According to the budget rule of 50/30/20, which the majority of economists are known to say is the split for living expenses, individuals would spend 50% of their income on needs, 30% on wants, and 20% on savings. If this is how money would be spent then why is it not how money should be made?
Today, the minimum wage rate in Michigan is $9.25 an hour. If you work 40 hours a week for a full year (2080 hours) you will gross $19,240. According to people in the finance / economics world, who are much smarter than me, 50% of that is spent on “needs”; housing, utilities, health insurance, transportation, food, etc. This means that you have, after a single person deducts 12% for federal taxes, $705.47 a month for rent, utilities, healthcare, car expenses (payment, insurance, maintenance, gas), local taxes, and groceries.
The information I found shows the minimum average cost of living in Michigan is roughly $27,000 annual gross, or $13/hr..
To make it simple just take rent (which many sites I found online do to determine cost of living). I’ve read that no more than 30% of your pay should go towards rent. If you make minimum wage and work full-time you will need to find a place for $481 month (just in rent) maximum. I did an apartment search in my state for a studio and there was nothing under $500; the state average came in around $750/$800 a month (some sites indicated a higher average but I don’t need to risk embellishing to make my point). If you stick with the 30% rule and trust that $500 is the minimum rent, you would need to make $1,666.67 a month or $9.62 an hour just to afford the cheapest place you can find in this state.
And yet, our minimum wage is set to even lower than what the minimum cost of living is.
I honestly don’t know how anyone can take a moral stance on minimum wage staying where it is today. Minimum wage should allow an individual who works full-time to live an average life covering basic need, some wants and an ability to set aside savings. This leads to non-dependency on government aid and contributions to economic growth like spending and investments.
Note: Yes, to do better one works harder, longer, wiser. But for the purpose of this blog we’re speaking only of minimums.
Uncommon Tongue 