Minimum Wage Too Low to Keep Working Families Out of Poverty, New Report Finds

WASHINGTON, Oct. 23 – The federal minimum wage is leaving millions of families in poverty, according to a new study prepared by the Government Accountability Office for Sen. Bernie Sanders (I-Vt.).

While 20 percent of working families earning the $7.25 minimum wage or below live in poverty, 13 percent of families with a worker earning up to $12 per hour live in poverty and 5 percent of families of with a worker earning up to $16 per hour live in poverty. Sanders has called for legislation to increase the federal minimum wage to a living wage of $15 per hour.

"As this new report shows, $7.25 minimum wage is a starvation wage that is not enough to keep working families out of poverty." Sanders said. "The United States Congress must raise the minimum wage to a living wage: $15 an hour."

Thirty Senate Democrats have signed onto the bill introduced by Sens. Sanders and Patty Murray (D-Wash.), which would raise the minimum wage to $15 per hour by 2024 and would be indexed to inflation thereafter. The federal minimum wage has not been raised since 2009. 

The GAO found that higher wages were associated with lower poverty rates. Low-wage workers – those earning $16 per hour or less – comprise about 40 percent of the U.S. workforce aged 25 to 64. Millions of these working families and their children are living in poverty as a result of low wages. In 2016, nearly half (48 percent) of single-parent families with a minimum wage worker were living in poverty. In families where the single parent was earning between $12 to $16 per hour, the poverty rates dropped from 48 percent to 17 percent.

Five industries consistently employ the majority (70 percent) of low-wage workers – leisure and hospitality, education and health, professional and business services, wholesale and retail trade and manufacturing. The highest concentration of low-wage workers is in the health and education industry with an estimated 22 to 25 percent of workers.

The report found that an average worker earning the minimum wage or below had annual earnings of $12,441 and may qualify for programs such as Medicaid, Supplemental Nutrition Assistance Program, the Earned Income Tax Credit and the Additional Child Tax Credit. However, given the very low income eligibility thresholds for some safety net programs, low-wage workers – even those earning the minimum wage and living in poverty – may earn too much to qualify. 

“The gap between the richest Americans and everyone else is wider than at any time since the 1920s,” Sanders said. “Instead of giving huge tax breaks to millionaires and billionaires, we must invest in critical programs that help working families make ends meet and lift millions of Americans out of poverty." 

The GAO’s study noted that the growing divide between the top 1 percent and everyone else is not only due to wage stagnation among low-wage workers, but in fact attributable to skyrocketing wealth among high earners. “Recent studies have found that while average wages experienced little or no change from 1973 through 2011 (when held in constant 2011 dollars), income inequality increased as a direct result of income growth among high-wage workers,” the GAO wrote.

Other key findings in the report include:

  • Only 5 percent or less of families with a low-wage worker received TANF cash assistance at least once in the last year between 1995 and 2016.
  • In 2016, most single-parent families (82 percent) with a minimum wage earner lived below 200 percent of the federal poverty line.
  • In 2016, 37 percent of all families with a minimum wage earner lived below 200 percent of the federal poverty line. Twenty-four percent of all families earning between $12 to $16 per hour lived below 200 percent of the federal poverty line. 
  • A hypothetical low-wage worker ages 25 to 64:
    • earning $7.25 per hour or less would have annual earnings of $12,441 – making them eligible for Medicaid, SNAP, EITC and ACTC
    • earning $7.25 to $12 per hour would have annual earnings of $20,592 – making them eligible for Medicaid, SNAP, EITC and ACTC
    • earning $12 to $16 per hour would have annual earnings of $30,784 – making them eligible for EITC and ACTC
  • The percent of workers earning $12 to $16 per hour with college degrees increased from 16 percent in 1995 to 22 percent in 2016.

Read the report here.