New Report Draws Bogus Link Between Housing Costs and Minimum Wage

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Every year, the National Low Income Housing Coalition (NLIHC) releases a new report with headline-inducing statistics and fancy maps detailing the so-called “Housing Wage” that workers need to earn to afford the current rental market. This year was no exception – and minimum wage hike advocates are using the newest numbers to push for an aggressive increase in federal and state minimum wages, to $15 and well beyond.

Here’s their main takeaway: the costs of housing are so high, no one earning the federal or state minimum wages can afford average housing costs. They calculate that workers need to earn an average “Housing Wage” of $24.90 per hour to afford “modest” rent, which they consider to be a two bedroom apartment for any minimum wage earner.

But interest groups and policymakers should be careful not to use this figure as a new minimum wage benchmark:

Reason #1: The metric used in the report is misleading and unrealistic.
Reason #2: For the minimum wage earners that may be in the market for a two-bedroom apartment, the majority are not relying on that paycheck alone to afford their housing costs.
Reason #3: Minimum wage earners who do need additional funds have access to better-targeted programs like the earned income tax credit and Section 8 housing vouchers.
  • The earned income tax credit (EITC) supplements the earnings of low income households, and the benefits increase for recipients based on marital status, number of children, and amount of earned income. Such a program more acutely targets cost of living by accounting for differences in family types and dependents, instead of the minimum wage which does not adapt to accommodate the unique needs of single earner families, or earners with dependents compared to those with no dependents.

  • A 2019 survey of 197 economists found 64% believe the EITC is a very efficient way of alleviating poverty, while only 6% believe that raising the minimum wage, to $15 for example, would address poverty needs.

  • The federal Section 8 Housing Choice Voucher Program also provides funds specific for those needing assistance with their rent. Eligibility is based on a proportion of median income for any county or metropolitan area, therefore adaptable to the varying costs of living across the US and even within individual states – compared to a flat minimum wage increase which does not account for higher and lower cost areas. For eligible households, the voucher subsidizes a proportion of rent based on the family’s adjusted monthly income for any housing unit where the owner agrees to participate in the voucher program.

While housing affordability is an important policy issue, tying minimum wage mandates to a misleading “Housing Wage” figure is not the most effective way to solve the problem. Minimum wage hikes have been demonstrated to have no significant effect on reducing poverty rates, in part due to well-documented job-killing consequences. One 2015 study found that a decade of minimum wage increases across the country provided no evidence that these hikes increased workers’ ability to pay rent, pay their utility bills, or “avoid financial or health insecurity.”

Instead, lawmakers should focus on the realities of minimum wage earning demographics, and support policies like the earned income tax credit and housing cost aid which directly supports individuals who need housing assistance without the damaging effects of raising minimum wages, which could put more workers out of a job altogether.