Why Raising a Family on Minimum Wage Is Impossible

The idea of living solely on the minimum wage is a common myth perpetuated by misunderstandings about its intended purpose and the realities of modern living expenses. This article explores why the minimum wage, often mistaken as a living wage, is insufficient for most households, especially those trying to raise families. We will also discuss how the financial landscape has changed due to the proliferation of unsecured credit, particularly the introduction of the FICO credit score.

A Critical Examination of Minimum Wage

Initially designed as a starting and training wage for young workers such as high school students, the minimum wage has never been intended to support a family. In reality, only a tiny fraction of U.S. workers earn the minimum wage. According to recent data, less than 1% of workers make the federal minimum wage of $7.25 per hour. This statistic alone highlights the irrelevance of the minimum wage as a living wage in modern America.

Let's consider a hypothetical scenario: earning $7.25 per hour at 112 hours per week, which is unsustainable and exceeds the typical work schedule. This would yield an annual income of $42,224. For a married couple, working such hours would result in an annual income of $84,448. While these figures may seem impressive, they actually fall short of the threshold necessary to support a family. Moreover, such an extreme work schedule is not sustainable, making it impossible to earn a living wage.

The Truth Behind Living Standards

A living wage is generally defined as four times the U.S. Federal poverty level, providing a much more realistic estimate for sustainable household income. In states and cities where the minimum wage is above the federal level, such as $15 per hour in many places, a married couple could manage to live comfortably with two incomes from the state minimum wage. This reality suggests that raising a family on the minimum wage is not practical, especially when considering other critical factors like increased living costs, education, and job training.

Education as a Path to Higher Earnings

Many of the "fast food" jobs are designed to be short-term learning experiences, serving as stepping stones for career advancement. To achieve financial stability and support a family, individuals should invest in their education and job training. By taking the time to increase their skills, perhaps through vocational school or additional training, workers can significantly improve their earning potential. Advancing to a higher-paying job such as one that pays six figures annually is entirely possible, even for those working a 40-hour week.

The Role of Unsecured Credit and the FICO Score

The rise of unsecured credit, driven largely by the introduction of the FICO credit score in 1989, has played a significant role in exacerbating financial challenges faced by many Americans. The expansion of the unsecured credit market has allowed more people to access easy credit, leading to an increase in living beyond their means. This phenomenon is particularly pronounced in the United States, where credit scores have become a critical factor in financial decision-making.

While advertising has certainly contributed to the proliferation of unsecured credit, the reality is that many individuals have made poor financial choices based on advertising and financial enticements. This has led to increasing levels of debt and financial strain for many families, making it even more challenging to live on minimum wage.

Conclusion

It is paramount for society to acknowledge that raising a family solely on minimum wage is not feasible. The minimum wage is a starting point for career development rather than a sufficient income for sustaining a family. Moreover, the financial challenges facing many Americans today are partly attributed to the expansion of unsecured credit and the reliance on credit scores. It is essential for individuals and policymakers to recognize the importance of education and proper financial planning in achieving financial stability and long-term success.