Minimum Wage? You Can Still Buy a Car.

It is not easy to live on minimum wage in the United States, especially since everything seems to cost more than it ever has. Economists and financial experts are always debating the merits and problems of minimum wage, but those who are paid minimum wage are always complaining about how little they make. The only lower option for pay in the United States is no pay at all.

The big discussion is whether a person who is paid minimum wage could actually afford a car.

What is Minimum Wage?

There is good and bad new to minimum wage. People making minimum wage do drive nicer cars than they did just a few years ago. James Sullivan from the University of Notre Dame is a labor economist who studies the spending and usage habits of those with low incomes. He also noticed that maintaining a car on minimum wage means that all other spending must take second fiddle.

The federal minimum wage is $7.25 per hour. Some states have higher minimum wages, but this amount is the lowest that anyone can be paid in the United States. The highest minimum wage is in the State of Washington at $9.04 per hour.

Do Some Calculations

If you work in Washington and make $9.04 per hour and you work for 40 hours per week, 52 weeks per year, you would make a minimal salary of $18,803 annually. This is without health care taxes or deductions. And, no one ever really works 40 hours a week, for the full 52 weeks each year.

The poverty level in the United States is $10,890 and minimum wage is not much higher. Many cars cost $18,000 and no one can spend their entire annual salary on a car. There are so many other things that people need to purchase in order to live.

When economists start to figure out appropriate budgets for people, many times those budgets are differentiated by behaviors of the family. For those who make minimum wage, the third most costly expense is the cost associated with owning a vehicle. Most people who live in poverty spend about 14% on their automobile, which is around $240 per month to pay for the car, maintenance, interest rates, gasoline, and insurance.

Sullivan, from Notre Dame, says that most of the impoverish car buyers are looking a late model cars. In the past, those cars that were between 5 and 10 years old were expensive to own because of repair costs, but they are not that way anymore. Cars are also more safe than they were in the past, and many of the minimum wage earners are buying nice cars.

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