How about an example from an employee perspective, though one is sensitive to the increased costs over the seven years the minimum raise would be phased in? (Raising the minimum wage to $15/hour over the next seven years would increase it annually by $1.07 per hour. The last time the minimum raise was raised was twelve years ago. Should the raises from $7.25/hr to $15 per hour have been spread out over those twelve plus the seven years now planned, the annual increase per year would have been 40 cents per year.)
A worker in Wichita, Kansas at the current minimum wage is $7.25 x 40 hrs x 52 weeks = $15,080.
Total income taxes are $1,766 leaving take home pay of $13,314. (from Smart Asset) Federal poverty level for one person is $12,490. Kansas Medicaid eligibility is an income not more than $16,612. So the employee would qualify for Medicaid but not food stamps (SNAP) in Kansas (below $14,940).
Acccording to
Living Wage Calculation for Wichita County, Kansas
which recommends a living wage for the detailed expenses to be $10.73 per hour for one adult, the
primary expenses for one adult for one year - Food - $3,058, Medical $2,244, Housing $6,096, Transportation - $4,866. Total - $16,264
(Their Housing calculation may be lower than it should. $6,096/12= $508 per month. Average rent in Wichita for a 761 sq ft is $644/month) Starting out, the projected expenses are higher than a minimum wage annual salary. However, because the employee qualifies for Medicaid, the medical of $2,244 can be subtracted. Augmenting food sources by going to food pantries, since they do qualify for SNAP will help lower those costs, making that $13,314 take home pay go farther. A roommate helps lower one's housing costs but may disqualify them from Medicaid, since criteria are figured on household income. Or lie about who's in the household. Cut out car insurance or a car, take public transportation or carpool. Assets are considered in Medicaid. A Medicaid extension would help when an income rises about FPL and an employer does not offer medical. Subsidize housing would help until an employee could save enough to get our.
So, after the first year's raise using the Smart Asset calculator linked, they would be earning $8.32 per hour or $17,305 with take home pay after taxes ($2228) of $15,077. In that first year, the employee would leave the Medicaid role for Kansas. The employee would also pay the federal government $223 more in taxes and $69 more in state taxes as well as $170 more in FICA. (Wichita does not have local taxes) The second year with another $1.07 per hour increase to $9.39/hr, they would still be less than the living wage for Wichita from above of $10.73. The third year the employee would be at $10.46 per hour. They are off the Medicaid roles, off government assistance, and contributing to state and federal taxes as well as contributing more to Social Security.
Medical costs are a concern for both employer and employee. As the employee moves out of Kansas Medicaid, they will hopefully have a health plan with their employer. A referendum by Kansas voters authorized an expansion of Medicaid to 140% of FPL, which the newly-elected Gov ran on, but the legislature has still not enacted it. (The chances of leaving it up to the Kansas legislature to increase the minimum wage are none.) So the minimum wage employee who has just left Medicaid must rely on their employer's plan. A deductible may run from $2-5,000 if they get sick.
Recently costs of living in the U.S. has gone up 2% per year. Kansas' cost of living index overall is low 89.0 (average 100), mostly due to low housing costs in most parts of the state.
Wichita's overall is 86.3 vs Overland Park (KC suburb) of 119.6.
Higher education always holds the possiblity of escaping a minimum wage trap. Should that employee, who is a graduate from K.U., be working at a minimum wage due to not finding employment in their field of study, they have averaged taking out $26,736 in loans. Perhaps they are contributing to public service in a profession that qualifies for loan forgiveness in ten years. Financial institutions and the fed government would not want them defaulting.
This is a best case scenario at a location with a low cost of living, low taxes, low housing, an unemployment rate of 3.7% and, if a higher ed graduate, relatively lower tuition. Change any of those factors for different parts of the country through the Location setting to get a better picture there. The benefits of raising the minimum wage phasing it in over seven years and getting employees off federal programs with more money to spend in their communities as well as increasing the state and federal revenues are clear. As noted, CBO estimates 17 million Americans would get out of poverty. Changes to any of the federal programs or block grants to the states might lower the chances of lifting yourself out of poverty.
