Opinion
The Math: What is a Living Wage?
“Challenging People to Shape
a Better Future Now”
B ERNIE F OSTER
Founder/Publisher
B OBBIE D ORE F OSTER
Executive Editor
T ED B ANKS
Advertising Manager
J ERRY F OSTER
Account Executive
L ISA L OVING
News Editor
H ELEN S ILVIS
Multimedia Editor
B RUCE P OINSETTE
Reporter
D AVID K IDD
Graphic Designer
M ONICA J. F OSTER
Seattle Office Coordinator
J ULIE K EEFE
S USAN F RIED
Photographers
The Skanner Newspaper, established
in October 1975, is a weekly publica-
tion, published each Wednesday by
IMM Publications Inc.,
Last week, workers at fast food
restaurants demonstrated outside
their places of work, highlighting
the low wages they receive and
demanding more. They say twice
as much, or $15 an hour, will pro-
vide them with a living wage. In
Washington, D.C., the City Coun-
cil has sent legislation to Mayor
Vincent Gray requiring “big box”
stores such as Wal-Mart and Best
Buy to pay $12.50, which is more
than the D.C. minimum wage of
$8.25 an hour. In response, Wal-
Mart says it may not build all of
the six stores it had slated for
D.C. Responses depend on whom
you talk to, with some of the
unemployed saying that an $8.25
job is better than no job, and oth-
ers saying that $8.25 is not a living
wage.
Let’s do the math.
Someone who earns $8.25 an
hour (which is a dollar more an
hour than the federal minimum
wage) earns $17,160 per year if
they work full time (40 hours) all
year (52 weeks). Although taxes
for the low income are low, they
are still deducted, especially the
Social Security tax (about 7 per-
cent). Too many minimum work-
ers don’t work full-time,
full-year. Many have their hours
cut so that companies can avoid
paying benefits. This means full
time, full year work is the best-
case scenario. For many, it can be
much worse.
The poverty line for one adult
and two children is $19,530,
which puts the $8.25 worker
below the poverty line. The par-
B ENNETT
C OLLEGE
Julianne
Malveaux
ent who earns this scant wage
struggles to make ends meet, and
often cannot. Too often, this par-
ent has to choose between trans-
portation and shoes for their
children, between children’s
books and food. A two-parent
family has a higher poverty
threshold of $23,550, about 20
programs or other efforts, offering
day care possibilities for those
who struggle to afford it. Accord-
ing to the Economic Policy Insti-
tute, the average cost of childcare
in the District of Columbia is
$1,300 a month, or $13,600 a
year. Poverty line $23,550, child-
care costs $13,600 per year. Go
figure.
In other parts of the country,
full-time, full year workers earn
less than D.C. workers. Those
who earn the federal minimum
wage of $7.25 an hour earn
$15,160 per year, less than the
poverty line for one parent and
one child. Those who earn $12.50
per hour, the proposed wage for
Many quibble over the minimum
wage, but the more relevant issue is
the living wage
percent more than the minimum
wage worker earns.
Federal and state supplements
often make the difference between
swimming and sinking. Many
families who live below the
poverty line use supplemental
nutrition programs (formerly
called food stamps) to enhance
their food budget. Congress is in
the process of cutting SNAP so
low that 5 million of the roughly
47 million people on the program
will be cut. Some receive medical
assistance through Medicaid.
Some cities subsidize summer
D.C. big box stores, will earn
$26,000 a year. The $15 an hour
that some fast food workers sug-
gest would push their wages to
$31,200 a year.
Some feel these low wages are
acceptable, especially some Tea
Party members of Congress, yet
they earn at least $174,000 per
year. Actually, if fast food work-
ers were as productive as this Con-
gress (which has produced little of
nothing so far this year), they
wouldn’t earn a penny. Yet those
who are well paid and well sup-
ported show little empathy for
those whose lives and work are
daily struggles.
The issue of unemployment
must be taken into account when
we look at the matter of poverty
lines and minimum wages. With
an overall unemployment rate of
7.4 percent and a Black unem-
ployment rate of 12,6 percent as of
July, too many households with
two adults have only one earner in
the household. Another concern is
that the federal poverty line is
published as a national rate, yet
it’s much cheaper to live, for
example, in rural Mississippi than
it does in New York City. In many
instances, the poverty line does
not reflect differences in housing
costs, health care costs, or even
transportation costs.
The Economic Policy Institute
(epi.org) has developed budgets
for “adequate” living in certain
cities. (Full disclosure – I sit on
the organization’s board). This
tool shows the wide variety of
realistic and adequate living costs,
which range from more than
$90,000 in New York City, to
around $40,000 in parts of Missis-
sippi.
Many quibble over the mini-
mum wage, but the more relevant
issue is the living wage. Millions
are pushed below the poverty line
because too many employers do
not take the cost of living into con-
sideration when the set wage lev-
els. Paying workers less than they
are worth drains our economy
because these workers will not be
spenders
or
“economic
expanders.”
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Overdraft Fees Cost U.S. Over $36 Million
In recent years, many banks
and credit unions have encour-
aged new checking account cus-
tomers to accept two items: a
debit card that replaces cash
transactions and a ‘protection’
known as overdraft coverage.
Overdraft programs automatical-
ly pay for transactions not cov-
ered by available funds; the bank
then repays itself the overdraft
amount along with fees – often
hefty ones — from the customer’s
next deposit.
However what many unsuspect-
ing consumers soon discover is
that this so-called protection from
banks comes at an extremely high
cost. In only one year, 2011, finan-
cial institutions charged con-
sumers $16.7 billion in overdraft
fees, affecting over 36 million
Americans’ checking accounts.
High-Cost Overdraft Practices,
the latest installment in the Center
for
Responsible
Lending’s
research series, The State of Lend-
ing, found that debit cards trigger
the most disproportionate fees. On
debit card purchases, the median
overdraft charge is $35 for a $20
overdraft. Further, debit card and
ATM transactions account for at
least 35 percent of all overdraft
fees charged.
The high share of fees generated
by debit cards is ironic, since
banks and credit unions can sim-
ply decline these transactions at no
cost to the consumer – and some
institutions do. For banks that con-
tinue this pernicious practice, the
Page 4 The Seattle Skanner August 7, 2013
R ESPONSIBLE
L ENDING
Charlene
Crowell
consequences for their customers
can be severe.
The report states, “Abusive
overdraft programs drive con-
sumers out of the banking system;
indeed they are the leading reason
consumers lose their checking
accounts.”
Today, three-fourths of the
would apply. Additionally and in
the same year, the Federal Deposit
Insurance Corporation’s guidance
advised that more than six over-
draft fees within a 12-month peri-
od was excessive for any account
holder.
However, CRL and others have
found that many financial institu-
tions aggressively market their
overdraft programs, pushing cus-
tomers most likely to generate the
most fees to “opt-in” for coverage.
Customers with small and no
cushions in their accounts may ini-
tially view overdraft coverage as a
way to save money. But as over-
draft fees are assessed per transac-
tion, the costs can quickly become
burdensome, leaving fewer avail-
‘Abusive overdraft programs drive
consumers out of the banking system’
nation’s largest banks and large
numbers of smaller banks and
credit unions charge fees on debit
card purchases, ATM withdrawals,
or both. Moreover, these over-
drafts and associated fees are
assessed without regard to a con-
sumer’s ability to repay them.
In response to widespread criti-
cism surrounding overdraft pro-
grams, the Federal Reserve Board
made a 2010 regulation that
required institutions to obtain a
customer’s ‘opt-in’ for overdraft
coverage on debit card purchases
and ATM withdrawals before fees
able dollars for the next month.
“Over time, the repeated fees
strip away consumers’ cash assets,
leaving them financially worse off
than when they first over-drafted
and unable to meet obligations
they otherwise could have met
even with no overdraft coverage at
all,” says CRL.
Some major banks have heeded
consumer concerns and improved
their overdraft practices. For
example, Bank of America, the
nation’s largest debit card issuer,
stopped charging overdraft fees on
debit card purchases. HSBC also
stopped charging overdraft fees on
debit card purchases as well as at
ATMs. Citibank has never charged
overdraft fees on debit card or
ATM transactions, and JP Morgan
Chase does not charge them on
ATM transactions.
Recent related findings by the
Consumer Financial Protection
Bureau show that the Fed’s opt-in
rule has not eliminated the sub-
stantial harm inflicted by overdraft
fees triggered by debit cards.
CFPB determined that involuntary
account closures were more than
twice as likely for customers that
opted in to overdraft than those
who did not.
“Banks and credit unions have
long defended overdraft fees by
saying they protect customers
from bounced checks, which typi-
cally trigger insufficient funds
fees and potentially merchant
fees,” states the CRL report. “But
the same justification could not be
made for debit card purchases,
since there is no NSF or merchant
fees charge for debit card transac-
tions that are declined at check-out
when the customer’s account is
short.”
CRL offers a set of policy reme-
dies to halt overdraft’s harmful
features. Highlights include ban-
ning overdraft fees on debit cards,
ATM transactions and on pre-paid
cards. CRL also advocates ban-
ning banks from manipulating the
order of consumers’ checking
transactions to increase fees.