Few Americans working at minimum wage can afford an apartment. This may not be new, but the troubles it uncovers are.
One of the most widely read stories last week was a report that a single minimum-wage worker can’t afford a two-bedroom apartment anywhere in the country.
A one-bedroom unit can be had in only 22 counties in five states, including in Washington. But here the relative affordability applies to only a few rural counties. In King County, even with Seattle’s $15 an hour minimum wage, a person couldn’t afford an apartment working 40 hours a week.
The data come from the National Low Income Housing Coalition’s latest Out of Reach report. Some caution is in order because this is an advocacy organization. As far as I can tell, the research isn’t peer reviewed and some of the numbers are a few years old.
Still, the organization is backed by establishment donors such as the Ford Foundation. And in our Digital Gilded Age, it strikes a nerve.
So, let’s unpack.
Last year, 1.8 million people worked at or below the federal minimum wage. This was 2.3 percent of all hourly paid workers.
According to the federal Bureau of Labor Statistics, this compares quite favorably to the 13.4 percent of all hourly workers at or below minimum wage in 1979, when statistics were first compiled.
The minimum is higher in 29 states and the District of Columbia, as well as in two dozen cities and counties.
Discontent with the federal minimum wage of $7.25, last raised in 2009, is widespread. The wage peaked in 1968 at $8.87 (in 2017 dollars). Since then, its purchasing power has eroded.
A 2016 poll by the Pew Research Center found that 52 percent of respondents favored raising the federal minimum to $15 an hour. However, only 26 percent of Trump backers approved, compared with 82 percent of Clinton supporters.
A valid question is whether minimum-wage workers could ever afford a two-bedroom apartment on their own? In the past, they got roommates or lived with their families, multiple family members worked, they worked multiple jobs. This no doubt continues.
But this era’s minimum-wage workforce, while still disproportionately young, is not the teenage burger-flippers of the 1970s. According to Pew, 45 percent of these workers were aged 16 to 24. More minimum-wage workers are older.
Also, a significantly larger group, about 20 million non-self-employed workers, are only slightly above the minimum wage.
No wonder, according to Harvard’s Joint Center for Housing Studies, nearly half of American renters were “cost burdened” in 2016. The center defines this as spending more than 30 percent of pre-tax income on rent.
The rental costs in King County can be 50 percent of income, but they’re even higher in Pierce and some other Washington counties.
The big-picture causes of rent increases are the usual suspects: High demand for rentals as homeownership fell during the Great Recession, rent prices outpacing inflation, and gentrification in some cities.
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Historically, the lowest-earners lived in tenements and shacks — a past no one wants to revive (I hope). The federal housing projects that began in the New Deal fell out of favor because of crime and persistent poverty. The Hope VI program, beginning in the 1990s, had some success spots with better-quality “New Urbanism” redevelopments. But these were mixed-income projects and critics said too many poor residents were displaced with no replacement housing. Tighter fire codes did away with old single-room-occupancy hotels.
The Out of Reach report proposes more federal spending for federal housing assistance, including vouchers, and building more housing that’s affordable to low-income people. These responses will be tough to achieve because of resistance from the Trump administration. (Seattle is making $100 million in affordable housing investments).
But another angle comes back to wages. One of the biggest housing-affordability headwinds is lagging pay. The economy and stock market are booming but raises have been slow to follow.
What about wage mobility? Although the lower wage groups exist as static entities on paper (“quintiles”), the same people don’t stay in them forever. Many move up and some move down. Or that’s the way it once was.
When I was young, back in the 20th century, I stayed at minimum wage for a very short time. Getting better pay required gaining education and skills, then moving.
I wonder what happens today? How many are trapped in minimum- or low-wage jobs, with the rent burden being a symptom?
Much of the scholarly work is years out of date. But in 2016, Stanford economist Raj Chetty and colleagues arrived at the shocking conclusion that only 50 percent of Americans born in 1980 are better off than their parents. This compares with more than 90 percent of those born in 1940 and 60 percent of those born in 1960.
Some economists argue that Chetty’s team overstates the degree of lost mobility, but none dispute that it’s happening. Much is out of whack here, and constructive responses will need to be similarly holistic.