Can a Family Survive on the U.S. Minimum Wage?

The federal minimum wage for nonexempt employees in the United States is $7.25 as of 2024. It's meant to be a living wage but this isn’t the case in practice. The hourly rate hasn’t kept up with the cost of living since 1970. The earnings of a minimum wage worker with a family of four fall well below the poverty line.

Thirty states, the District of Columbia, Puerto Rico, the Virgin Islands, and Guam, have minimum wage rates higher than $7.25 as of 2024, however.

What Is the U.S. Federal Minimum Wage?  

The federal minimum wage has been $7.25 an hour or $15,080 a year since 2009. Many economists believe that this is woefully inadequate and unjust. The minimum wage peaked at an inflation-adjusted value of $12.61 in 2023 dollars in 1970, which was worth 74% more than the federal minimum wage in 2023.

History of the Federal Minimum Wage

The minimum wage has been a political issue since its inception. President Franklin Delano Roosevelt said in 1933, five years before the first minimum wage became law, that “...by living wages, I mean more than a bare subsistence level—I mean the wages of a decent living.” The first U.S. minimum wage was implemented in 1938 as part of the Fair Labor Standards Act.

President Barack Obama signed an executive order to increase the minimum wage of some federal workers to $10.10, reasoning that the overall federal rate should also be raised to that amount. This campaign stalled in Congress but federal inaction prompted many states to legislate their own minimum wage increases.

The U.S. House of Representatives and the Senate both referred the Raise the Wage Act of 2021 to committee in early 2021. The bill is aimed to gradually increase the federal minimum wage to $15 an hour by 2025. It was last introduced in 2019 but it didn't make it out of committee. The debate about whether to lift the federal minimum wage rages on as a result.

A movement to increase the minimum wage has been largely worker-driven since about 2010. Fast-food and retail workers have staged nationwide walkouts in grassroots efforts to effect change. Home care workers, labor organizations, and women’s groups have also joined the fight.

Minimum Wage by State

Thirty states, the District of Columbia, Guam, Puerto Rico, and the Virgin Islands paid more than the federal wage floor as of 2024.

Individual cities have also taken action. The minimum wage in Seattle is $19.97 as of 2024, more than double the federal minimum.

Florida residents voted to increase the state’s minimum wage incrementally in Nov. 2020, beginning at $10 per hour on Sept. 30, 2021, until it reaches $15 per hour in Sept. 2026.

Twenty-two states increased their minimum wages starting Jan. 1, 2024, including Washington, California, Maine, New York, New Jersey, Delaware, Colorado, and Arizona.

Voters in the District of Columbia passed a measure in the Nov. 2022 election that will increase the minimum wage for tipped workers, set at $5.05 at the time, until it matches the minimum wage for non-tipped workers by 2027.

Can a Family Survive on Minimum Wage?

Full-time employees earning the federal minimum annually pocket just $15,080 in 2023 if they work 40 hours each of the 52 weeks in a year. This places them well below the $19,720 poverty line in 2023 for families of two. A full-time minimum wage earner with a family of four falls $14,920 below the 2023 poverty line of $30,000.

Pay Isn't the Only Problem

Many companies don’t offer full-time hours, even when workers want them. Fluctuating work schedules, split shifts, and the dreaded “clopening” of closing the store at night, then reporting back to work early the next morning to open it, make it difficult for employees to work second jobs, attend college classes, or arrange childcare.

Minimum wage employees are also vulnerable to pay reduction from wage theft, which includes lack of overtime pay, erased time cards, and any unpaid time that employees spend while at work, such as going through lengthy security bag checks.

The vulnerabilities of hourly wage earners were further highlighted during the COVID-19 pandemic. Employees at grocery stores and some large retailers, as well as delivery workers, were forced to work on the frontlines at the height of the outbreak without being offered paid sick leave or health insurance by their employers.

Some retailers temporarily boosted pay or offered bonuses but workers, including those at Whole Foods, Instacart, and Amazon, maintained that this wasn’t enough to put their health at risk. They staged walkouts in March 2020 to demand safer working conditions when much of the U.S. was under varying degrees of lockdown.

The Typical Minimum Wage Worker

According to the U.S. Bureau of Labor Statistics (BLS), 78.7 million workers were paid hourly in 2022 (the most recent information), representing 55.6%, more than half, of all wage and salary workers in the U.S. Of that group, 141,000 earned $7.25 per hour. Nearly three out of four workers earning the minimum wage or less in 2022 were employed in service jobs, mainly food preparation and serving-related jobs.

About 2% and 1% respectively of hourly-paid women and men were paid at or below the federal minimum in 2022, according to the BLS. The BLS stated that about 1% of hourly-paid White, Asian, and Latinx workers earned the minimum wage or less. About 2% of hourly-paid Black workers earned the minimum wage or less.

Almost 40 million workers would have seen an increase in pay if the Raise the Wage Act had passed and the minimum federal rate had been raised to $15 by the end of 2024, according to the Economic Policy Institute. Workers who would have benefited include:

• 38.6 million adults ages 18 and older
• 23.8 million full-time workers
• 23 million women
• 11.2 million parents
• 5.4 million single parents
• The parents of 14.4 million children

Arguments for and Against Raising the Minimum Wage

Business groups such as the National Retail Federation (NRF) and the National Federation of Independent Businesses (NFIB) opposed the minimum wage increase in the Raise the Wage Act, arguing that it was a one-size-fits-all approach.

It would force businesses to hire fewer people, slash growth plans, and/or raise prices. They believed that the Act would negatively affect early-career and low-wage workers as well as cause harm to the economy in a variety of other ways.

The nonpartisan Congressional Budget Office (CBO) concluded in a report published in Feb. 2021 that it would benefit up to 27 million workers when the minimum wage reaches $15 in 2025. This is significantly fewer than the Economic Policy Institute’s estimate but would cost an estimated 1.4 million jobs. The CBO also concluded that 0.9 million people would see their annual incomes rise above the poverty level.

Groups such as Small Business Majority, Main Street Alliance, and Business for a Fair Minimum Wage support a higher wage, believing that it will inspire employee loyalty and boost workplace morale. This would lead to more satisfied customers and an increase in consumer spending.

Some large U.S. employers that pay an hourly wage have established company-wide minimum wages. They include big retailers such as:

• Amazon: $15 an hour ($18 for new hires)
• Target: $15 to $24 an hour
• Costco: $17 an hour
  

The Bottom Line

The minimum wage in the United States is no longer a living wage. Many states are paying more than this amount but minimum wage earners continue to struggle to make ends meet.

The federal minimum wage hasn’t kept up with the cost of living in more than half a century at $7.25 per hour. But there's a growing movement among workers, policy analysts, state and city governments, and even some employers to raise it.