Being poor in America is expensive. The 16% of our population that lives in poverty faces a daily barrage of hidden fees, fines, and predatory interest rates almost perfectly designed to keep them trapped in poverty. 

To be poor in America is far more difficult and complicated than it is often presented as. Things can quickly spin out of control when hidden costs start to pile up with no relief in sight. With the $15 minimum wage hanging in the balance, it’s important leaders consider how they are asking those making below a living wage to live.

Let’s start by picturing an average low-income worker. They work full time at $10.22 an hour, the median hourly wage, taking home $17,950 a year. Our worker is making $2.97 more than minimum wage workers who live in the 19 states that have refused to raise the minimum wage, being paid $7.25. If our worker has an apartment, the average cost of rent will be $784 a month, or $9408 a year, leaving them with just $8,542 after rent. That’s $8,542 to cover transportation, utilities, cellphone, and food for an entire year. 

If our worker has to pay the first month’s rent and security deposit, they will have to save for at least one month before they can afford to move in. Instead of renting, they might opt to live at a residential hotel. Although there’s no hard data on how many low-income folks are residing long-term in hotels, one survey of hotels in metro Detroit found that 84% of occupants were long-term, low-income residents. 

Hotels might offer less upfront cost and no credit check, but a lack of kitchen access and higher long-term costs impact our worker’s financial and physical health. Without a refrigerator or stove, our worker cannot take advantage of bulk purchases or perishable goods. Our worker will be forced to buy smaller and more costly, less nutritious, convenience foods. 

Transportation is another expensive necessity for our worker. Transportation costs eat up 23% of the average worker’s income, whether they use a car or public transit. Low-income public transportation users are underserved by city transit systems as policymakers cut funds for heavily utilized inner city bus lines to subsidize the more costly suburban commute. If our worker wants to buy a car, purchasing from low-income neighborhoods can cost them over $500 more than other buyers pay, and they are more likely to purchase from “buy here/pay here” dealers who charge as much as 50% to 75% above costs.

If our worker can rent and falls behind in utility bills, they could face water or electricity shutoffs on top of late fees, or if they own the home, a lien on their home. In North Carolina, for example, 375,000 people were impacted by delinquent water bills in 2019. During a pandemic, where washing hands can be a life-saving measure, not having access to water can become a death sentence for high-risk citizens. Not coincidentally, lower-income citizens are 32% higher risk for COVID-19. To get the water back on, many will have to pay off the balance in full before the utility companies will reconnect the home to water.

If our worker is a tipped minimum wage worker or has another kind of fluctuating income, they might struggle to maintain a minimum in an account, like the $1,500 minimum daily balance at Bank of America, and face overdraft fees. Overdraft fees are on average $35 for each transaction, and it is easy to see how in a few short days on a slow week, how a worker can so easily slide into hundreds of dollars worth of debt. 

Now that our worker has a deep overdraft, they will likely turn to cash checking operations that will charge a high fee between 5% to 12% to cash the workers check. If the worker is desperate, they might take out a payday loan. Our worker might end up paying rates of $15 per $100 on a 400% interest rate.

If our worker cannot pay for their payday loan, they might face late fees or rollovers. According to a 2020 study, 54% of American households incur late fees each year, to the tune of $74 billion annually, or $577 on average per household. Rollovers make it so the payday lender may allow the worker to pay only the fees due and extend the due date of our workers loan. And if they can’t pay? A court summons from the creditor can be issued, and our worker now has an arrest warrant out. They then face bail fees to get out of jail once arrested and small claims court fees.

This may seem extreme, but for 16% of Americans, this is a glimpse into the issues they face every day. And remember, this isn’t even someone working for the minimum wage – this worker is earning $10 an hour. Anyone arguing that $15 is too much should reexamine what it costs to live in this country. The hidden tax on poverty can be inescapable for the average person. Without access to a living wage and protections, more and more Americans fall into the cycle of poverty. 

This is why many progressives push for a higher minimum wage – people cannot pull themselves up by bootstraps they do not have. We have to create a minimum wage that enables people to live a life worth living and not in crushing poverty. The Raise the Wage Act, getting us to a $15 minimum wage floor by 2025, is America’s only shot at pulling people out of this kind of poverty. It is time to raise the wage and help start to end this vicious cycle for the millions of citizens experiencing poverty in this country.