for minimum wage and found that it
would be more beneficial money-wise to just collect social security instead of being taxed on
the low income she was earning. I kept this womans story in mind when I was researching
solutions for minimum wages. I found it hard to believe that our government programs offer

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greater benefits to unemployed people than it does to minimum wage workers. I am thankful
to have had the opportunity to partake in such a wonderful volunteer program. Not only have
I enjoyed helping taxpayers with their taxes, I have also learned a lot about people and their
struggles regarding low income.