Why Poverty Persists Despite a Living Wage in the US
Despite the existence of a minimum wage that provides a living wage in certain areas, poverty remains a pervasive issue in the United States. This article aims to understand this paradox by examining the context in which poverty is measured, the disparity between urban and rural settings, and the personal experience of someone living comfortably below the federal poverty line.
The Federal Poverty Line: An Arbitrary Measure
The federal poverty line in the United States, established just before the implementation of Medicare/Medicaid, is the standard used to qualify for these programs. However, its relevance to modern economic realities is questionable. This line is a fixed, arbitrary number that does not reflect the cost of living and quality of life in different regions.
Rural vs. Urban Life
Living in rural areas can offer a comfortable lifestyle even at the federal poverty line. In many small towns, resources are more affordable, and people often manage to live well despite low incomes. In contrast, in major urban centers, the cost of living is significantly higher, necessitating higher incomes to maintain a similar standard of living.
Personal Experience: Living Below the Poverty Line
Consider the case of a 58-year-old individual who has managed to live comfortably at a fraction of the federal poverty line for many years. This person currently lives in the fifth largest urban center in the US, where the minimum wage (after taxes) is approximately $25,600 per year, or $19,456 take-home per year, equating to about $1,621.33 per month.
Thanks to strategic financial planning and living below means from a young age (age 26), this person has managed to afford their home and car. Currently, their monthly living expenses are around $1,000, leaving them with approximately $621 a month to do as they please. At age 59.5, they will be able to access their Roth IRA, but they doubt it will sustain their basic needs if withdrawn at a rate of 3% annually until they reach 67.
The Impact of Inflation and Economic Resilience
The current high inflation rate is further exacerbating the challenges faced by those living at or below the poverty line. Due to inflation, this person has had to travel further from their home to secure a higher wage, which is often dependent on individuals who have more financial reserves. In their neighborhood, many people operate on a "paycheck to paycheck" basis, meaning they do not have the luxury of spending on wants.
The Work-Life Balance
This individual currently works part-time, earning $12.80 per hour, which equates to 25 hours a week or $26 per hour to achieve the same income. They do not need to work full-time or for 50 weeks a year to maintain a comfortable lifestyle. Flexibility and choice in their work schedule are key to their financial well-being.
Challenging the Paradigm of the Poverty Line
The federal poverty line is a vestige of a bygone era and no longer accurately reflects the realities of living and working in the United States today. It is used primarily to determine eligibility for social welfare programs, not as a measure of actual economic viability. Redefining the poverty line to better reflect regional cost of living and quality of life could help address the underlying issues of poverty more effectively.
Conclusion
The persistence of poverty despite a living wage in the US is a complex issue. By understanding the limitations of the federal poverty line and recognizing the stark differences between rural and urban living, we can work towards a more equitable and practical measure of economic well-being. This would help in providing better support for those who need it most while allowing more individuals to live comfortably within their means.