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Minimum-wage workers live on the edge

  • Story Highlights
  • $6.55 per hour not enough for rent, food, transportation
  • Majority of low-wage workers labor in hospitality industry
  • Economist: 'Echo effect' will boost pay for those just above minimum too
  • Low-wage workers often have health risks, economist says
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By Jason Hanna and Jim Kavanagh
CNN
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ATLANTA, Georgia (CNN) -- Timothy Davis, a 21-year-old who makes just above the minimum wage, chose to live on his own three months ago. He was soon second-guessing the decision.

Almost two-thirds of minimum-wage workers are employed in the hospitality industry.

Almost two-thirds of minimum-wage workers are employed in the hospitality industry.

Until Thursday, when the federal minimum wage rose from $5.85 to $6.55, he was earning $6.15 hourly for 35 to 40 hours a week at a Wendy's restaurant in Atlanta, Georgia.

He said each paycheck, coming every other week, amounted to about $380 after taxes. The month's first paycheck went exclusively to bills, food and his $551 rent. Nearly all of the second went to the same.

Very little was left over for clothes, let alone leisure money. He has no medical insurance. What would happen if he were to get sick?

"Oh, man," Davis said, indicating that a doctor visit was out of the question. "Work it all out. Fight it." See how fast the money goes »

About half the states have their own minimum wages above the federal minimum. According to the Bureau of Labor Statistics, 2.3 percent of American hourly workers -- 1.7 million people -- are paid at or below the federal minimum. Learn what the minimum wage is in your state »

"They're often low-skill, low-education, low-experience," said Paul Menchik, director of graduate programs in economics at Michigan State University. "Things have changed a bit. People used to say, 'Well, they're teenagers.' But there are adults who are making low or close to minimum wage."

Minimum-wage earners tend to be unmarried part-time workers in service-industry jobs who are younger than 25 years old and have not completed high school. Race and ethnicity seem to make little difference. Three percent of female workers and 1 percent of male workers are paid at or below the minimum, according to the Bureau of Labor Statistics.

Davis said he hoped to learn welding or another trade and perhaps go to college.

"I don't want to be 25 and still be making minimum wage," he said.

He said he moved out of his sister's home, where he paid $400 a month, because he wanted to have a place of his own.

"There are quite a few minimum wage recipients who are, say, teenagers or part of a larger household, but if you're on your own, it's very difficult," Menchik said. "In fact, you would be under the federal poverty line, even if you worked 2,000 hours [per year], if there are two people in the household."

About 60 percent of minimum-wage employees work in the leisure and hospitality industry, primarily food and drink establishments. However, many of these employees receive tips as a significant portion of their income.

The industries with the largest proportion of low-wage jobs where tips don't play a significant role are education and health services (8.3 percent) and retail trade (8.2 percent).

"People who are close to the minimum wage will probably see a raise as well," Menchik said. "There is some echo effect on people right above it."

Federal programs such as food stamps and Medicaid are available to low-income Americans, and the earned income tax credit specifically targets low-wage workers, Menchik said.

"You may be able to survive" with food stamps, Menchik said. "Maybe not very well, but ..." iReport.com: Are you surviving on minimum wage?

Even after a 70-cent raise, low-wage workers will just barely get by, he said. "They'll just get by a little bit better."

Families in poverty find ways to cut corners, watering down milk and filling up on "cheap and filling carbohydrates instead of protein," which can lead to health problems, Menchik said.

Davis said he's been feeling better about his move in recent weeks, thanks to his friends' generosity. They've provided him with a television and furniture, things he now doesn't have to worry about buying.

He doesn't buy gasoline, choosing instead to rely on Atlanta's mass transit system. Because he was making more than the minimum wage before it rose Thursday, he expects that his new wage still will be above the new mark.

He's not sure how much the increase will help him.

"I want to see a difference on my check before I can say it's better," he said.

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He noted that prices for food and other things are rising, and he said he wished the minimum wage would rise more often. Before the minimum wage rose to $5.85 last year, it was left unchanged at $5.15 since 1997.

"Why doesn't it go up every year?" Davis asked.

All About Minimum WageU.S. Bureau of Labor StatisticsJobs and Labor

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