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Relating the minimum wage to cost of living

September 14, 2013

Which comes first, the cost of living or the minimum wage? In other words, does legislating a higher minimum wage result in a higher cost of living?  Or, does the higher cost of living cause the need to increase minimum wage levels?

Leaving out the fact that minimum wage earners are typically the  least experienced workers, or the very young and the very old, what happens when the minimum wage goes up?

The five  most expensive states to live in are the District of Columbia, Hawaii, Maryland, California and at number five, Connecticut, according to the Massachusetts Institute of Technology (MIT). A look at the 10 most expensive cities as identified by Kiplinger ranks the Manhattan area of New York City as the most expensive metropolitan area to live in, followed closely by Honolulu, HI, and also in the top 10, five  cities in California ( San Francisco, San Jose, Los Angeles, Oakland and San Diego),  Boston, MA, Stamford CT, and Washington, D.C. which ranks as the sixth most expensive city.

We can sort of give Hawaii a small pass. It is outside the contiguous United States and thus suffers from high transportation costs as well as an almost single-source highly tourism-based economy. Alaska is also non-contiguous, but it has some income-producing industry in its fishing, natural resource and oil-based industries.

Most charts, graphs, and surveys of wages vs. cost of living has some agenda or premise to prove, according to the slant of the survey designers. Methodology for the surveys is not standardized. For instance, in that survey produced by MIT, found at, my home county statistic lists the cost of housing for a single-parent, one child household at $645.00. That may in fact be available, but finding a decent two-bedroom living space for that figure which apparently includes utilities, would be very difficult, since apartment housing options are very limited. Also, the so-called food costs do not apparently take into account that food is only a percentage of what a family spends at the grocery store. The necessary non-food items such as baby diapers, the adults clothing, cleaning products etc. can often be easily as much as the food items, and the paltry $159 dollars for “other” hardly covers it, even if you are shopping at Walmart.

My town is the 10th least-expensive place to live in the entire United States, according to a June 2013 Kiplinger survey. That’s nice, but the state only places 40th on the list of states by average household income according to the U.S. Census Bureau, i.e. there are only 10 other states with lower average household incomes. Therefore, you could probably expect that prices for everything are lower here.  Bingo! Low cost of living status. 

By contrast the District of Columbia ranks 5th in terms of the highest  average income per household, at $63,211 in 2011, and the holder of five of the country’s highest priced places to live, California, ranks 10th on the list with average household income of $57,287.

The point of all this is that there needs to be a discussion of whether the idea of raising wages is actually causing or at least contributing to the high cost of living. Apparently the average household makes what could be considered good money in the highest priced places to live. It just isn’t good when compared to the cost of living.

It does absolutely no good to raise the minimum wage to the living wage standard of today, if that is just going to drive up the cost of living tomorrow. If your $1.00 kid’s meal of today goes up to a $3.00 price the day after  you get that minimum wage hike does it really do any good? If your basic family health plan goes from $300 a month to $600 with no dependent coverage,  will $12.50 an hour cover it?

The only way to ensure that wages are not outstripped by costs is to raise wages without allowing prices to rise as well, and that would rapidly put an end to a large share of all but the largest businesses, the ones that can afford to move offshore. Your local McDonald’s is a franchise. It is probably owned by one of your neighbors. If it can’t recoup increased costs, it will close. Then where are you going to work, or buy that kid’s meal?

There needs to be a concerted effort to reduce the cost of living, the cost of doing business at all levels. Raising the minimum wage will not accomplish that.   

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