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Why Minimum Wage Isn’t Enough
June 9, 2015
Picture this: Jane Doe is a single adult working a full-time (40 hours per week) minimum wage job. Jane wants to rent a modest one-bedroom apartment. No matter where Jane lives in America, and regardless of whether Jane lives in a state with a minimum wage higher than the federal minimum wage, Jane will be unable to do so.
Why? Because there’s no state in America in which a person working a full-time job that pays minimum wage can afford to rent a one-bedroom apartment.
This shocking fact comes from the National Low Income Housing Coalition’s recently-released report, "Out of Reach 2015." The report analyzes the Department of Housing and urban Development's estimated Fair Market Rent (FMR)—which is defined as the 40th percentile of rents for typical, non-substandard rental units, including the cost of utilities—in relation to wages earned in each state. The report estimates the earning necessary to rent one-bedroom and two-bedroom apartments without spending more than 30 percent of a household’s total income on rent.
Let’s look at how the information presented in this report might impact Jane Doe’s apartment search:
- To rent a one-bedroom FMR apartment, Jane would need to earn $15.50 per hour. This is more than twice the federal minimum wage of $7.25 per hour. Even the proposed federal minimum wage of $10.10 per hour would be insufficient for Jane to rent an apartment.
- To a rent a two-bedroom FMR apartment, Jane would need to earn $19.35 per hour.
- If Jane lives in Alaska, California, Connecticut, Delaware, the District of Columbia, Hawaii, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Vermont, Virginia, or Washington, she’ll need to make over $20 per hour to afford a two-bedroom apartment.
- The average national FMR price for a one-bedroom apartment is $806 per month. That means Jane would need to work 86 hours per week in her minimum wage job to afford the cost of rent.
Unfortunately for Jane, findings in the "Out of Reach" report show that her situation is unlikely to improve any time soon. Nationally, rents are rising, wages are lagging behind, and there is a limited supply of affordable housing. With all these barriers to renting an apartment, it’s easy to see how Jane might end up doubled-up with family or friends, severely burdened by the cost of her housing, or homeless.
Unless we take action to increase the supply of affordable housing units (Out of Reach suggests America needs 7.1 million more units to meet demand), increase the minimum wage, and decrease the cost of rent, Jane won’t ever be able to afford her apartment.