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Several Democrat congressional candidates are talking about something that has been called the "Minimum Wage Challenge"

http://www.politico.com/magazine/story/2014/07/a-mile-in-shoes-of-the-minimum-wage-worker-109418.html#.U9fYssZJMg0

For all of last week, I worked hard to live on the budget of a minimum wage worker. That meant I had $77 to spend on food, transportation, activities and other personal expenses for the week.

This is just one of many stories currently trending in the US political battlefield. But my question is where does that $77 figure come from? How was that figure arrived at?

  • FWIW If anything I expect that the 77 could be higher than reality. I remember the days of working 2 minimum wage jobs and still not making ends quite meet. – SoylentGray Jul 29 '14 at 21:13
  • Maybe this would go better on Skeptics.SE? Or at least be more likely to find an answer? Fact-checking politics is very much where the two sites overlap. – Bobson Jul 30 '14 at 1:19
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    They don't provide sources, and no other references I could find come close to their numbers. Humorously enough, they can't even get their own math right, "(7.25 * 40 ) = $290 per week. $290 - ($176.48 housing + 35.06 taxes) = 78.46 per week, not $77. – user1873 Jul 30 '14 at 5:07
  • Just as a FYI, the official LiveTheWage.com site is now gone. – Bobson Sep 1 '15 at 18:15
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There's an article on ABCnews which gives a bit more detail. Specifically (emphasis mine):

Reps. Tim Ryan and Jan Schakowsky joined former Ohio Gov. Ted Strickland in taking the challenge–and are each living on a budget of $77 for the week – the same amount that a minimum wage worker typically has to spend on food, transportation and day-to-day expenses–after factoring out major costs such as rent and utilities.

Since minimum wage for a full-time job is $290 per week, they're working under the assumption that there is $852/month to pay taxes, rent and utilities. This is part of the Live The Wage Challenge, which claims an average housing budget of $176.48 and an average tax of $35.06.

I dig further into these number below the line.


According to eHow (a questionable source, but comprehensive), a single person will pay 10-15% of their minimum wage pay for taxes, depending on whether they get at least 29 hours of work each week.(1) Social Security and Medicare are are another 6.2% and 1.5% respectively, or $35.96 + $8.70 for the full time job. Assuming the 15% tax rate, that's a total of $131.66 out of the bi-weekly $580, or $263.32 out of $1160.00 per month.

So, to recap: $1160.00 monthly gross pay - $263.32 federal taxes = $896.68 as a base amount each month to pay state taxes, rent, utilities, food, and so on. The proposed $77/week works out to $308 of this, leaving $588.68 for state taxes, rent, and utilities.(2)

The official numbers for the challenge are $705.92/month for housing and an $140.24/month in taxes. Working backwards, that's 12.1% in taxes (I calculated 22.7%). I can only assume that there are tax credits that I'm not looking at - their number is supposedly a real-world average (although they have no references to support it), and mine is just theoretical.


1) This is based on a "$417 in 2 weeks" breaking point for tax brackets, and involves a bit of rounding. At minimum wage, you cross into the next tax bracket at just over 57.5 hours in a two-week span, or approximately 28.76 in each of the two.

2) This currently unanswered question on Skeptics.SE asks whether the $77/week is even accurate, but for purposes of this answer, I assume that it is.

  • @Chad - Well, I found the source, which breaks down how it got to $77, but it has no references for the component pieces of the equation. – Bobson Jul 29 '14 at 21:40
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    Thanks that is what I was looking for. Its not based on a real average person surviving, its based on an aggregate value of a class of people and their declared incomes. – SoylentGray Jul 30 '14 at 13:39
  • @Chad - I asked about sources for that average over on Skeptics, so we'll see if anyone can find where they came from. – Bobson Jul 30 '14 at 14:49
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    Given assorted tax rebates (EITC etc...) I am not sure that the taxes figure isn't grossly misleading (e.g. most minimum wage people GET money in taxes, not lose it). I would be highly skeptical of the $263.32 figure, or even the sign in front of it. – user4012 Jul 30 '14 at 19:51
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    @Bobson - Unless they spent last year's tax return on booze, not counting the money returned back at tax time is kind of a cheating move. It IS real money, and inflation isn't big enough for its value to be diminished – user4012 Jul 30 '14 at 20:00

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