Minimum wage increasingly lags poverty line

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Snapshot for January 31, 2007.

Minimum wage increasingly lags poverty line

by Liana Fox

The recently released 2007 federal poverty guideline highlights the severe and growing inadequacy of the minimum wage. Currently, a full-time minimum wage worker (40 hours/week, 52 weeks/year) would earn $10,712 a year, falling nearly 40% below the $17,170 poverty level for a family of three. Even after factoring in the earned income tax credit, which was designed to bring low-wage workers up to the poverty line, this worker would still fall short of the poverty line.1

The minimum wage is at its lowest real value in over 50 years and has not been raised since 1997. This is the longest stretch of federal inaction since the minimum wage was first instated in 1938. As the basic income required to support a family has grown with inflation,2 the minimum wage has not kept pace with the rising costs of goods. As a result, federal inaction leaves minimum wage workers in an increasingly dire situation.

Every day that Congress fails to enact a higher minimum wage, workers lose purchasing power. However, if the minimum wage bill currently under debate in the Senate (HR 2) were immediately passed, this gap would be significantly reduced. In 2009, this bill would raise full-time minimum wage workers above the poverty line for a family of two for the first time in over a decade. While this modest bill would still place minimum wage workers 18% below the poverty line for a family of three, it would provide much needed relief to low-wage workers and their families.

Notes
1. In 2007, families with two or more children will receive an EITC equal to 40 cents for each dollar up to $11,790 earned, for a maximum benefit of $4,716. A single worker with two children earning $10,712/year would qualify for a $4,285 tax credit under the federal EITC program, receiving a total of $14,997in 2007, which is $2,173 below the federal poverty level.

2. It is widely recognized that the poverty line substantially understates the income needed to support a family.