There has been talk about raising the minimum wage for a while now. As a citizen, I am surprised how haphazardly we legislate and calculate the minimum wage. The wage is passed into law without being tied to any economic measure and does not automatically increase with inflation. It is a static wage.
I would suggest that the minimum wage be calculated using the poverty line as a basis. But in that regard, I also feel that we do not adaquaty measure the poverty rate accurately and so such a change to how we calculate the minimum wage would require reevaluating the way we measure poverty in America.
When President Johnson launched his War on Poverty, the Orshansky formula became the official measure for poverty in the US. Remarkably, after nearly 50 years, the formula has not been adapted to fit modern conditions which has been one of the many criticisms leveled at the US government about how it measures poverty.
The Orshansky formula is quite simple as it is based upon food costs alone. In short, we take the food costs measures from the USDA for various sized family units and multiply that by three (because back in 1964 when this equation was devised, food costs represented about a third of one's basic living expenses). So for a family of 4, the estimated food costs are $7,683.30 and thus the poverty line is roughly $7,683.30 x 3 or $23,050 for a family of 4.
Immediately there is a major problem with this calculation -- food costs now only represent about one fifth of the average person's living expenses as food costs have dropped and housing costs have risen since the 1960s, acording to the Southern Poverty Law Center (see http://www.tolerance.org/lesson/calculating-poverty-line). If you take this into consideration, the poverty line for a family of four should actually be $38,416.50 - the current formula used by the US government underestimates the poverty line by 40%!
There are other criticisms of the Orshansky formula, such as that it does not take housing costs into consideration and is not calculated relative to various regions within the country, with the exception of Alaska and Hawaii. I argue that more nuanced approach to determining the poverty line should take into consideration all the factors we as a society expect for a healthy and productive people inducing average food costs, average housing costs, basic utilities, health care and transportation costs (to and from work by public transportation).
Unfortunately I don't have the time to research and calculate this more nuanced approach at this time and so if we just go by the Southern Poverty Law Center's adjustment of the Orshansky formula (that considers food costs representing one fifth of one's annual living expenses), for a single person the poverty line should be $19,150 and not $11,400 as currently calculated by the Department of Labor. If someone worked 50 weeks a year at a regular 40 hour a week job, with 2 weeks off for vacation, the minimum wage should be $9.58/hour.
Considering that if we take other factors into consideration like rent and health care, the minimum wage could be even larger based upon this method.
The point of this thought experiment was really to suggest the following:
1. We need a better formula to calculate the poverty rate, that takes into consideration the basics of living in a modern world including food costs, rent, utilities, health care and adequate transportation to and from work.
2. We need to base our minimum wage laws on this new poverty measure
3. When calculating the minimum wage, we should still consider a minimum of 2 weeks vacation.
4. We should consider adapting this discussion to not only discuss the bare minimum poverty levels and minimum wages. We should come up with levels that calculate the costs of not just surviving but of thriving in a modern country that include the costs of higher education, and leisure/engagement of cultural endeavors.
