The Minimum Wage Gap: How It Falls Short of Affording Average Rent
From coast to coast, the minimum wage is falling short of how much Americans need to comfortably afford average rent prices in major cities.
The Problem with the Federal Minimum Wage
The federal minimum wage has sat at $7.25 for the past 15 years. For tipped workers, it’s just $2.13 an hour. While 34 states have raised their state minimum wage, others have kept it at $7.25 or lower, according to the National Conference of State Legislatures.
The Fair Market Rent Standard
Fair market rent is based on the U.S. Department of Housing and Urban Development’s fair market rent standard. Under this model, around 40% of similar units in the area rent for less than the listed fair market rental price, and 60% rent for more.
The Minimum Wage Gap
Here’s how the minimum wage in 15 large U.S. cities compares with the hourly wage you’d actually need to earn in order to comfortably afford a one-bedroom dwelling at fair market price, per Clever Real Estate’s data.
1. New York
- Fair market rent: $2,330
- Hourly minimum wage: $16
- Necessary hourly minimum wage: $44.81
2. Los Angeles
- Fair market rent: $2,081
- Hourly minimum wage: $17.27
- Necessary hourly minimum wage: $40.02
3. Chicago
- Fair market rent: $1,560
- Hourly minimum wage: $14
- Necessary hourly minimum wage: $30
4. Houston
- Fair market rent: $1,279
- Hourly minimum wage: $7.25
- Necessary hourly minimum wage: $24.60
5. Phoenix
- Fair market rent: $1,679
- Hourly minimum wage: $14.35
- Necessary hourly minimum wage: $32.29
6. Philadelphia
- Fair market rent: $1,512
- Hourly minimum wage: $7.25
- Necessary hourly minimum wage: $29.08
7. San Antonio
- Fair market rent: $1,231
- Hourly minimum wage: $7.25
- Necessary hourly minimum wage: $23.67
8. San Diego
- Fair market rent: $2,328
- Hourly minimum wage: $16.85
- Necessary hourly minimum wage: $44.77
9. Dallas
- Fair market rent: $1,606
- Hourly minimum wage: $7.25
- Necessary hourly minimum wage: $30.88
10. Jacksonville, Florida
- Fair market rent: $1,454
- Hourly minimum wage: $12
- Necessary hourly minimum wage: $27.96
11. Austin, Texas
- Fair market rent: $1,650
- Hourly minimum wage: $7.25
- Necessary hourly minimum wage: $31.73
12. San Jose, California
- Fair market rent: $2,975
- Hourly minimum wage: $17.55
- Necessary hourly minimum wage: $57.21
13. Columbus, Ohio
- Fair market rent: $1,194
- Hourly minimum wage: $10.45
- Necessary hourly minimum wage: $22.96
14. Charlotte, North Carolina
- Fair market rent: $1,647
- Hourly minimum wage: $7.25
- Necessary hourly minimum wage: $31.67
15. Seattle
- Fair market rent: $2,293
- Hourly minimum wage: $19.97
- Necessary hourly minimum wage: $44.10
The Future of the Federal Minimum Wage
Currently, a person working one full-time job earning the federal minimum wage of $7.25 an hour would only make $15,080 annually. That’s barely above the federal poverty threshold, according to the Department of Health and Human Services’ 2024 guidelines.
Conclusion
Raising the federal minimum wage could prove to be a double-edged sword, according to the Congressional Budget Office’s analysis. While it could lift many workers out of poverty, it could also cause employers to hire fewer workers due to the higher minimum wage.
FAQs
- What is the current federal minimum wage?
The current federal minimum wage is $7.25 per hour. - What is the fair market rent standard?
The fair market rent standard is based on the U.S. Department of Housing and Urban Development’s fair market rent standard. - How does the minimum wage gap affect workers?
The minimum wage gap can make it difficult for workers to afford average rent prices in major cities, making it challenging to live comfortably. - What is the Raise the Wage Act?
The Raise the Wage Act is a bill introduced by Senator Bernie Sanders, I-Vt., that would gradually raise the federal minimum wage to $17 per hour over the course of five years.
