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KEY TAKEAWAYS
- Although the federal minimum wage of $7.25 has not changed in more than a decade, renting costs have increased.
- There are no major American cities that hold an average monthly rental cost which is 30% of a minimum wage earner’s gross income.
- The monthly income of a minimum wage worker on the federal wage is $1,257, which means that a one-bedroom apartment for a single renter would need to be $377 a month to be considered affordable.
There are no longer any American cities where a minimum-wage earner can comfortably afford the rent price of a one-bedroom apartment.
The federal minimum wage is $7.25. A minimum wage worker’s monthly income on the federal wage would be $1,257 before taxes. In October, the national average rent was $1,558 a month, according to Apartments.com.
That is more than 30% of a worker’s income, which traditional financial advice considers unaffordable. For example, a one-bedroom apartment for a single renter earning the federal minimum wage would need to be $377 a month to be considered affordable.
However, according to research from Clever Real Estate, housing costs far more than that in all major cities across the country.
Cities and states can both have higher minimum wages than the federally mandated minimum wage, contributing to differences in affordability.
The city where minimum wage workers can easiest afford housing is Buffalo, NY, where the average one-bedroom apartment takes up 39% of a minimum wage earner’s gross income. The minimum wage, which is $15 an hour in New York, is not enough to comfortably afford the average monthly rent of $1,001 for a one-bedroom apartment in Buffalo.
In 15 cities, it would take three or more minimum-wage incomes to afford a one-bedroom apartment. Atlanta is the most expensive location, with a one-bedroom rental costing a minimum-wage earner 132% of their monthly income.
Minimum Wage Is Not Keeping Up With Rent and Inflation
American workers who earn minimum wage saw the last hike to the federal minimum wage in 2009. During that time, the average rent rose 64%, and inflation on all items jumped 48%, according to the Consumer Price Index.
According to Clever, to maintain the same purchasing power after 15 years of inflation, the federal minimum wage would need to be hiked to $10.59 per hour. However, minimum-wage workers would still be unable to comfortably afford the average rent at those levels.