Wage hike activists routinely claim minimum wage hikes are necessary to creating a “living wage.” Their target wage amount typically hinges on arbitrary calculations of living costs that don’t align with workers’ living arrangements.
A report claiming “Minimum-Wage Workers Can’t Afford Rent in Any of America’s Largest Cities” says wage hikes “improve rental affordability,” citing minimum wages as high as Seattle’s (currently $21.30 an hour). But like previous claims, the data and metrics behind this report don’t hold up:
- They assume all minimum wage workers are looking to rent an apartment. Yet more than a quarter (26.4%) of all minimum wage workers are teenagers according to the Bureau of Labor Statistics, and more likely not to be the primary breadwinner of their household. More than (53.1%) of those earning the minimum wage are younger than 25, and could be less likely than older workers to be searching for an apartment, due to college housing or living with family while attending school or building savings.
- They assume all apartment-hunting minimum wage workers are seeking a 1-bedroom apartment. Looking only at the cost of renting a one bedroom apartment overlooks the many ways people actually enter the housing market, like searching for a larger apartment size with roommates. Consider Atlanta, where the median asking rent for a two-bedroom apartment is roughly $2,070 per month. Two roommates splitting that apartment would each pay about $1,035, a substantially different calculation than assuming one worker is responsible for the full cost of a one-bedroom unit. While not every worker chooses to share housing, this example illustrates how household sizes and living arrangements can significantly influence what is actually affordable.
- They rely on the federal government’s “Fair Market Rent” estimates that may be higher than market prices. While these figures are commonly used by the U.S. Department of Housing and Urban Development (HUD) to help determine housing assistance, they are not always the same as what renters actually pay in the private market. Apartment listing sites like Zillow often show lower median rent prices. For example, the report uses a monthly rent of $1,648 for a one-bedroom apartment in Dallas, TX, while Zillow’s median estimate for the same-size apartment is $1,350 per month.
Housing costs have become a growing challenge for workers across the country. But many wage hike advocates claim the cost requires sky-high wage mandates, when experts say this would only make the cost of living worse for these workers. One study published in the Journal of Urban Economics found that minimum wage increases can place upward pressure on rents over time, estimating that a $1 increase in the minimum wage is associated with rent increases of as much as 10%.
An EPI survey of American economists found a large majority oppose wage hikes up to $20 or more per hour, and cite beliefs that minimum wage increases actually make the cost of living worse for consumers.
While the cost of living is top of mind for many across the country, misleading headlines pushing for steep wage hikes is not a solution. Instead, it could leave rental prices even higher and affordability further out of reach for many.