Can the nuclear family survive on minimum wage – even it if goes up?

There is a lot of talk about the Federal Minimum Wage and how raising it to $10.10 per hour across the nation could help many more working Americans make ends meet. The question is, if the minimum wage is raised over the next 2 years, will this make a difference to the average nuclear family (Mom, Dad, and 2 kids)?

Why Increase the Minimum Wage

Recently, Senator Elizabeth Warren contributed an article to ABC News called 17 Million Reasons to Raise the Minimum Wage. Sen. Warren was referring to the millions of children who have parents who earn minimum wage in the USA and how they go without the basic necessities every day because their families can barely keep a roof over their heads and food on the table. The article went on to explain how in 1968, a family of three lived above the Federal poverty level on minimum wages (which were $1.60 an hour back then). Now, in 2014, with the minimum wage hovering around $8 an hour on average, the average family can barely afford rent, let alone all the necessities of raising kids and working outside the home.

Let’s consider for a moment the factors that go into raising a small family in today’s present economic climate. There is little if any wiggle room when a parent or parents are working for minimum wage. The costs associated with having a safe home, owning a car, putting meals on the table, and paying for daycare alone are staggering. For example, the average monthly costs break down like this:

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The Cost of Raising a Family

At the very lowest end of the scale, with no extras like dance classes, new clothes for the kids, vacations or birthday celebrations – families are looking at between $2,000 to $4,000 per month just to survive the cost of living in 2014. These are very modest numbers based on average costs of living around the USA, but they can vary greatly depending on housing availability and other lifestyle needs. For the lucky few families who have support to care for their children, or are living debt free, these costs are substantially less.

Now, at the present minimum wage of $8 an hour, with two parents working full time; before taxes the best they can hope to earn is around $2,560 a month. After they have taxes and benefits assessed (around 30 percent of their gross salaries), take home pay is closer to $1,800 a month.  It should be obvious that a two-earner family on minimum wage cannot survive on this alone. This explains why the United States Department of Agriculture (USDA) reports that almost half of all Supplemental Nutrition Assistance Program (SNAP) recipients are children (48 percent) and working age women represent 28 percent of the caseload as of most recent figures. Families who are working for minimum wage are struggling just to maintain a reasonable standard of living in America.

If minimum wages go up, this would add around $600 to $800 more a month after taxes to the average family’s household budget. It’s still going to be tight for many families, especially those who include just one working parent. This is not what many would consider to be living in the greatest nation in the world, but as compared to other places where the standard of living is a lot worse; it’s a start.

What Do U.S. Businesses Have to Say About $10.10?

In the 2014 Compensation Best Practices Report, we surveyed companies to find out what they thought about the Fair Minimum Wage Act and it turns out they have mixed opinions about it. Overall, 40 percent of companies surveyed were in favor of it and 30 percent were against it, with another 30 percent unsure. The responses across industries were more varied, with Healthcare & Social Assistance and Professional, Scientific, and Technical Services giving the highest response in favor (46 percent and 45 percent respectively). The Manufacturing industry was the most against the proposed minimum wage, with 37 percent answering against.

Pros and Cons of Minimum Wage Increases

Many politicians are backing up the raising of the minimum wage. They see it as a way to not only help stimulate the economy (more spending money for consumer goods), but as a way to help bring us all up to higher standards in our living costs. On the other side, some believe that raising the minimum wage will hurt businesses who are already struggling to pay for their current employees and new benefit requirements under health care reform. Only time will tell how the increased compensation burden will affect the economy over the next 24 months as states stage their minimum wage hikes.

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We encourage you to think about how the minimum wage may help your family to survive better in an already challenging job market, and leave your comments below.