Pay cheque to pay cheque: Living on minimum wage is not easy

Living on minimum wage is not easy. You have to be very careful about spending and there is usually very little money left over for fun if any.

This is especially the case if you have children or a family to care for. However, despite the challenges, it can be done.

Patrice Phillip, 39, is an example of that. She had to make many sacrifices and adjustments to her lifestyle when the business she was working for closed at the end of 2018 and she began working a minimum wage job.

She now makes $1,550 a fortnight and has a baby to care for.

With her previous job she paid $1,800 in rent and had to pay for electricity. However, when she was laid off, she had to move in with her father because she could no longer afford it.

Phillip told Newsday the salary at her previous job was not comfortable but it was still much more than she is making now. When she lost her job, she had a lot of debt because she had school and furniture to pay off and she was owing on her rent. But she worked hard, was disciplined with her spending, and eventually paid off those debts.

She still must pay off her credit card and a loan, as well as pay bills including gas, maintenance and insurance for her car, and essentials for her baby.

“The transition was very hard in the beginning. It was so stressful. When you’re financially free your mind is more at ease. Right now, anything that’s not absolutely necessary has to wait. I don’t have the luxury of making plans or goals.”

For example, she recently lost her phone, the air conditioning in her car is not working, and she would like to start saving for emergencies but will all have to wait.

“My father is doing so much for me but it’s still difficult. My partner doesn’t work a permanent job so technically I’m the main breadwinner, but I can’t do much other than buy food and diapers and I’m barely making instalments on my credit payments.”

She said her credit card expired and she had no intention of getting a new one because the interest is too high. For convenience, however, she might think of getting a pre-paid credit card in the future.

Before the covid19 lockdown, she had other sources of income. She is a personal trainer and used to do face painting at children’s parties. But with gyms closed and no large gatherings allowed, those sources have dried up.

Now she has even less money for entertainment or luxury items. She, therefore, had to discontinue her gym membership so she has not worked out in a while as she prefers weights to cardio. However, she hopes to join a smaller gym when they are allowed to reopen.

Phillip said she no longer buys clothes or shoes and if such a purchase is absolutely necessary, she looks for sales. She does not go out to lime and had to reduce her cell phone plan.

Before she lost her job, the main ingredients of her diet were fish, chicken breasts and eggs. While she still eats eggs, she only occasionally eats meat. Even then she looks for cheaper cuts and so “recently discovered” gizzard and liver. Also, her meals are also more economic with a lot of peas, greens, rice and potatoes.

She used to go to the market near closing time to get her fruits and vegetables cheaper, but she stopped going altogether because of covid19. Also, she can no longer buy groceries for the month but makes purchases as items run out.

“I used to be a Massy shopper but now I only go if they advertise a special deal. Not only because they are a bit more expensive than other groceries and every cent counts over time, but it has too much temptation. Now I try to support smaller businesses because Massy’s already established and doesn’t need my small money.”

She said she saved a lot of money when she decided to breast feed her child, and she gets a lot of baby clothes from family abroad. However, she has never been able to take her daughter to a private doctor. From the beginning she has had to carry her for free public health care.

“One positive thing about my job is that I work from 6am to 12pm from Monday to Friday so I have time to spend with my baby.”

TT’s current minimum wage is $17.50 per hour which is equivalent to $3,033.33 per month. However, legally, a minimum wage worker is anyone earning $26.25 per hour or less.

Dr Daren Conrad, Head of the Department of Economics at the University of the West Indies told Newsday there is no international standard and no set way to calculate minimum wage. However, the objective is to ensure people get a living wage and to put them on par with the cost of living.

“The general purpose of a minimum wage is to establish a floor that employers can not go below. Below that would mean that the employee will not be able to, at minimum, meet their dietary needs.”

He noted that the minimum daily caloric intake for an adult to not starve is around 1,200 calories. He believes the Minimum Wages Board, whose purview is to review various micro-economic factors, uses 2,400 calories, the amount needed to maintain one’s weight, in its calculations.

“A lot of people think it’s a political tool but it’s actually a scientific process. The Minimum Wage Act specifically says the minimum wage takes into consideration the average level of wages, the cost of living, and the contributions payable provided under the National Insurance System. Then there are whatever other factors the government may want to take into consideration, like reducing unemployment.”

He said the minimum wage is usually tied to the customer price index. According to Investopedia.com, the consumer price index is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. So, when those go up, the minimum wage should increase as well.

“When looking at the minimum wage, the government is looking out for the welfare of the average citizens but the challenge is now for the employer who has to find the extra money to pay.”

Small businesses especially may have issues with an increase but he said they need to be realistic because people need to survive.

He said $3,200 per month per adult should meet people’s basic hierarchy of needs – food, shelter, clothing. “People may not be in the best position but it is not unrealistic to assume they would survive. They would have to make some personal adjustments and get creative, legally of course.”

He suggested that those people access social programmes such as bus passes, food cards, public assistance for their children, and other grants to supplement their income.

He stressed that people should not compare minimum wages of other countries and should not convert currency if doing so.

“When you look at the minimum wage across the globe and the average cost of rent, you would say that person can’t live, but they can because they can eat.”

For example, he said, in the US the average worker may earn around US$2,700 per month after taxes. A conversion to TT dollars would be over $18,000, which may sound like a lot. However, their gas and electric bills may be around $300, rent at $1,200, groceries around $600, then they may have car payments, fuel costs, and both car and medical insurance to consider. That person may be living pay check to pay check and may even have to find a second job.

In an e-mailed response to questions by this reporter, the Ministry of Labour said, “Setting and adjusting the level is perhaps the most challenging part of minimum wage fixing. If set too low, minimum wages will have little effect in protecting workers and their families against unduly low pay or working poverty. If set too high, minimum wages will be poorly complied with and/or have adverse employment effects.”

In addition to the needs of workers and their families, the general level of wages in the country, the cost of living, and contributions and benefits under NIS, other factors are taken into consideration. These include economic factors such as the requirements of economic development, levels of productivity, and the desirability of attaining and maintaining a high level of employment.

“Minimum wage levels need to be adjusted from time to time to take into account changes in the cost of living and other economic conditions. Failure to do so may lead to an erosion of the purchasing power of workers who earn the minimum wage when prices of goods and services are rising, or to greater wage inequality when the general level of wages is increasing.”

The ministry noted that a national minimum wage was introduced in TT in 1998. It started at $7 and was increased in 2003, 2005, 2011, 2014, and 2019 to $8, $9, $12.50, $15.00, and $17.50 respectively.

It added that the ministry will soon embark on a project to engage a consultant to research the impact of the minimum wage on the economy as well as to develop an econometric model for the setting of a minimum wage in the future.

BE REALISTIC

Ralph Coutain, senior branch manager at Sagicor Life said those living on minimum wage first need to accept their limitations and be disciplined about living within their means.

He said they have to live with a written budget of primary and secondary expenses – things they need for survival, and things that are not necessary but in which they still engage.

“The first two items on your budget should be giving back to your source, and to pay yourself. Anything that we get, we get it from the universe so we need to give back, even in limited situations. Then, you need to build an emergency fund. As little as it is, take ten per cent to save and invest. And this pandemic actually showed everyone how important that is because by the end of March there were far too many people who did not have any savings to rely on.”

Primary expenses include food, clothing, rent, travel, education, medication, and entertainment. He included entertainment because, he said, it was necessary for people to “keep their sanity and balance.”

When buying food he suggested people always check their cupboards to see what they are short of and add the items to a written list which they should take with them to the grocery. Only buy what is needed, buy items from the six basic food groups for a balanced diet, avoid fast food as much as possible except as a reward, and avoid buying sweets, alcohol and cigarettes.

When possible, buy frequently used items in bulk. He said people could join with a family member or neighbour to share the goods and split the cost. In this way the unit items would be cheaper.

With clothing, avoid brand names, buy what you would need and use regularly, and look for sales, including garage sales.

“If you buy things you do not need, soon you will have to sell things you need. So, people need to avoid impulsive shopping. If you don’t really need it, don’t buy it.”

People also need to limit spending on secondary expenses such as liming, and alcohol.

“It boils down to developing that discipline to manage your limited resources and maximise its use.”

In addition, Coutain said, in some cases, people may have to share a home and have room mates. They should also learn to cook and possibly make a big pot and freeze several portions for later use. If they have children, they should be taught to cook from so they can help themselves.

He also suggested that people get creative and look for opportunities to maximise the use of talents and skills even though it will call for additional output, thinking, and time.

“This pandemic has brought so much creativity to the forefront. I’ve seen so many people across TT tapping into their skills and using it to generate multiple streams of income to help themselves. It’s about seeking to strive rather than just survive.”