Are The Poor Bringing The Poor And Middle Class Down With Them?

California is broke. And some would argue the poor are bringing the poor and middle class down with them. Governor Schwarzenegger declared that some 200,000 California state workers are to receive minimum wage. That's earnings of just $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. After all they 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. 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 the poor and middle class are best inclined to collect unemployment for 99 weeks instead.

Dragging Down The Poor And Middle Class

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, including the poor and middle class, 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.

Minimum Wage Federal Poverty

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.

Conclusion – Educate To Help The Poor And Middle Class

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 are my answers. We need to count on our own hustle and free will to make a better life for ourselves, including the poor and middle class.


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Federal Poverty Levels 2020

The Definition Of Middle Class

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49 thoughts on “Are The Poor Bringing The Poor And Middle Class Down With Them?”

  1. The governor irritates me by abusing the state employees to make political statements. Okay, now that I have that off my chest I can answer your questions.

    We couldn’t make it on $15K a year. Even people that can are probably just barely surviving. I think all three groups should help the poor: themselves, the rich and the government. Using a three-pronged approach gives us the best chance for success.

  2. I’ve been living on less than $15,000 a year for the past SIX YEARS, unfortunately.
    Of course, I had to move out of California to do it. Part of that time was in Florida, and part of it is in Utah. There is no way I could live on less than $15,000 a year in California, unless it was outside of the metro areas. And even in these other areas, it’s tough, and I don’t have my own place (just a room). It sucks. (which is why I’m back in college again, to get a more useful degree than the graphic design degree I already hold).

      1. Heh, it’s tough, that’s for sure. You basically need to room with someone who is going to give you a spectacular rent discount.

        Hopefully it will be all up from here. I’m back in college for another degree, this time, Accounting. I’m sure it will be a much better one than the Graphic Design degree I already hold.

        And another plus side, is that I’m 100% debt-free, which does feel fantastic.

  3. @Craig Gonzales

    What did you do while in Singapore and while in Bangkok? I got lucky in the sense that the two jobs I had in Thailand paid much more than what I could find in the USA or Singapore. (700k THB a month and 660k THB a month respectively).


  4. I guess i could live on $15k a year, it would be in my car!
    I prefer living where I am, i don’t know if people can actually survive on so little unless they are more than 1 person in the household.

  5. I could live on $15k per year provided my spouse was also earning $15k per year. I much prefer a higher salary, though.

  6. Wow, their salaries were cut from around $65,000 to $15,000. Schwarzenegger should take a 77% pay cut on his next movie, or at least they should charge 77% less for the tickets.

    I think such a big pay decrease would be especially hard, because these people would have their lives set up for the higher salary, so they’d have higher mortgages, car loans, kids in college, etc., that would already be dependent on that higher salary.

    Having to cut back so much means defaulting on loans, downsizing, and everything else that comes with losing most of your salary, while somebody else who say only earns $22,000 that goes down to $15,000 would be better equipped, as they’d probably have less financial commitments.

    10+ years ago, when I didn’t have any financial responsibilities, I was living on around $15,000, and I guess I got by somehow, but today it would be an incredible sacrifice.

    1. IT’s amazing to see the UC Regents (Educator Admins) make $500,000-$800,000 a year. Poor state employees in California. It would be great if we found a way to build the State’s cash warchest.

  7. In our current financial state we definitely could not. We’d have to sell both cars and our house (and at a significant loss). And we live in Ohio! But we’ve got student loans and loans on both cars (big mistake).

  8. That is rough. I’d be happy to still have a job but I wouldn’t be able to last long on minimum wage. Our state and federal governments need some major schooling on how to manage money effectively and balance a budget.

  9. Do you really think it’s up to the rich to help the poor help themselves? Why do you think this? Is it b/c there is a thought that rich people know better than poor people? I think some of the “poor” would resent trying to be taught something by the rich.

    A large part of me believes that only if one wants to improve, will they improve.

    Making 10X more than your first ever job is a great leap! Congrats!

  10. This year, my daycare expenses will be over $16K/year and that’s cheap relative to other places in MA. I currently could get by on a minimum wage job if my 2 kids had somewhere to go while I was at work.

    Where my son went to pre-school, many of the students were subsidizing by the government. What are your thoughts on paying for someone’s child care so a person can work? I hear in New Zealand, every citizen is entitled to 20 free hours of childcare per week. Wow..would that be cool!

    There are tons of things you can do to reduce living expenses but many people just don’t see them as options (like sharing your house with renters).

      1. I don’t know the exact history of the program, but I think it has to do with the
        welfare to work program. Childcare costs made coming off welfare impossible
        for many, so this was a way to get people back to work. It’s income based
        and it’s on a sliding scale..and only certain places can accept those types of
        children (there are state mandated curriculum’s etc).

        I prefer paying my taxes into childcare vs to welfare any day of the week. Some
        of these kid’s home lives were pretty messed up and pre-school offered them
        a positive experience and 2 healthy meals, 5 days a week.

  11. Money Reasons

    I agree with you that more power should go ro the states! Having a big government is like telling everybody that they can only wear womens size 4 shoes. Yeah, it will work out great for a certain group of folks, but it will be pretty darn uncomfortable for the rest of use… :)

    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?
    Yes, I’m pretty sure I could get by for quite a while. But if I didn’t have any savings, then no…

    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?
    Hmmm, tough question. I think this should be a local government problem…

    What is the most effective solution in reducing poverty?
    Stopping all the manufacturing jobs (or really any jobs) from going overseas. Not everybody is smart, so these type of jobs really help the working poor. The government might not realize it, but some workers can’t make spreadsheet and the simplest of software programs to work…

    1. Wow, some pretty protectionist recommendations Don! I like it since that is not something anybody else would say eg the poor is the “local government’s problem”, protect jobs from moving. That fights against the free market, which I guess is necessary to a certain extent due to timing issues.

  12. Kevin@InvestItWisely

    Oh, never answered on whether I could live off 15k a year. Where I live, yes I could. I did it for all of my student life, but I had help in paying the tuition and I paid $450 of rent including heating and parking. It would be a miserable existence, but that’s only relative. Human envy is always relative! Compared to people 500 years ago I’d still be living like a King with my own apartment, internet, and TV!

  13. Incredible. I don’t see how anyone in California could live off of $15k/month. You would have to get a second job just to buy food, clothes, and pay other needed expenses. It cost me $15k/year just to have the house I have.

  14. No, I could not. After tax, that’s what, maybe $12k? $1000 a month? Rent is $500 a month, food around $200, transport $100, another $100 or so for bills. That leaves $100 for a buffer, clothes, medical, savings….etc – it’s not sustainable for me.

    I don’t really want to get into the stand on your own feet vs handout argument, but I believe in the welfare safety net and giving a hand up.

    Then again, I’m from NZ.

  15. I could not. With a family, in my current situation, not a chance.

    Once people start adding liabilities to their life (large mortgages, RE taxes, car payments, consumer debt, etc) they really NEED the income more. If people avoid such liabilities, live within their means, pay cash instead of borrowing, etc – then there is less of a need for cash flow.

    Now, I’m not incurring all the debt I mentioned above, but still have cash outlay that couldn’t be covered on a minimum wage salary. My hope is to pare down these expenses so that we can survive on less income if need be, and save the rest.

    $15,000 a year for a family is tough in an area like Chicago (where I am), much less the Bay Area! I suppose it could work if some social norms we have in this country were “modified”, such as multiple generations living under the same roof. Sure, it would give some issues to our independence that we expect, but in dire circumstances, it’s better than running a deficit!

    1. It’s funny, cuz every time I hear about Chicago property prices, I’m amazed how CHEAP everything is there compared to the bay area!

      It’ll be good to gradually reduce debt until the time we retire for sure.

  16. I have no debt and a paid for house, so I could live on $15 K a year, but certainly not at my current standard of living. I would undoubtedly lose weight. :)

    I think the worst way to help the poor is through government programs. Receiving tax payer money for doing little or nothing is not a great motivator to become innovative and industrious.

  17. I know of one man who is thriving on $7,000/year in the Bay Area. Early Retirement Extreme.

    So it can be done.

      1. He’s taking no government handouts, has medical insurance, is well fed, owes nothing, owns his home, and doesn’t have to work (though chooses to work a 4 hour week editing science papers). He’s racing sail boats and pursuing several other interests and is self-publishing a book…

        If that doesn’t describe thriving, then your definition must be rather extraordinary?

  18. Could I live off minimum wage – absolutely not – as my mortgage is much more than I would make on minumum wage.

    I also agree that you never know when life might send you for a loop and thus it is very important to save lots of money – just in case.

    Punctuations Police again – some of the reasons why California is in such bad shape have to do with the uniqueness of how things operate in that state. 1) they need 2/3 of the legislature to approve a budget – just getting more than 50% is often hard enough, imagine having to get 2/3 of the people to agree, 2) when the people in CA change a law regarding taxes, this changes the CA constitution and thus it is very difficult to get the revenue back again. In Massachusetts when the people vote to change a tax law, the legislature can change it immediately – and they often do.! So in CA the people vote to decrease taxes but increase expenditures on given items, like education, this makes the job of a legislature in CA very difficult.

  19. In our current situation our mortgage alone would be more than the $15k/year – so without savings we would not be able to get by on minimum wage. If you include our savings, however, we would be able to get by just fine for a couple of years as we have almost a year of expenses saved in our emergency fund.

    As far as who should help the poor, i think it is up to the poor themselves, to the rich, the middle class, to the government, and it is up to other community groups to help. All should have some place in the process.

    Personally, in our current state I think it has skewed far too much towards the government taking care of all our needs, when it should be much more of families and friends helping each other, churches stepping in to fill gaps, and people helping themselves. I really do think many of our social welfare programs don’t encourage people to get out of poverty, but instead give incentives to stay there – especially if the incentives they’re getting last longer and are about the same or more than any minimum wage job they could get. I mean, if you could get a job, and get paid the same as being on welfare – wouldn’t you just stay on welfare?

    In the end, I don’t think we’ll ever completely get rid of poverty – it’s just not possible. What is the best way to help people out of poverty that want to get out? Education, incentives to work, and helping to get business moving again to help create new jobs that will pay more.

    1. I would definitely stay on welfare, if I couldn’t get a job that pays more. That’s a no brainer.

      I think education is the key to everything, I really do. Thnx for your thoughts.

  20. Morgan Spurlock (of “Super Size Me” fame) did his first TV show called “30 Days” where him and his fiancee lived on minimum wage for 30 days (in OH no less). If you haven’t seen it I suggest you do (originally aired on FX channel) and now shown on Planet Green.

    Great video and great series, though somewhat biased.

  21. Kevin@InvestItWisely

    I love this post, Sam. I am not sure that alleviating poverty will help, as absolute poverty is no longer a significant problem in the US. If you don’t believe me, show me where the mass of people dying and starving in the streets are. As bad as things seem for some people, this isn’t 1960s China or 1930s Russia.

    I think the problem is in part caused by envy: Envy of what your neighbour has, envy of the riches of others. This envy is what causes high taxes, what gives great benefit to government employees (most of which are in the middle class), and what causes expensive social programs to be enacted. The problem is that all of these programs come at a net cost to society over the long run, as we are starting to find out.

    Big government is an attractive drug for some in the beginning, when the benefits are great and the costs aren’t highly visible. Like any drug, it takes a bigger and bigger hit to get the same buzz, and the body eventually can’t take it anymore. Everyone gets shafted by big government in the long run; it just sometimes takes a long while to see that, and once things are better, people are quick enough to jump back on the big government bandwagon. So-called “fiscally conservative” Republicans were just as big government as everyone else during the boom years.

  22. Living in Southern California, I definitely could not live off minimum wage. I’d have to take on TWO minimum wage jobs to make ends meet, and that would be after completely restructuring my life. Maybe something the state workers need to look into.

    I also agree with Everyday Tips, if money used for welfare and social service programs was instead spent on schools, kids would have a better chance of making it out of poverty. Some money would still need to be spent in these areas since teachers can’t be with their students all the time. However, by reducing the money in one area (the individual) and increasing it in another (the group) we’d probably see a positive outcome.

    On a side note, I think people deserve the unemployment benefits they’ve paid into. However, 99 weeks is a little long. I know a few people who are waiting for their benefits to run out before looking for a job. It does seem to make them a little lazy.

    1. Kevin@InvestItWisely

      Since schools are funded by property taxes, poorer areas are going to have worse service than more well-off areas. Since the system is also territorial by nature, this means that there is little incentive for teachers to care, since it’s not like their funding is going to be affected. In fact, if they do a bad job, it’s possible that they get even MORE funding, to try and correct the problem. Finally, if the curriculum is set by the government, then there is no competition between schools in terms of the quality of teaching material.

      I agree wholeheartedly about education, but I don’t think that the government is the best avenue to fulfill that goal, especially when it comes to teaching material that would lessen its role in society.

      1. Kevin@InvestItWisely

        On a personal note, I believe that us bloggers ARE making a difference. There is so much material out there that is available at no cost at all, and the quality is far superior to anything you’ll find in something that has passed through a dozen bureaucratic layers!

    2. Hard to blame the people waiting until they’ve exhausted their 99 weeks of benefits unti lthey find a job. I can see the attraction of milking it as much as possible.

      Let’s say you find another job after 99 weeks, and get laid off a year later…. why not just collect another 99 weeks and let the cycle repeat?

      1. Craig Gonzales

        long-term unemployment has incredibly negative consequences. Self-worth is all but gone, people lose pride and a sense of self. People who are not used to handouts feel worthless.

        While there are some people that will game the system, I firmly believe they are the outliers. Most people WANT to work, not only for the money, but for the status.

        Companies aren’t hiring the way they used to, and not everyone is entrepreneurial. There was an article in NYT just two days ago about high-tech not hiring. Computer engineers are being laid off. When a tech is laid off, he/she has to spend a lot of time brushing up her skills, because the industry changes daily. Long-term unemployment for a skilled worker can have serious consequences (they may lose the skills the would otherwise have).

        So I think we are stereotyping the unemployment – types based on a few bad apples.

        1. I agree that most people want to work for sure. Although I am definitely one who wants to see some money back after all the taxes I’ve paid.

          Let’s say one lost their job now in September. Would be good to collect 4 months of unemployment, go vacation/travel since firms have shutoff their hiring for the year, and wait until spring!

  23. I don’t know how anyone could live in California, or most other places for 15,000/year. Many people that are already making lower wages probably are not debt free either, so I cannot imagine they could live off that amount for long.

    I was just thinking this morning about how I think the country would be better off if funding could be spent on infrastructure as opposed to individuals. For instance, the Detroit Public Schools are a disaster. (Two kids just got shot today on the first day of school.) If money could be spent on making the schools world class, then maybe the dropout rate wouldn’t be so high and kids could see education as being part of their future. Yesterday there were 80 fires in the city because some illegal wiring (I think people ‘borrowing’ electricity from neighbors because theirs got shut off) caught fire, and the high winds spread the fires. Of course, Detroit does not have nearly the manpower to handle this amount of fires, which is why they spread so far. We keep throwing money at people and the problems don’t seem to be getting fixed.

    I am not saying that unemployment and welfare do not have their place. But all the ‘problem solving’ does seem to be short term that there are no real strategies for real change. I know it all takes money, but like they say, is it better to teach a man to fish, or just hand the fish over to him?

    1. Yikes, that’s some crazy shizz on illegal wiring!

      Do you live in the Detroit area? I would try to leave if I had a family…. the system won’t be fixed in our generation unfortunately.

  24. Craig Gonzales

    I could not. That would cover my rent and my student loan minimums, and I live in SE Asia (Singapore, so not technically the cheapy place you think of).

    Luckily, I paid attention in school, and left America during the crash to seek riches in Asia, so I should be okay for now.

    I worry about the state of the nation. The declining dollar is making my loan payments easier month by month, though, so there is something.


      1. Craig Gonzales

        With all the political back-and-forth, it’s hard to predict. I was in Bangkok for two years before SIngapore. Riches in Bangkok? Yes, but not financial riches. It was rewarding on a person level. Riches in Singapore? It’s a work in process. Moving into rewnewable energy, which, I think will bring riches.

        For me, it’s just the speed a barrier to entry. In US I didn’t have the network I was able to make while in Asia. I think I grew up a lot out here, so my netowrking skills just flourished. Going back to US would be starting that over again, I think.

        Plus it’s cheap. I earn USD and pay in either SGD or THB.

        1. Craig Gonzales

          You have the right attitude! I’ve been telling my folks to live in Latin America for years. They are too stubborn to listen. But the life they live off of their retirement could be 100 times better if they lived in a cheaper location.

          Sell/rent the house, move south, live in a small place, with a garden for dad and a church for mom. easy breazey, but they do not like the unknown…

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