What is the lowest possible hourly rate that someone would be willing to work for if there was no minimum wage law?
Apart from local wage floors that don’t actually cover the full COLA that includes rent for a single worker without having to rely on roommates, the highest return a worker could bargain for their labor would depend on 1) the scarcity of their skills and qualifications for any particular occupation 2) the barriers to self-employment as none would work for wages lower than what they could earn on their own. The floor of wages is always the margin of production i.e. the best rent free site where you can get the highest returns on your labor and capital. In simple terms that means less desirable sites will be used if they are believed to generate just as much revenue minus the rent a landlord would charge for a better site. That is why adjusted wages were higher in colonial America, towards the last quarter of the 18th century, than in the British isle and the difference even larger if you only compared free labor in both locations. Even accounting for chattel slavery and indentured servitude income inequality was still estimated to be lower in colonial America than concurrent Great Britain and even the present U.S.That is also why adjusted wages were higher on the western frontier in 19th century America as well. That is the main reason people migrated from Britain to colonial America and from the eastern seaboard west. Yes, there were religious reasons for some but nobody moves to a more dangerous place to be poorer there; usually there has to be a higher return to justify the higher risk.
Unfortunately, since the 19th century the barriers to self-employment have only grown larger. Even in 1910 50% of laborers were self-employed, but as the U.S. has continued to sprawl outwards commercial landlords have gobbled up remaining prime sites with the few remaining undeveloped ones being withheld from development for speculation. A housing shortage precipitated by the 2008 housing market collapse has worsened the proletariat predicament by creating a captive market for residential landlords to charge rent hikes that exceed even median household income growth. In short, the private land monopolies the government erected yesterday have eviscerated the bargaining power of propertyless labor today. Local governments exacerbate the problems that the federal government created in the past by making the scarce resource of land even scarcer and thus more expensive with exclusionary zoning, minimum floor space requirements, minimum lot size multifamily housing and minimum parking space requirements. Something I’ve pointed out repeatedly here is that local governments go out of their way to make housing more expensive even when they add a few low income housing units or provide vouchers. And developing communities around single family house sprawl makes public transit unfeasible requiring low income workers to take on the additional purchase and maintenance costs of a vehicle just to earn a living.
Even if a low income workers attempted to earn a better living on their own and don’t need a commercial location to set up shop, the growing number of state occupational licensing laws over jobs that can be done without a six figure college education price them out of the only other route to social mobility.
Abolish Occupational Licensing (Part 3)
And even if many low income workers were able to pool their resources and form an employee owned enterprise they’d be stymied by the discriminatory lending practices of the money monopolists who prefer lending to large companies with rigid corporate hierarchies. Even the SBA that was supposedly set up to finance small businesses discriminates against Co-ops and ESOPs by excluding buying clubs and requiring anyone owning more than 20% of a business to use their personal assets as collateral.
How the SBA Discriminates Against Co-ops
Every wage floor is a band-aid policy for the resource monopolies and market barriers the government has erected and not even an adequate one at that.
Case in point: California’s current $20 hr wage floor for fast food workers is inadequate to afford $1,200 a month in rent which is considered “rent control” prices in the coastal region of that state.
Answer: Is $20 an hour a livable wage if I work 40 hours a week and my rent is $1200 a month
$1,100 and even $1,000 a month would be a bit of a stretch when you consider the money they actually have to pay rent after taxes are withheld (about 35% of net income). A reasonable rent for a single worker making $20 an hour would be in the triple digits but those are highly scarce in major cities nowadays and there certainly isn’t enough housing in that price range for every service sector worker earning the wage floor. Fast food workers would need to make about $80K a year, the equivalent of $40 an hour, to comfortably afford coastal California.
The Salary a Single Person Needs to Get BY in Every U.S. State
43% of small businesses nationwide were unable to pay their rent in full in April this year. 52% of restaurants were unable to pay rent in full the same month and it is unlikely they can afford mandatory wage hikes that don’t even cover the rent of their employees with their landlords bleeding them dry.
The actual floor of wages is a moving target that is continually suppressed by the institutional power governments exert over market entry, property owners exert over land and finance capitalists exert over money living from one QE and bailout to the next whiling skimming most of the profits off the top of the real economy.