Double Whammy

High Gas Prices Hammer Minimum Wage Earners

May 24, 2006

You won’t have to go far this Memorial Day weekend to notice that local gas stations are unable to change their signs as quickly as prices are rising. Low income families, many of whom work at the minimum wage, are especially affected by rising gasoline prices. After all, the federal minimum wage has not budged since 1997.

Millions of minimum wage workers are caught in a tightening vise. The reason: It now takes more than a day of work in all 50 states and the District of Columbia for them to earn enough money to fill a tank of gas, up from a little more than half a day in March 2001. In 14 states minimum wager earners must labor until lunchtime Tuesday to pay for the gas to drive to work. In another 16 states these employees have to work until well past mid-morning on Tuesday to pay for their gas.

Analysis by Christian E. Weller, Senior Economist at the Center for American Progress, published today shows that rapidly rising gasoline prices and mostly flat minimum wages have resulted in the cost of minimum wage earners getting to work each week jumping an average 104.9% between March 2001 and May 2006. On average, across the 50 states and the District of Columbia, it takes 11.2 hours of work for minimum wage earners to pay to get to work, up from an average of 5.5 hours in March 2001.

In the 17 states and the District of Columbia that raised the minimum wage between March 2001 and May 2006 or already had in place a minimum wage higher than the federal-mandated level, it still took minimum wage earners until Tuesday morning to begin earning money to pay for something besides gasoline. But according to the study, minimum wage employees in these states could more quickly turn to earning money for rent, food and clothing, education and other basic necessities.

The minimum wage, of course, represents the floor upon which many low income workers begin to negotiate for higher wages to take care of themselves and their families. Amid rising gasoline and oil prices, 23.2 million families with incomes of less than $24,102 paid almost 8% of their annual income for gasoline in 2004, according to the most recent date from the Bureau of Labor Statistics. And that’s before the recent jump in gas prices.

The public policy response to this deteriorating situation for the Americans with the lowest incomes should be clear. While in the long-run it’s paramount to reduce energy costs for families by increasing energy efficiency, low income families need immediate help. This can primarily come by raising the minimum wage. This would provide financial relief for low income families facing this painful double whammy.

Read the entire report (PDF)