A Higher Minimum Wage Does Not Equate to a Living Wage

Feb. 13, 2013— -- A full-time worker who earns a minimum wage today makes about $14,500 a year. That may be enough for a single person to live on in some parts of the country, but in others it doesn't come close.

Areas with high Hispanic populations, such as Los Angeles, Miami and Chicago, have higher than average costs of living, and many families struggle to make ends meet even when they earn a minimum wage.

President Barack Obama said he wanted to change that during the State of the Union address on Tuesday night. He called for an increase in the minimum wage to $9 an hour from the current rate of $7.25. He also proposed linking minimum wage to inflation so that increases in cost of living trigger an increase in the minimum wage.

The additional $1.75 an hour would give a minimum-wage earner about $3,500 more per year for a total of $18,000. But is that enough to offset the high cost of living in many places, and does it amount to a livable wage?

That much is up for debate.

The federal poverty level in 2009 for one person was $10,830 and $22,050 for a family of four. A family with two full-time minimum wage workers would theoretically rise above the poverty line.

But there is a difference between beating a federal marker and actually getting by.

According to 2009 Census data, the average Hispanic family earned about $40,000 in 2009. However, Hispanic households spent more than that, about $42,000 per year, including an average of nearly $16,000 on housing.

That number soars for some urban areas.

Households in the heavily Hispanic Los Angeles metropolitan area spent an average of more than $54,000 a year in 2009-10. In other words, they spent three times the poverty level. And the average family didn't spend an exorbitant amount on extras like entertainment. Most income goes toward housing costs.

As housing prices and the cost of living have soared in recent decades, the poverty level has not kept pace.

In 1999, it was $16,700 for a family of four when households in the L.A. area spent about $44,750 a year. The poverty level has gone up less than $6,000, while average expenditures have increased by nearly $10,000.

And Latinos are particularly vulnerable to poverty.

According to a report by the Department of Labor, Latinos working full-time earned a median weekly wage in 2011 that "was only 71 percent of that earned by Whites."

The report notes that the difference in earnings is due to a number of factors, including lower levels of education and different skill sets. Latinos are less likely to have college degrees, and less likely to work in high-paying management positions. Language barriers also play a role for Hispanics, particularly immigrants.

Latinos make up a quarter of all construction workers, an industry that has struggled to rebound following the economic slump and foreclosure crisis. And many work in food services and other industries that skirt minimum-age requirements by factoring in tips, which are anything but reliable.

Still, a number of Republicans argue that increasing the minimum wage will actually hurt workers, particularly those in low-paying jobs. They say it would harm small businesses by forcing employers to lay off workers, and drive up the price of goods and services. Businesses say they will have to downsize or pass the added costs on to consumers.