Sunday, January 13, 2013

Raising Minimum Wage will Cut Government Spending

Raising the Federal Minimum Wage Would Allow Us to Cut Government Spending - Because $7.25 an Hour is NOT a "Living Wage".

When people are paid less than it costs to live, yes, they will try to qualify for "free stuff". After paying for food and rent, who can live on $71 a month? If we raised the U.S. Federal minimum wage to $20 an hour, the Federal, State and local governments would no longer have to subsidize wages -- meaning, the taxpayers wouldn't have to give away most of all that so-called "free stuff".

The U.S. government defines "poverty" for a single person (without children) as someone with AN ANNUAL GROSS INCOME of $11,170 --- which includes ALL sources of income (wages, unemployment insurance, Social Security, welfare, veteran's benefits, pensions, alimony, child support, etc).

Over 38 million American wage earners (25% of the entire work force) NET less than that a year. And 50 million (33% of the entire work force) only NETS $15,000 a year or less (based on wages earned that are subjected to FICA and Federal income taxes and are reported by employers on Forms W-2. (Source: Social Security Administration).

If you work full-time and earn $8.25 an hour in Nevada, you would be OVER the limit to qualify for food stamps (SNAP).

And if you earned ZERO in income and had ZERO in assets, but were older (say 55) and had access to an IRA, 401k or pension fund for an early withdrawal, that would be considered first before determining whether or not you could qualify for TANF (welfare) -- which is only $400 a month for a single person without children in the State of Nevada.

I've lived all over the country, and so the calculations below are based on the REAL average cost-of-living expenses based on my own personal experiences. You can use your own "wage" and calculate your payroll taxes here -- and then apply the cost of rent, utilities and groceries where you live.

If You Live in Las Vegas and Earn the Nevada Minimum Wage

In my case scenario below you are single, you have no children, you live in Las Vegas, you earn the Nevada minimum wage of $8.25 an hour and you walk to work, so you don't need no car. (I also don't mention exemptions, deductions or other expenses that could convolute the scenario, keeping this scenario as simple as possible.) I also use Nevada in my scenario because it not only represents the average cost of rent and food, but it is also is the best case scenario for someone making $8.25 an hour, where there is no State, County or City taxes withheld from someone's paycheck (as it is in places like NYC).

Here Are Your Basic Monthly Living Expenses

  • $750 rent for a 700 sq-ft one-bedroom apartment (includes W/D, water, trash pick- up)
  • $150 electric or gas (heat, A/C, hot water, cooking, etc.)
  • $200 food ($50 a week or $6-$7 a day)
  • = a total of $1,100 a month -- or $13,200 a year for the most basic living expenses.

Look at this weekly paycheck

If you are earning the Nevada minimum wage in Las Vegas (and pay no state or city payroll taxes, just federal and FICA taxes): That equates to $8.25 an hour X 40 hours a week (if you are allowed to work full-time) = $270.18 NET a week after payroll withholding taxes (see chart below) = $14,049.36 a year in actual take-home pay.

That this leaves you...

  • $14,049.36 in NET wages per year
  • minus $13,200.00 a year for rent, heat and food
  • = $849.36 a year NET as a balance --- or $70.78 a month to live on.

What can $70.78 a month pay for, beyond BASIC rent, heat and food?

$70.78 a month is what you will have left over for...

  • clothes
  • hygienic and cleaning goods
  • basic land line telephone (no cell)
  • basic cable TV and internet connection (if this is not considered a "luxury", like telephones and refrigerators once were.)

After that, this is what you would not have any money left over for...

  • health insurance (not near enough!)
  • savings for emergencies (not enough)
  • savings for retirement (not enough)
  • school tuition (not enough)

Now let's add another "luxury"

  • car payment (not enough)*
  • car insurance (not enough)
  • gas for car (not enough)
  • car maintenance (not enough)

* Remember, in my case scenario you are walking to work, so a car isn't needed -- although most people need a car to get to work. And you are living in a small average-sized apartment within walking distance to your work, so you wouldn't need bus fare either.

The maximum monthly gross income in Nevada (for someone who is single without children) to be eligible for food stamps is $1,174 a month GROSS (or $903 a month NET).


If you earn the Nevada minimum wage of $8.25 an hour (X 40 hours a week ($330) X 52 weeks a year ($17,160) ÷ 12 months = $1,430 a month) that is OVER the limit to qualify for food stamps. Are you getting all this Bill O'Reilly?

In other words, in a State like Nevada, if you are single, you would have to be already living near the poverty level to qualify for food stamps, and you will only have your Social Security income to rely on when you get older if you opt to take welfare and try live on $400 a month in cash assistance with $200 a month in food stamps. (which is $600 a month X 12 months = $7,200 a year in government assistant) and maybe you might also qualify for state Medicaid for healthcare, especially if you have a pending Social Security disability claim.

Fox News Bill O'Reilly said "millions are leaving their jobs to go on disability" and that Social Security disability is a con. He says," It's easy to put in a bogus disability claim." Yeah Bill, it might be easy to file a claim, but it's very difficult to actually peruse a claim and to have a claim eventually approved (it takes about 2 to 3 years on average).

And IF approved, the average monthly SSD benefit is $1,111 -- or $13,332 a year -- which is what you'd be earning making $8.25 a hour --- just enough for a small apartment, heat and food -- which is too much to qualify for food stamps in Nevada --- and leaving you about $70.78 a month left over to live on.

But Bill O'Reilly and John Stossel (and all the other loons at Fox News) are telling the general public that millions of lazy slackers are leaving their jobs to get $40,000 a year in government benefits. PANTS ON FIRE! They say those things to deliberately enrage the taxpayers, so that they will demand more cuts in government spending (so that multi-millionaires can pay less in taxes).

Bill O'Reilly and John Stossel (and the Republicans and Tea Party) want everyone to believe that millions of Americans are living "high on the hog" and drinking Margaritas by pool at the taxpayer's expense. These seek out a few bad examples and use them to make their case with false analogies. It's just not true.

So what part of my scenario doesn't corporate America, the Republicans or people like Mitt Romney and Bill O'Reilly understand? When people are paid less than it costs to live (or earn nothing at all), yes, they will try to qualify for "free stuff", such as food stamps (etc).

A payroll check for a single person in Nevada earning $8.25 an hour for 40 hours in one week.

Net Pay
Calculation Based On

According the Bureau of Labor Statistics there are 1,427,300 maids and housekeeping employees in the U.S. -- and that number is expected to climb to another 111,600 over the next 7 years. Maids and hotel housekeepers work very hard for a median average wage of $9.32 an hour.

But they only gross 82¢ an hour more than in my case scenario...just like the 1.2 million Americans who work at Wal-Mart, or the 745,000 who work at McDonalds, and all the others who work at places like Dominos, PaPa Johns and Staples --- employers who pay the "47%" sub-standard wages and give them no benefits.

What part of my scenario doesn't corporate America, the Republicans and people like Mitt Romney understand?

Mitt Romney's "47%" are just regular Americans who are forced to try to live on a net annual income of $27,000 a year or less -- and why 80% of all households NEED two wage earners just to survive -- and why mom can no longer stay home to supervise the kids -- and why over 45 million Americans don't have healthcare and also need food stamps.

>>>> Raise the federal minimum wage to $20 an hour and the government won't have to subsidize wages in the private sector any longer, so there will be far less people who need to "free stuff". Then maybe multi-millionaires like Bill O'Reilly can stop whining about government "hand outs" -- and the "makers" can stop complaining about the "takers".

And then maybe we can cut government spending (while eliminating tax loopholes for millionaires) and lower the national debt.

As an aside - Speaking of tax loopholes: If someone like Mitt Romney can deduct $17,000 a year from his federal income taxes for the cost and care of maintaining a show horse as a medical expense (because it's therapeutic and makes his wife Ann feel better), then if someone loses their job and is diagnosed for depression, can they buy a dog and also write off the cost and care of their pet because it makes them feel better? Just wondering ;)

1 comment:

  1. An E-Mail to the DAILY DELANEY DOWNER at the Huffington Post:

    "I was divorced in 2007. Lost everything I had worked for through my lifetime. Had to take early SS retirement just to be able to get off the streets. I still struggle every month to meet expenses. My benefit amount will increase from $1,018 to $1,035, an increase of $17. Wow. I can assure you that food prices have increased MORE than the 1.7% that the COLA embraces. It really stokes my furnace when I read of these people in DC who have NO CLUE what it is like to subsist on that amount monthly."