Let’s think about the minimum wage and what it means for financial security

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AUTHOR: R Quinn on 11/04/2025

We hear a lot these days about the minimum wage, that it is not a living wage and hasn’t been increased since 2009. Both are true. But there is more to it than that. 

I am not trying to make a case for or against raising the minimum wage. However, there are consequences that proponents seem to ignore or gloss over.

I do think the answer to long-term financial security is not found in raising the minimum wage rate, but in getting out of a minimum wage job through education, job skills and adding value to an employer – easier said than done for many, but perpetuating the current state by chipping away at minimum wage limitations is not a solution in my opinion.

Minimum wage workers make up a small percentage of hourly paid worker and even smaller of all workers, but that is little consolation if you are one of them. 

Thirty states and the District of Columbia have a minimum wage above the federal minimum wage.

Some people call for a minimum wage that provides living wage, but I don’t think that is possible. According to the MIT living wage calculator, a minimum wage of $30.71 is necessary in San Diego, Ca. for a single person. The actual rate is $16.50 while fast food workers have a minimum of $20.00 per hour. 

In the county where I live in NJ the living wage for a single person is said to be $24.94 while the actual minimum is $15.49, but for a couple with a child it is $41.97 which equals $87,297 a year. 

Is it practical to assume we can pay those rates to a hotel housekeeper or a restaurant dishwasher? The median salary for teachers in NJ is about $80,000 at the high school level, less at lower grades. 

It is even more complicated because of salary compression. Simply put, if you raise the minimum, those earning just above that will expect increases as well and on up the pay scale.  In addition, the cost of wage increases is not limited to cash, but anything aligned to wages-employer FICA taxes for sure, but other benefit costs too for some employers. 

The other possible complication is that for some workers a pay raise would make them ineligible for social safety nets thus incurring a net loss.

Who are minimum wage workers? According to the Bureau of Labor Statistics:

Age. Minimum wage workers tend to be young. Although workers under age 25 represented one-fifth of hourly paid workers, they made up 44 percent of those paid the federal minimum wage or less. 

Sex. Among workers who were paid hourly rates in 2023, about 2 percent of women and 1 percent of men had wages at or below the prevailing federal minimum.

Race and Hispanic or Latino ethnicity. The percentage of hourly paid workers with wages at or below the federal minimum differed little among the major race and ethnicity groups. Among White, Black, Asian, and Hispanic workers, about 1 percent earned the federal minimum wage or less.

Education. Among hourly paid workers age 16 and older, about 2 percent of those without a high school diploma earned the federal minimum wage or less, compared with about 1 percent of high school graduates (no college), those with some college or an associate’s degree, and those with a bachelor’s degree and higher. 

Marital status. Among never-married workers, who are younger than married workers on average, about 2 percent of those who were paid hourly had wages at or below the federal minimum wage, compared with less than 1 percent for married workers and for workers who were widowed, divorced, or separated. 

Full- and part-time status. Among part-time workers (people who usually work fewer than 35 hours per week), about 2 percent were paid the federal minimum wage or less, compared with about 1 percent of full-time workers.

Occupation. Among the major occupational groups, service occupations had the highest percentage of hourly paid workers earning at or below the federal minimum wage, at about 4 percent. Nearly 8 in 10 workers earning the minimum wage or less in 2023 were employed in service occupations, mostly in food preparation and serving-related jobs. For many of these workers, tips may supplement the hourly wages received.