Even with raise on the table, workers struggle to make ends meet
by Vanessa Newman, National Housing Conference
The cost of living near jobs, transit and amenities keeps growing in many American cities, while the minimum wage stays the same. The Center’s latest edition of Paycheck to Paycheck, detailing housing costs and wages for workers in 76 different jobs in hundreds of cities nationwide, just came out August 15, highlighting the gap even full-time workers face between how much they take home and how much they need to cover the rent or mortgage. At least partly in response to the growing need for housing affordability, cities including Chicago and Washington, D.C., are considering or already have enacted “living wage” laws to force large retailers to pay higher wages to workers. Perhaps it’s time to talk about what makes living in high-cost markets so unaffordable, what the minimum wage was designed to do, where it’s failed, and what we can do to help minimum- and low-wage workers make ends meet in communities nationwide.
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| Seem cheap for Park Avenue? It was even cheaper than it seems. Consider that in this apartment ad from the 1930s, the rent listed was per year, not per month. |
The first federal minimum wage was set in 1938 at $0.25 per hour and, although the minimum wage was never pegged to automatically rise with the cost of living, the law was written with the intention that Congress would do so. Between 1938 and the time of the last minimum wage hike in 2009, the minimum wage rose from 25¢ per hour ($3.80 per hour in 2013 dollars) to $7.25/hr. Minimum wage growth has outpaced inflation over the long-term, so it would seem that low-wage workers should be better off now than they were in the past (at least better than they were in 1938). However, certain crucial costs of living, such as housing and transportation, have grown even faster than the minimum wage, taking up a growing share of the household budgets of low-wage workers. In 1938, the significantly poor or underprivileged could rent a Single Room Occupancy (SRO) hotel room. Moderate-wage workers could easily afford an apartment even in commercial hub cities. In 1930s New York, for example, rent on the average apartment ran, on average, $45 per month in the currency of the day (equivalent to about $750 per month in today’s dollars). Today, SRO hotels and boarding houses are scarce, and the equivalent price of an apartment in New York today would be about $3,500 per month. This would mean the inflation in the New York housing market has increased nearly 8,000%, outstripping the rate at which minimum wage was ever expected to increase.
With housing inflation being so off the charts in comparison to the increase rate of minimum wage, not just in New York, but increasingly in urban cities, D.C.’s “Large Retailer Accountability Act of 2013”, which passed in July, is progress. The bill requires all retailers operating stores at least 75,000 square feet and whose corporate parent has sales of at least $1 billion to pay wages no less than $12.50/hr. Although that probably doesn’t affect the majority of businesses in the district, for some, that $4.75 difference may seem like a blessing. A blessing it may be, but that additional $4.75 simply still isn’t enough to bring housing costs within reach of those getting the increase. According to that fresh Paycheck to Paycheck data, the fair market rent for a one-bedroom apartment in the D.C. metro area is $1,328 per month, requiring an annual income of $53,120 to make it affordable. And while D.C. is experiencing a major construction boom, most new home construction in the city is of luxury apartments and condominiums, doing nothing to increase the supply of affordable housing and causing housing costs in once-affordable neighborhoods to rise rapidly.
Let’s use Wal-Mart as an example of being one of the companies affected by the new act. Wal-Mart employs salespeople, food prep staff and janitors, all job categories offering wages not much above minimum wage, which comes out to about $15,000 a year. However welcome an additional $4.75 an hour would be to help these workers meet their household budgets, it’s not enough to help cover the full cost of housing in an expensive housing market like D.C. That $4.75 raise would bring up workers’ annual pay to about $26,000, still only about half of what they’d need to make to afford the rent on a one-bedroom apartment, and that’s just to cover rent, not including transportation, food, healthcare, etc.
Moving farther away from job centers to areas with a cheaper average housing costs isn’t an answer, either; according to the Center’s 2012 report Losing Ground, adding transportation costs necessary to cover a long commute can make outlying areas some of the most expensive parts of a metro area when transportation costs are factored in.
Despite the efforts of D.C.’s Large Retailer Accountability Act, it simply isn’t enough, for those affected by the change, and those working in smaller retail businesses won’t be able to enjoy the raise at all. If we’re being realistic, change isn’t going to happen overnight, and although a raise in minimum wage is a bit of progress, it is infeasible to believe at this time, the government is going to take on a minimum wage reform to catch low-wage workers up entirely with the costs of living they face.
One venue of progress-making, more practical than a federal minimum wage hike, is adopting housing policies that benefit low-income residents living in these high-cost-of-living areas. Many options require federal action, but many other options can be enacted at the state and local levels.
Increasing housing vouchers for more families who may not be eligible but should be and providing services to help assist families in finding low-income housing is one action. Increasing the supply of Tax Credit and public housing for families on vouchers and of low-income to be able to have homes to find is another action we can take. Enacting zoning codes or providing incentives for builders to construct mixed-income housing, especially in income-diverse areas such as D.C., to maintain housing equality is another action we strive for. Funding bills that show promise in making progress in improving and expanding affordable housing or advocating for these policies to are both solutions to the issue of affordable housing.
Through these efforts of pushing for more affordable housing and income equality, we hope to create more environments where the cost of living will be truly affordable not just to those earning a livable wage, but minimum wage as well.
Vanessa Newman was a summer Marketing and Communications intern with the National Housing Conference. The Maryland native’s last day was August 22, 2013, when she returned to American University to continue her studies.