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Tue Mar 27, 2012, 11:10 AM

Affording Health Care and Education on the Minimum Wage


The current value of the federal minimum wage $7.25 per hour is often compared to the cost of living, the average wage in the economy, or the productivity of the average worker. By all of these benchmarks, the current federal minimum is well below its historical levels.1
But the current minimum wage looks even worse when compared to two kinds of purchases strongly associated with a middle-class standard of living or the ability to move up to the middle class: health insurance and a college degree.
Table 1 below shows the results of a simple exercise. We ask how many hours a minimum-wage worker has to work to pay for a year of college education (at various kinds of institutions) or a year of health insurance (for an individual or a family). The table compares the experience facing a minimum-wage worker in 1979 when the minimum wage was $2.90 per hour to that of a minimum-wage worker in 2010 or 2011 when the minimum wage was $7.25. (All wages and prices, here and below, are in current dollars that is the actual dollar value at the time, without any adjustment for inflation. The point is to compare the minimum wage in place in each period with the actual cost of health and education services at the same point in time.)
A minimum-wage worker in 1979, making $2.90 per hour, had to work 254 hours in a year to pay the $738 annual cost of tuition at a public four- year college. By 2010, minimum-wage workers at $7.25 per hour had to spend 923 hours to cover the $6,695 annual tuition at a public four-year college. (All our calculations ignore taxes and subsidies. More on that later.) (See Figure 1.)http://www.cepr.net/documents/publications/min-wage2-2012-03.pdf

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