Memphis has one of the highest poverty rates among large cities in the U.S. Some years, Memphis is the large city with the highest poverty rate; other years, we are in second place.
Why are there so many poor people in Memphis? A popular answer is that they do not work. But that popular answer is flawed.
This does not stop Memphis leaders from speaking endlessly about the need to bring jobs to the city. The Greater Memphis Chamber (GMACC) talks about bringing jobs to Memphis. City Council and the County Commission talk about bringing jobs to Memphis. The Economic Development Growth Engine (EDGE) board of Memphis and Shelby County talks about bringing jobs to Memphis. Memphis Tomorrow, Memphis 3.0, The Blueprint for Prosperity, and every single plan I have heard of talks about bringing jobs to Memphis.
Jobs are of course very important for our community. Productive employment is the only real solution to poverty.
The problem is we often bring the wrong kinds of jobs to Memphis — jobs that pay far too little.
Poverty is miscalculated
To understand this, first we need to understand how poverty is calculated.
Absolute poverty means that people have incomes that fall below a specific threshold.
The threshold that is used to assess poverty in the United States was created from a formula developed by Molly Orshansky, an economist who was working with the Social Security Administration in the early 1960s. At the time, it was estimated that a family of four would spend a third of its budget on food. Orshansky took the cost of the cheapest nutritionally complete diet which was published since 1955 by the Department of Agriculture, and simply multiplied by three to estimate the level below which a family would be clearly under poverty.
She was not trying to estimate how much money a family would need in order to thrive. Rather, she was trying to determine when a given family would be unable to meet its basic needs and would therefore be at risk of starvation.
According to the U.S. Federal Poverty Guidelines published by the U.S. Department of Health and Human Services, a family of four is in poverty if their income is below $31,200. However, that threshold is very low, even using the formula created by Orshansky and adopted by the U.S. federal government in the late 1960s.
According to that formula, which ostensibly we still use today, the poverty level for a family of four should be $35,038.80 per year. That’s based on the U.S. Department of Agriculture’s Thrifty Food Plan, which costs a family of four $973.30 per month. Multiply that by three (per Orshansky’s formula) and the cost rises to $2,919.90. Multiply that by 12 months and the total reaches $35,038.80.
It is not difficult to see that the poverty threshold in 2024 should be higher than what the Department of Health and Human Services (HHS) has determined.
Poverty and low wages
I have been poor, and I have researched poverty for over a decade. I have interviewed people who grew up in poverty, people who remain in poverty, and people who have escaped poverty. I have examined dry statistics and touching personal accounts from the U.S. as well as other countries.
What I have found from my research is that poverty is the result of policy decisions that favor the few at the expense of the many. Poverty is not the result of behavior or attitude. Poverty is the result of inadequate wages.
The minimum wage was first set up by President Franklin Delano Roosevelt in the 1930s to allow workers to support a family. Now we seem to think that minimum wage workers do not deserve a basic level of existence for themselves or their families.
The minimum wage and a living wage are very different things.
The minimum wage is the lowest hourly wage that an employer may legally pay an employee. When instituted, the minimum wage was supposed to be a living wage. It was supposed to allow a family to survive. Today it does not.
A full-time employee (40 hours a week) working at the $7.25 federal minimum wage only makes $15,080 a year, which is far from sufficient to support a family. Even utilizing the lower poverty threshold of $31,200 used by HHS to measure poverty in 2024, a full-time employee working 2,080 hours a year needs to earn $15 per hour. If we were realistic, the minimum wage should be almost $17 an hour to produce an annual income matching the higher poverty threshold of $35,038.80.
The minimum wage is clearly too low.
What is even more important is that the minimum wage serves as an “anchor” wage to which we compare all other wages, and thus a depreciated minimum wage results in the depreciation of all other wages and the erosion of the middle class. When the minimum wage is $7.25 an hour, $15 an hour looks like a lot, but it is not.
People complain about inflation, but inflation is not really the problem. The problem is that goods and services have increased in cost while the salaries of working families has not. Looking at inflation is looking at the problem from the wrong side.
Are Jobs the Solution?
In Memphis, we recognize the value of employment and a steady and reliable income, and so we want jobs. Everybody clamors for jobs. Jobs! But in doing so we are willing to let companies take advantage of Memphis because they promise us employment. In offering these companies enormous tax breaks, we are willing to forego the revenue the city so desperately needs to provide basic services — all for vague promises of jobs.
But bringing jobs that do not bring families out of poverty is not helpful. After all, in the Antebellum South people were put to work. They did not receive wages, but they were certainly working.
The EDGE Board and GMACC have said that tax-incentivized large corporations could bring 30,000 new jobs to Memphis. But if those jobs do not bring wages that are at least $17 to $20 an hour, we are being disingenuous. What we really need is a wage sufficient to support a family and allow them to thrive. Again, the minimum wage is insufficient.
The minimum wage and the real value of the minimum wage over time. (Source: CPI inflation calculator of the U.S. Bureau of Labor Statistics)
The last time the minimum wage was increased was in 2009. Since then, inflation has been around 35%. According to the inflation calculator of the Bureau of Labor Statistics, a dollar in 2009 is worth only 68 cents now.
When we are willing to sell our souls to external megacorporations, we may get a few jobs, but these companies invest outside of Memphis, spend outside of Memphis, hire outside of Memphis, reward outside of Memphis, and are always one financial decision away from leaving Memphis. They have no attachment to Memphis or ties to our social conditions or civic organizations. In the end, bringing low-wage jobs to Memphis only helps megacorporations, and Memphis is stuck in a cycle of poverty we cannot seem to break. Building our community from the inside out and promoting real wages for Memphians is the only path forward if we want to join the world community.
