According to the U.S. Department of Labor’s historical data, the federal minimum wage in 2012 was $7.25 per hour. In 2022, the federal minimum wage has not changed. $7.25 per hour isn’t enough to buy a meal at many fast-food restaurants. $7.25 per hour. That’s $58 for an 8-hour day, $290 per week, or $1,300 monthly. At minimum wage, an individual earns about $15,000 a year before taxes. Members of Congress and the Senate make $174,000 per year.
Childcare and annual earnings leave no money to survive and provide
As a quick comparison, according to the U.S. Department of Labor National Database of Childcare Prices, the first year of childcare for infants in 2022 ranges from an estimated $8,310 for small counties to $17,171 for large counties. If there is a worst-case scenario, a full-time job at $7.25 per hour is not enough income for childcare for an entire year. This does not include rent, electricity, food, phone, and everything else needed to live.
National federal minimum wages
Minimum wages are set at the federal level and state levels, but not all states have their own laws about minimum wage. Arguably, employers on average probably pay higher than minimum wage, but sometimes just barely. Having two or three jobs is necessary to survive.
Why tipping your server makes a difference
For those in the service industry, tips are the main source of income. In Texas, if you are tipped at least $30 (thirty) per month, your employer is only required to pay $2.13 per hour. Texas Law Help’s website states that “If you earn less than $5.12 per hour in tips in a work week, your employer must make up the difference so that you receive $7.25 per hour in that work week.” Hopefully, most businesses are paying more than $7.25 per hour, but the costs of everything else – rent, food, tuition, childcare – has definitely increased over ten years.
The Economist’s Big Mac Index
One of the most interesting ways to analyze currency exchange rates across the world is using the cost of a Mcdonald’s Big Mac in different countries, known to economists as the Big Mac Index. How much did a Big Mac cost 10 years ago? In the US, a Big Mac in 2012 cost $4.26, and $5.15 in 2022 – an increase of about 21% which equates to less than $1, but an increase nonetheless.
The publication The Economist explains: “The Big Mac index was invented by The Economist in 1986 as a lighthearted guide to whether currencies are at their “correct” level. It is based on the theory of purchasing-power parity (PPP). The Big Mac index has become a global standard, included in several economic textbooks and the subject of dozens of academic studies.”
In conclusion
The point is, Big Macs are about $1 more expensive now than they were 10 years ago, but the federal minimum wage of $7.25 has not changed. Childcare costs as much as a full-time job and we need to change that. It is time for both federal and state to raise this so people can actually afford to live.
Notes:
McDonald’s provided the costs of the Big Mac over time, and The Economist created the index using data from McDonald’s across the world and with different currencies. The methodology can be found here. The data generated by The Economist are available under the Creative Commons Attribution 4.0 International License.
Putting all of the data together, the chart takes a look at each state’s minimum wage in 2012 vs. 2022. The hourly wage data was taken directly from the U.S. Department of Labor Wage and Hour Divisions. The two horizontal lines show the cost of the Big Mac in 2012 and 2022, over the ten years. In 2023, there are 18 states (AK, AZ, CA, CO, DC, FL, ME, MN, MO, MT, NV, NJ, NV, NY, OH, OR, SD, and WA) that currently have scheduled annual adjustments for their minimum wages based on varying formulas. Most of these increases occur around January 1st. Individuals should consult the relevant state labor offices for information on the particular formula used to adjust the state minimum wage.
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