by Derek Teed
October 2018
Discussions around minimum wages are often a heated debate. Workers complain that it is not a livable wage. However, raising the minimum wage can force marginally profitable businesses into losses, keep young workers out of the labor market, or force employers to automate away jobs at a faster pace.
To determine if minimum wages are enough to live on we must determine a method for cost of living, the type of minimum wage, and the hours worked.
The cost of living in Minnesota is determined by the cost of childcare, food, healthcare, housing, transportation, taxes, and other expenses. These factors are will vary significantly with the age and the area in which they live. I broke out rural and urban areas. I also broke out my cost of living into 12 different categories based on 1-2 active workers living with 0-1 non-working partners, and 0-2 children. I assume the workers, partners, and children live under the same roof. The methodologies for determining the costs of each category can be found at the Cost of Living page on the MN DEED website.1
The minimum wage was determined using the 2018 large-employer minimum wage of $9.65 an hour. Total annual wages for one worker is based on 2080 hours worked in a year. One and a half workers are based on 3120 hours worked in a year. Two workers are based on 4,160 hours worked in a year.
Results:
The results show that all homes making minimum wages in Minnesota are living below the cost of living, except when two workers are living together in a rural area with no children. In fact, any individual raising at least one child on minimum wage is making under 50% of the cost of living. This suggests that any single parent will need to make at least double the minimum wage to meet the cost of living in Minnesota. Otherwise workers might require government assistance or need to work more than one job.
