Minimum Wagers Can’t Cover Median Rents

Though renting is certainly less expensive than buying, it is still unaffordable to these workers, argues columnist Lew Sichelman.

Lew Sichelman

Minimum wage earners can’t afford to buy a house anywhere in the United States. But they can’t afford to rent an apartment, either, according to new research from LendingTree.

Though renting is certainly less expensive than buying, it is still unaffordable to minimum wage workers in every state, the study says. Even in Arkansas, which was found to be the most affordable place to rent, people making the $11-an-hour state mandated minimum come up $170 short when trying to pay the $742 median rent.

Across all 50 states, the average difference between an affordable monthly housing payment and median gross rent is $533, according to the study.

Interest groups have long pointed out the disparity between market rents and earnings. But, the mortgage finder website seems to have no axe to grind in the debate about minimum wages.

Senior Economic Analyst Jacon Channel says the proponents for a higher minimum “are right.” Rent costs are not only unaffordable, he says, they have been for more than two decades.

As in other studies, LendingTree calculated total earnings for minimum wage earners by assuming they work 40 hours a week for 52 weeks at their states’ required minimum wages. For states without a legislated minimum, the federal minimum was used. Federal sources were used to determine monthly rental figures as well.

Channel says affording a place to rent is quite possibly more difficult for minimum wage earners than his findings suggest. Because part-timers are more likely to be paid at the minimum than full-time employees, he explains, they probably have even less money to put a roof over their heads.

State Comparisons

The study found that after Arkansas, Maine and West Virginia were the most affordable. But the gap between the affordable monthly payment and the median gross rent was wider in these two states.

In Maine, where the state hourly minimum wage is $12.15, the affordable monthly housing payment is $632 but the median monthly gross rent is $870, a difference of $238. And in West Virginia, the difference is $272. There, the minimum wage is $8.75, an affordable rent is $455, but the median rent is $727.

The spread is far wider in the three least affordable states to rent—Hawaii, California and Maryland.

The state-mandated hourly wage in Hawaii is $10.10, enough to pay $525 a month in rent. But the median gross rent is a whopping $1,651, a difference of $1,126. It’s not quite as wide in California and Maryland, at $938 and $572, respectively. But it is still a tough situation to bridge.

Rounding out LendingTree’s worst 10 are Florida, New Hampshire, Virginia, New Jersey, Colorado, Utah and Texas.

To remedy the situation, President Biden has called for a $15-an-hour minimum wage. But even at that, a full-time minimum wage worker could afford to spend $780 a month for an apartment. However, the report notes that would be enough to afford the median rent in just five states—West Virginia, Arkansas, South Dakota, Kentucky and Mississippi.

Still, should the minimum wage be raised, says Channel, housing “would be much more affordable than it is now.”

For what it’s worth, LendingTree also looked at where it is most affordable to own a place while earning the minimum wage, and Arkansas again topped the list. West Virginia moved up to the second spot, followed by New Mexico.

Not surprisingly, Hawaii was again the least affordable state to own, this time followed by New Jersey and then California.

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