This isn’t about me and my personal finances directly, but it makes me think. Finally, the minimum wage is rising. Local governments are realizing that the people who run their cities and towns need to make enough to live in the cities and towns. The new norm is $15/hour. That’s more than twice the federal minimum wage. At least for where I live, that’s still not enough. I’m wondering about that. Welcome to a journey as my thoughts stroll through some arithmetic and realities.

Disclosure: There are experts in this field and I’m not one of them. I wrote a book about personal finance from my perspective (Dream. Invest. Live.), and am a licensed real estate broker (with Coldwell Banker Tara Properties on Whidbey Island); but I am not a financial advisor. I’m just someone witnessing a social disconnect.

Let’s play with that $15/hour. Yay! Every hour make almost enough to pay for a movie and popcorn, or maybe a non-fast-food meal, or – well – not much really. That $15/hour is the total. Knock it down by taxes and life and watch it shrink. It’s easy for the first hour of the day paying for getting to work and the last hour of the day paying for getting home. Divide that income by two and four hours can be spent paying to get to and from work. Life is more than work, but with so little left, it becomes obvious why those with little see little benefit. They might just be getting from one job to another.

Let’s multiple that $15/hour by 2000 hours, roughly a full-time work year. The result is $30,000/year. That at least sounds better. Surely, that’s sustainable, especially from the perspective of someone in 1990. But not really. Median income in 1990 was $54,621. In 2017 it was $61,372. That isn’t much of a change considering that’s only 12% in 27 years.

Make that a monthly instead of a yearly number by dividing by 12 and get $2,510. At least that’s more than rent or mortgage in many places.

Ah, but there’s more to life than housing. The rule of thumb is that other bills eat up about 70% of non-housing expenses meaning people shouldn’t have to spend more than 30% of their gross income on rent or mortgage. That means $753/month spent on housing. In my work as a real estate broker I concentrate on people owning rather than renting, so I’ll concentrate on mortgages.

Pull up an online mortgage calculator (I just typed in “google home mortgage calculator”), type in $753 for a monthly payment, accept the 3.92% they auto-filled for a fixed 30-year mortgage, and find that results in a mortgage loan amount of $159,259. With 20% down on a ~$160,000 mortgage a person can shop for a ~$190,000 house.

Oops.

Out of ~300 houses in my area, none are available at that price. Out of just under 190 houses sold in 2019, only 4 were in that price range.

Pausing and pondering – though your eyes will proceed much more quickly to the next paragraph.

I’m not the only one pausing and pondering. I’m thinking about many of my friends, friends who usually have more than one job, and who have more than the minimum level of expenses. Families must be raised. Some health issues can’t be ignored. Insurance increases every year as each of us ages. Education is expensive in time and money. Short term setbacks can take years to recover from. Making enough takes more than simply having a job.

I hear from people who have more than enough, who hear the economy is doing well, that unemployment is down, and that insurance is subsidized. Some of them don’t understand how anyone could be homeless or struggling.

A job is not enough.

Minimum wage is not enough.

Or maybe we should rename or redefine minimum wage. What would be the minimum wage to minimally sustain a reasonable life, a minimum livable wage?

Instead of looking at a $190,000 house, how much would it take to afford a $300,000 house? Go back to that same calculator, plug in $240,000 (assuming an extra $60,000 for the downpayment – and how they’re going to save that up is a mystery considering that it is more than one year’s gross income), and get a monthly payment of $1,135. Add in the other 70% of living expenses and get to $3,783 gross monthly income. Multiply by 12 for an annual salary of $45,400. And be looking at a number that probably exceeds the expectations of most people with service or low-skilled-labor jobs – frequently the people who see who are serving us food or mowing our lawns.

Of course, one answer is to rent, and possibly rent forever. That can work. But, again, that’s assuming they’re making minimum wage or better. For folks trying to only pay $753 per month, there are fewer than a half dozen apartments on the island. Even RV spaces in backyards are charging $1,000 per month.

Ponder.

Much of the housing debate discusses ways to provide additional housing. Perhaps the affordable housing issue has less to do with housing and more to do with what’s affordable. What’s affordable can be changed by making housing that is cheaper, or finding ways to help people make more money. There are places with housing shortages, but income shortages can be alleviated without infrastructure, environmental impact, or permit processes.

Personal finance issues usually have more than one side: assets versus liabilities, income versus expenses. If it seems like there’s a lack of progress on one issue, consider addressing its counterpoint. Maybe instead of building more houses we find ways to raise wages – and then let those people decide whether they want to rent, build, or buy.