09/18/2014 02:00 pm ET Updated Nov 18, 2014

The Hourly Rate of Poverty

Minimum wage began in 1938. Employees engaged in or producing goods for interstate commerce were granted a minimum wage of $0.25 per hour. That same year, President Roosevelt stated, "I see one-third of a nation ill-housed, ill-clad, ill-nourished." after federal agencies studied income levels.

Poverty lines before 1958 did not take family size into consideration. After that time, the gender of head of household as well as family size were factors. Later, gender was dropped from the quotient.

The earliest poverty threshold for a woman with two children was $2393 in 1961. By that time, the minimum wage rose to $1.15.

Comparing the minimum wage with poverty level of a single head of household with two children revealed interesting results. A full-time worker, working 40 hours a week, for 52 weeks works 2080 hours. Dividing $2393 by 2080 yields $1.15. In 1963, the minimum wage rose to $1.25; the full-time hourly rate for poverty for the family of three was $1.18.

Looking back at these figures, from 1963 until 1979, minimum wage was slightly higher than the hourly poverty level.

Between 1961 and 1981, the minimum wage was adjusted eleven times. This hourly rate of the poverty level and minimum wage stayed within nineteen cents of each other during these years. In 1981, 20 billion dollars was cut from food stamps and the welfare program. At that time, minimum wage was $3.35 and the hourly poverty rate was $3.52.

The next minimum wage rate increase was in 1990; to $3.80 and the poverty threshold for a family of three had risen to $10,530 or $5.06 when divided by 2080. Minimum wage increased the following year to $4.25, lessening the difference between minimum wage and the poverty level. However, in 2007, that difference was the most disparate. The minimum wage was $5.85 and the poverty level for a head of household with two children was $16705, or $8.03 when divided by 2080.

The most recent figures are today's minimum wage of $7.25 compared with 2013 poverty level of $18769 or $9.02. A single head of household working 40 hours a week, for 52 weeks at minimum wage makes $15,080.

Twenty-eight million workers are currently making minimum wage. Less than 25 percent are between the ages of 16 and 19 years old. More than half are women (62 percent).
President Obama called on Congress to raise the minimum wage from $7.25 to $10.10 for all U.S. workers during his State of the Union address in January. Shortly after his address, he signed an Executive Order raising the wage to $10.10 for individuals working on new federal service contracts.

The Fair Minimum Wage Act of 2013 would raise the minimum wage from $7.25 to $10.10 in three increments of $0.95. The first increase would come three months after enactment to $8.20; the second increase to $9.15 after one year and the third to $10.10 after two years.

The Act also includes annual indexing by the Secretary of Labor on the third year and thereafter. Indexing is an increase based on the Consumer Price Index. Tipped wages are also addressed wages. Tipped wages have not increased since 1991, when minimum wage was $4.25. Tipped wages are currently $2.13. This Act proposes an increase fifteen months after enactment to $3.00 as well as a formula to keep it at 70 percent of minimum wage. The Minimum Wage Fairness Act and the Invest in the United States Act are related bills currently pending in Congress. It is unlikely that any of these bills will be enacted.

By January 1, 2015, twenty-six states and the District of Columbia will have a minimum wage above the federal minimum of $7.25. Additionally, cities and private companies have instituted minimum wages and starting wages well above the federal minimum; many of these are above $10.00 per hour.