The hourly wage has remained stagnant at $7.25 since 2009. Gov. Tom Wolf is working to change that, despite opposition from state Republicans.
Could you survive on $15,000 per year?
For the more than 96,000 minimum wage workers in Pennsylvania, that question isn’t hypothetical—it’s reality. The state’s minimum wage is $7.25 per hour, or $15,080 a year, assuming 40-hour work weeks. That’s tied for the lowest rate in the nation.
Pennsylvania’s Democratic Gov. Tom Wolf is working to change that: Last week, he announced he will once again push to raise the state’s minimum wage. (This will be the sixth time Wolf has tried to enact this change.) His plan includes increasing the current minimum wage to $12 an hour by July 1, 2020, with annual 50-cent increases until the rate tops out at $15 an hour in 2026.
“Too many workers are still struggling to get by because Pennsylvania hasn’t raised the minimum wage in more than a decade,” Gov. Wolf said in a statement. “The cost of living goes up and Pennsylvanians wait as 29 other states, including all of our neighbors, raised the minimum wage for their workers.”
Pennsylvania’s minimum wage has not increased since 2009—that’s also the last time the federal government raised its own $7.25 an hour minimum wage.
According to the independent, nonprofit think tank Economic Policy Institute, workers today who earn the federal minimum wage are, after adjusting for inflation, paid 29% less than their counterparts were in 1968. EPI experts also say that if the minimum wage kept pace with the rate of labor productivity growth since 1968, it would be over $20 per hour today.
Pennsylvania Senate Republicans supported a $9.50 per hour minimum wage in 2019, but it was a non-starter in the House.
Wolf’s new proposal appears destined to meet a similar fate. House Majority Leader Bryan Cutler (R-Lancaster County), argued last week that raising the minimum wage as much as Wolf wants would lead to job losses. Republicans in other cities and states that raised their minimum wage made similar arguments, but those losses have largely failed to come to fruition.
“Too many workers are still struggling to get by because Pennsylvania hasn’t raised the minimum wage in more than a decade.”
While Wolf’s battle with Republicans unfolds, we decided to take a closer look on what it might look like to try to live on the state’s current minimum wage.
A Living Wage
An increasingly common way to measure the fairness of a state’s minimum wage is to compare it against a “living wage,” which the Massachusetts Institute of Technology (MIT) defined as the “minimum subsistence wage for persons living in the United States.”
The living wage model is a market-based approach that takes into account the geographically specific costs of food, childcare, health insurance, housing, transportation, and other basic necessities. The living wage model does not allow for spending on eating out at restaurants, entertainment, unpaid vacations or holidays, or any sort of savings or long-term investments.
According to MIT’s living wage calculator, the average living wage across Pennsylvania is $11.45 per hour—more than $4 above the state’s minimum wage.
The living wage varies from city to city and county to county. In Philadelphia, a living wage would mean earning $12.64 per hour, while in Johnstown—which has a population of 19,643—the living wage is only $10.26 per hour.
Surviving on the Minimum Wage
Let’s look at the Allentown-Bethlehem-Easton metropolitan area, also known as the Lehigh Valley, where the living wage for one adult with no children is $11.40—only five cents below the state average. There are about 843,000 Pennsylvanians living in the Lehigh Valley.
For our purposes, let’s assume one of them is named Jane. Jane lives in Bethlehem and earns the minimum wage of $7.25 per hour, which translates to an annual gross income of $15,080 before taxes.
Jane’s after-tax or “net” income could vary based on several factors, but assuming she pays all of her federal, state, and local taxes (Bethlehem has a 1% income tax rate), that number ends up at $13,025.
Jane has no children, no student loan or credit card debt, no monthly car payments, and no major healthcare conditions that require expensive out-of-pocket costs. In short, the only thing Jane is paying for is rent, utilities, food costs, transportation, and medical care.
Would $13,025 be enough for her to live on?
According to the National Low-Income Housing Coalition’s 2019 Out of Reach report on rental affordability, the fair market rent for a one-bedroom apartment in the Lehigh Valley is $887.
That equals out to $10,644 per year, or more than two-thirds of Jane’s annual take-home pay just on housing.
If you live in a one-bedroom apartment, the rule of thumb is to allot about 20% of your rent for utilities, assuming you skip a cable TV subscription. That comes out to about $177 per month, or $2,124 per year that Jane spends on utilities.
Estimates vary here, but according to one analysis, the lowest 20% of earners, which Jane is part of, spend an average of $2,582 per year on groceries.
Jane doesn’t own a car and therefore foregoes the cost of monthly payments, car insurance, gas, and repairs. Instead, she takes public transit to and from her job. A monthly pass for the Lehigh Valley’s LANtaBus system comes in at $60.
That’s $720 per year, assuming she never needs to take a cab, Lyft, or Uber.
So far, Jane’s total annual expenses ($10,644 + $2,124 + $2,582 + $720) equal $16,070.
We’ve blown past Jane’s net salary by more than $3,000 before even taking healthcare expenses into account. Medical costs are among the toughest to estimate, given the enormous disparity in coverage, providers, and medical situations from person to person.
If Jane receives employer-sponsored coverage—which is rare for minimum wage workers—MIT estimates she would spend $2,321 on medical care per year as part of her employer-sponsored plan. If she didn’t, she could spend anywhere from nothing to tens of thousands of dollars, depending on her health and whether she obtains insurance.
There’s another wrinkle to this: Since Jane’s pre-tax salary is $15,080, she qualifies for Medicaid in Pennsylvania, which would cover a substantial portion of her costs.
Assuming she obtains coverage through the public insurance program, she would still have some out-of-pocket costs, but they would be low. This does present a catch-22, however: Jane could lose the coverage if her salary rises above 133% of the federal poverty line, or $16,612.
This means that if Jane opts to work 50 hours per week to make some extra money to survive, she risks losing Medicaid and having to purchase her own insurance on Pennsylvania’s health insurance exchange, which would cut into those earnings.
It’s Not Enough
This is far from a scientific exercise, obviously. Jane could always opt to save on housing costs by splitting a one-bedroom apartment with a family member or living with multiple people in a larger apartment.
But it’s important to remember that this was also calculated assuming that Jane has no debt, no children, no car payments, no car insurance or gas payments, no gym membership, and no Netflix subscription. Jane never eats out, never goes to a bar, never goes out to see a movie, and never buys clothing, jewelry, makeup, or furniture. She also can’t afford a cellphone, which makes it difficult to communicate with her employer—or anyone, for that matter.
Even crunching the few numbers we looked at, it seems to be virtually impossible, or at best, extremely difficult, for Jane or any other Lehigh Valley resident to survive while earning the minimum wage.
The Battle Over the Minimum Wage
Jane is fictional, but 96,300 Pennsylvania workers earned the minimum wage or less in 2018.
Not only would these workers benefit from a minimum wage increase, but, as Gov. Wolf pointed out, raising the rate would provide a direct wage increase to a total of one million workers while also improving financial stability for women, and rural and tipped workers.
In the long run, that number could grow even higher. A 2019 report from the Harrisburg-based Keystone Research Center (KRC) found that increasing Pennsylvania’s minimum wage to $15 per hour by 2025 would boost the wages of 2 million workers, or 33.7 percent of the state’s resident workforce.
Contrary to popular belief, the majority of workers who would benefit from the raise are not teenagers, but adults. Nearly 90 percent of workers who would get a raise are adults, 61 percent are women, and 55 percent work full-time, according to the KRC report.
Raising the state’s minimum wage to $15 per hour would also allow nearly 93,000 adults to move off the state’s Medicaid program and generate more than $300 million in state tax revenue in 2026, according to Wolf.
There is broad support for raising the minimum wage among working Pennsylvanians. A November 2019 study from the Center for American Progress Action Fund found that 68 percent of working-class voters and 67.9 percent of college-educated voters in Pennsylvania said they would vote for a hypothetical ballot measure to raise the state’s minimum wage.
But there is no ballot measure at the moment—the decision will ultimately lie with Republicans.
Knowing that, Wolf and his allies in the legislature appear ready to turn up the pressure. “The unwillingness of Pennsylvania House leaders merely to consider our bipartisan minimum wage legislation is a sad commentary on their commitment to the working people of the Commonwealth,” State Sen. Christine Tartaglione (D-Philadelphia) said in a statement. “Regressive ideologies and nebulous special interests seem to be calling the shots. As a result, millions of low-wage Pennsylvanians continue to suffer.”