Fight for $15! This is the battle cry for higher wages. Seemingly awesome. It is now taking hold on both sides of the nation. At this point, Los Angeles, San Francisco, Berkley, Oakland, Seattle, and now New York, have wage agreements that when eased in over time (3-6 years) will result in higher minimum wages!

For a decade, between 1997 and 2007, Congress failed to raise the Federal Minimum Wage at all. This set workers’ wages (coupled with normal inflation) on a trajectory that was so negative and so severe it resulted in putting the basics of life, including housing, beyond the reach of millions. In fact, the ever shrinking minimum wage relative to the cost of daily necessities has become so extreme that even such things as basic rental housing have moved beyond the reach of full time, 40 hour a week, minimum wage workers. Inaction on the part of Congress has only added to the 3.5 million people now experiencing homelessness in this nation. When the federal government failed to act, the people in desperation, jumped into the fray pushing for higher wages in their areas.

This is the very core of our American Dream…a fair wage for a fair day’s work! If you work hard, keep your head down, eventually you can get ahead, get married, and raise a family.

New York Governor Andrew Cuomo has indicated his support for recent economic changes. In fact, at a recent rally celebrating the NY wage proposal, he was noted as saying, “This is just the beginning. We will not stop until we reach true economic justice.” Awesome! Finally, we will acknowledge that the minimum wage worker, the janitor, construction laborer, hotel worker, bank teller, fast food worker, theater attendant, farm worker, receptionist, nurse’s aide, maid, poultry processor, child care worker, home care aid, garage attendant, etc. make up the socio-economic base of our society and that they all need living wages.

But wait a minute! Did we just mention farm workers? These are strictly rural workers. What about all the other minimum wage rural workers? While 80% of Americans live in urban areas according to the 2010 census, 20% of all workers are scattered throughout rural America. How will they and others in their situation, ever attain income-equity if they aren’t unionized and are too few in concentrated numbers to affect change? And by the way, ten states have passed laws that prevent local minimum wages to rise about the Federal Minimum Wage (currently set at $7.25 per hour or $2.13 per hour for agricultural workers).

And while we’re at it, when we examine the $15.00 for those who are organized and in states where it is OK to have a minimum wage above the federal minimum wage, we find that even $15 per hour falls significantly short of what is needed to become housed and to get by on a daily basis. Then we examine the common sense of the Universal Living Wage (ULW) formula, we see that it is based on three existing government guidelines:

  1. spend no more than 30% of your income on housing,
  2. work a full 40 hours per week,
  3. index the wage to the local cost of housing.

We calculate that the wage required to afford a one bedroom apartment using the HUD Fair Market Rents in a few notably cities with high costs of living-

City/StateHourly wage for an efficiency apartmentHourly wage for a one-bedroom apartment
New York, NY$23.00$24.02
Los Angeles, CA$17.56$21.21
Seattle, WA$18.69$22.12
San Francisco, CA$24.15$31.44

$15 per hour is a far cry from any of these basic requirements, and as we have seen in the past, when some of these $15 amounts go into effect as much as six years away, their value will be highly degraded due to inflation and we will be right back where we started. At the same time, currently in rural America we see that in areas such as found in a few sample cities in the table below-

City/StateHourly wage for an efficiency apartmentHourly wage for a one-bedroom apartment
Chico, CA$9.92$12.63
Little Rock, AR$10.31$11.90
Cumberland, MD$8.83$10.42
Asheville, NC$9.81$13.90
Decatur, IL$7.92$10.12

This again is a significant distance from the $15 per hour bench mark in the opposite direction. We cannot destabilize small business throughout rural America as we work to stabilize our minimum wage workers.

What we need to do is act smart and address these two major concerns right up front. First, we have all learned by now that one size (or one wage amount) does not fit all. In fact, we have learned that we are a nation of 1,000 plus economies. Each population area throughout the nation has its own cost of living. We’ve all traveled; we know this to be true. We all know it costs much more to visit/live in Washington DC than it does to visit/live in Rapid City, South Dakota. The ULW formula takes this very real concern into account. We realize that by simply ascribing $15/ hour in an area that only requires $10 per hour would seriously hurt small business in that area. We must not saddle them with a one size fits all $15 per hour wage when it’s unnecessary and destructive to small business. Instead, we can use the HUD Fair Market Rent values to determine what a person should reasonably expect to pay for an apartment and other living necessities throughout the nation in areas about the size of counties. Then by simply making the wage relate to the cost of housing by indexing it to the local cost of housing, we ensure that no matter what that housing cost rises to, if we put in our 40 units of work per week, we’ll be able to afford basic housing and the core necessities of life without hurting small business. This is also a reason for people to be drawn away from welfare and back into work.

We need to keep the federal standard created in 1938 after the Great Depression that established The Federal Minimum Wage, in play for the entire nation. We need to be able to afford the basics in life: food, clothing and shelter (now transportation is added with the ULW formula) but we must tweak The Federal Minimum Wage so it is based locally. By using the same principle throughout the nation, but by indexing it locally, we find that over time, we are able to make the wage relate to even the most costly of housing markets in urban America without hurting small businesses in rural America.

This approach finally solves the problem of wage inequality at the minimum wage level while ensuring that a full time minimum wage worker is able to afford a roof over their head, (other than a bridge), and without adding to the existing homeless population. Finally, it gives businesses the opportunity to plan ahead by knowing exactly what the wage of employees will be now and in the future.

Photo: Steve Rhodes