$7.25 minimum wage doesn’t help families pay all the bills in any state

on Mar2
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Activists with Our Revolution hold $15 minimum wage signs outside the Capitol complex on Thursday, Feb. 25, 2021, to call on Congress to pass the $15 federal minimum wage hike proposed as part of the Covid relief bill.

Bill Clark | CQ-Roll Call, Inc. | Getty Images

After legislative setbacks, Democrats appear to have scrapped plans to add a $15 federal minimum wage to the $1.9 trillion Covid relief bill being weighed in Washington.

That means the current national wage floor — $7.25 an hour, or about $15,000 a year before tax — will likely remain in place for the short term.

The current minimum wage doesn’t cover the cost of living for full-time workers in any U.S. state, according to cost-of-living data published by researchers at the Massachusetts Institute of Technology.

The cost of living would eclipse earnings for single adults in about half of states, even with $15 an hour. And the typical family of four couldn’t afford the basics in any U.S. state. (This example assumes two adults, working full-time for minimum pay, with two children.)

The data weighs costs like food, childcare, health care, housing, transportation and other necessities. It doesn’t include income from safety net programs for the poor.

Setback for Democrats

Democrats can pass the bill with a simple majority in the Senate — as opposed to the typical 60-vote threshold — using a process called budget reconciliation.

But they were dealt a blow last week when the Senate parliamentarian ruled a $15 minimum wage didn’t meet the strict criteria for reconciliation. Senior party members eyed a workaround that would have taxed big companies paying a lesser wage. They quickly abandoned that “plan B” due to a time crunch.

Now some progressives are calling for President Joe Biden to override the parliamentarian’s decision. Administration officials have said there are no plans to do so.

“If we don’t overrule the Senate parliamentarian, we are condoning poverty wages for millions of Americans,” said Rep. Ro Khanna, D-Calif. on Monday.

Democrats, including President Biden, have vowed to continue the fight for a $15 minimum wage if it’s not ultimately included in the American Rescue Plan.

That plan would likely face significant opposition from Republicans. Some centrist Democrats have pushed back, too. Critics argue a national pay increase would lead businesses to cut jobs due to higher labor costs, potentially outweighing the benefits.

“It’d boost the income of some but lose income for others” said Rachel Greszler, an economist at the Heritage Foundation, a conservative think tank. “I don’t think those are very good tradeoffs.”

Where shortfalls are greatest

For single adults with no kids, current wage shortfalls relative to cost of living are largest in Georgia, Louisiana, New Hampshire, North Carolina, Pennsylvania South Carolina, Texas, Utah and Virginia, according to a CNBC analysis of living-wage data.

All pay $7.25 an hour. (Virginia recently passed a law to raise it later this year.)

Single adults working 40 hours a week in those areas can cover less than half their living expenses, on average, when earning the minimum wage, according to the analysis.

Regional differences

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