disclaimer: In no way am I trying to trivialize the struggle of low wage workers in America. This post is simply meant to be a non-partisan look what living on minimum wage would really look like for me.
Here in the Windy City, minimum wage workers and their advocates have been making some noise lately. They’ve been protesting Chicago’s $8.25/hr minimum wage in favor of a more equitable $15/hr. Let’s put politics aside for the moment, and think about what it means to live on minimum wage.
I loved my first job in high school. I was a lifeguard during the summer at the community pool in our neighborhood. It was more of a fun place to spend a summer than a way to really earn a living, but it certainly gave me a a sense of what it took to earn a dollar. For the most part the job consisted of telling kids not to run on the pavement, playing foursquare whenever it rained, and making fun of the old hairy people who always showed up for lap-swim. I made $6.25/hr, but I was able to save pretty much all of it. My jaw dropped when my coworkers would come in for a 4 hr shift ($25 before taxes) and order Chinese carry-out to eat on their break. Including tip, they actually might have been loosing money by coming to work!
Anyway, it seemed like a fortune, but that was because I was a high school kid with zero expenses and a supportive family that gave me pretty much everything I needed. Fast forward 10 years and I’m now living independently, working at a job I love, and doing pretty well overall (if I do say so myself). But all these recent protests about the stagnant minimum wage have me thinking. I consider myself to be a champion of reasonable frugality, so what changes I’d have to make just to make it on minimum wage in Chicago, if that’s even possible!
My Current Spending
What counts as frugal? I don’t know… some people would say my average annual spending of $22,000 is living like a Spartan, and some would say I’m spending money like it’s going out of style. I tend to think I’m on the moderately frugal side of life, but I’m certainly not down to the spending level I’d need to be at if I made just the minimum wage in Chicago.
But that brings up and interesting question. Could I cut out nearly all the remaining fat from my budget and remain cash-flow positive even on minimum wage?
Here’s what my spending breakdown looked like over the past 12 months. 32% on housing, 18% on food, 13% on transportation, etc…
What Does Minimum Wage In Chicago Look Like?
I know a lot of times it’s a compilation of minimum wage jobs, because most low-income folks can’t support themselves and their families on just one job. But let’s consider how much I’d make if I had one, or multiple minimum wage jobs, adding up to 40 hrs/week.
Before taxes, that’s $17,160/yr, and after an effective overall tax rate of 12% I’d be left with just $15,100/yr. Off the bat, it sounds crazy low! I guess that’s is why it’s so tough to be a low-wage worker in the United States these days. But instead of just lament the fact that the minimum wage is low, let’s see if I would ever be able to live a reasonable life within my means.
The Cuts I’d Have To Make
I’ll start with the proverbial ”low hanging fruit” and grow a little more ruthless as the list goes on. I’m going to make theoretical changes I could live with, that wouldn’t affect my quality of life too much. That way we’ll see if I’d even be able to come close to making it. So my goal is to cut $6,900 of my typical budget. Think it’s doable?
- Cable = $300/yr – That’s an easy one, it cut the cord right away. My share of the cable bill is about $25/mo.
- Work Clothes = $300/yr – If I worked a minimum wage job, I wouldn’t have to replace my fancy work clothes, and I could come to work in thrift store clothes that would be significantly cheaper.
- Running Costs = $820/yr – This is the area of my budget where I spend a lot of unnecessary money on race registration fees and shoes. None of this stuff is necessary, so on minimum wage there’s no way I’d be able to afford it.
- Going Car-less = $1,800/yr – Last year I spent about $3,000 on transportation, most of it on fuel, car repairs, and auto insurance. I’d get rid of everything but an unlimited monthly bus/train pass for $100/mo. If I lived and worked in the city, that’s really all I need because the train/bus system good enough.
- Eating Out = $1,000/yr – I know this is a pretty big area of my budget that I’d be able to trim. Right now, half of my budget goes to groceries and half goes to eating out. By cutting down on eating out by 80% and increasing my grocery budget by 30%, I’d be able to save about $80/mo.
- An Extra Roommate =$3,780/yr – Currently I live with one roommate in an updated apartment in a moderately priced area of the city, and my share of the rent is $775/mo. By checking out Zillow, I’ve found that I’d be able to rent a slightly less-nice 3 bedroom apartment for $1,500 in the same area. That would cut by monthly rent by $275, along with internet, electric, and gas.
To recap, $22,000 – $8,000 = $14,000/yr. My goal was $15,100 in annual spending.
So Is All This Doable?
On paper, it looks like I could make all these cuts, only slightly decrease my quality of life, and still make ends meet. But even though the math seems to work out on paper, it’s likely not feasible. There are a ton of issues with spending almost exactly how much you make.
- One medical disaster, and your whole budget is done for. (not to mention the lack of health insurance)
- Supporting a family would be nearly impossible.
- One splurge and you’ll be in debt for the foreseeable future.
- Most low-wage workers haven’t spent hundreds of hours reading about frugality like I have.
- I’d probably never be able to retire.
My takeaway from this exercise is that I might be able to make a minimum wage budget work for a few months, but if I was ever in that situation, I’d spend every waking free moment trying to learn marketable job skills. It’s clearly not enough to prosper on, but I think just staying cash-flow positive would be an incredible feat for most folks earning minimum wage in Chicago.
Have you ever supported yourself on minimum wage? Do you think you could make the spending cuts to do it?