Governor Schwarzenegger declared that some 200,000 California state workers are to receive minimum wage earnings of $15,000 a year to help shore up the budget deficit. $15,000 is quite a salary cut from the $65,000 a typical state worker earns. A 77% pay decline hurts, but some would argue that our system is already bloated and earning $15,000 a year temporarily is better than earning zero.
Three questions really come out of this unfortunate situation. 1) Why is California in such bad financial shape? 2) Are the poor bringing others who are poor down with them? and 3) Can you live off minimum wage if you had to, and for how long?
THE REASON WHY CALIFORNIA IS IN SUCH BAD FINANCIAL SHAPE
It’s really simple. Politicians are generally fiscally irresponsible and spend while in office and leave deficits to another party. Politicians after all need to appease their supporters by spending lavishly on their causes. Politicians only have a finite time in office (8 years for the President) and need to take advantage of the system as quickly and aggressively as possible.
The other reason for such a massive deficit is because people take more from the State than they give. If you’re making less than $50,000, it just might be a little cumbersome to have 5 kids don’t you think? Don’t have kids if you can’t take care of yourself, even if you are really horny. Furthermore, if you studied real hard in school, never skipped a class, and went to a great university, chances are you’re doing fine.
The two largest welfare programs are Aid to Families with Dependent Children (AFDC) and food stamps. In 1992, the average yearly AFDC family payment was $4,572, and food stamps for a family of three averaged $2,469, for a total of $7,041. In that year, the poverty level for a mother with two children was $11,186. Thus, these two programs paid 63 percent of the poverty level, and 74 percent of a minimum wage job. Not bad, but not great and not enough to get by comfortably as some may presume. Perhaps best to collect unemployment for 99 weeks instead.
DRAGGING EVERYBODY DOWN WITH THEM
Do people see the irony of the Governator’s minimum wage imposition on state employees? The irony is that the government employees, whose mission it is to help the people of California are getting hurt by the very people they are working to help! Students of the University of California system learned the hard way about becoming fiscal conservatives after the state raised tuition by 32% (“Tuition Hike For The Poor is Like A Tax Hike For The Rich“). It looks like state workers are unfortunately learning the hard way as well.
Imagine a country where there was nobody below the poverty line. Think what a happier, less crime ridden society we’d have? Politicians would focus on advancing causes for the good of all people because they’d have a much smaller budget burden to manage. Everybody somehow gets dragged down by the poor. Hence, it’s up to us to educate our youth as much as possible to alleviate poverty.
SURVIVING ON MINIMUM WAGE
If I had no savings, there’s no way I could live off minimum wage in California. Even modest studio apartments in San Francisco cost $1,000 a month. Add on transportation and food and we’re talking $1,500 a month easy. The good thing is, most of us have money saved. Unemployment checks and working minimum wage jobs should lessen the savings drain rate by at least 50%. Sure, I could live in my mom’s basement, but I’d rather not! Minimum wage in San Francisco is more like $25,000 a year, and not $15,000.
The differences in various cities costs in America is exactly why implementing a national standard of taxation, wages, and laws is ludicrous. States need to be given more power to enact laws they see fit ironically. The national conforming mortgage limit is $417,000 for example. Choosing a conforming mortgage is often 0.375% or more cheaper than getting a jumbo loan (>$417,000). Yet, the median home price in the Bay Area is around $600,000, which means a good majority of people are paying higher than national interest rates here. That’s not right.
You never know when disaster will strike which is why you’re saving so much money all the time. We can’t depend on the government to educate us at a reasonable cost, or take care of even their own employees. Given the case, it continues to perplex me why so many people are for big government. Would you trust a thief to hold your purse while you go use the restroom? Would you trust a creepy man at a playground to watch your kids while you feed the meter? No and no is my answer. We need to count on our own hustle and free will to make a better life for ourselves.
Readers, can you live off minimum wage of $15,000/year for longer than a couple years in your current financial situation? What if you had zero savings, is it still possible?
Do you think it’s up to the rich to help the poor, the poor to help themselves, or the government to help the poor?
What is the most effective solution in reducing poverty?
Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”