Jacob Channel on minimum wage and housing costs

Elissa Branch: Hello, “HousingWire Daily” listeners. I’m Elissa Branch, and today I’m joined by Jacob Channel, the senior economic analyst at LendingTree. Welcome back to the show, Jacob.

Jacob Channel: Hey, thanks for having me back.

Elissa Branch: Thanks for being here. Today, we are going to discuss a recent LendingTree study about housing affordability for minimum wage workers. But before we dive into the report, Jacob Channel, can you tell us a little bit about your work? I mean, I know you’ve been on the show before, but it’s been a little minute. So, could you give us just a little refresher about what you do over at LendingTree?

Jacob Channel: Sure. Yeah. So I’m LendingTree’s senior economic analyst. And primarily, what I do is research and write studies about the housing market. But I also touch on a ton of other economic-related topics. So, I guess, generally speaking, you could just sort of call me LendingTree’s kind of resident economist.

Elissa Branch: Awesome. I don’t think I’ve ever had anybody describe themselves as a resident economist, but I feel like you definitely fit that description. So, today, we are going to be talking about that LendingTree report about minimum wage workers. And specifically, the report looks at the relationship between minimum wage workers and minimum wage, in general, and housing affordability in all 50 states. According to the data, the average minimum wage worker that works 40 hours a week, 52 weeks a year cannot afford housing at the recommended level of 30% or, like, 1/3 of their income. So, can you talk a little bit about the methodology behind the study and kind of what these findings say about housing and National Employment?

Jacob Channel: Yeah. So, your summary was actually just really, really great. So, there’s not a ton more about the methodology that I have to mention. But essentially, what we did was we looked at minimum wage as sourced from the U.S. Department of Labor and reported by the Federal Reserve Economic Data database. And using that, we calculated what their potential monthly earnings would be assuming that they work 40 hours a week, assuming that they work 52 weeks out of the year. Now, just as a point of clarification, those assumptions are, as I said, assumptions. It’s important to note that a lot of minimum wage workers, especially probably aren’t working 52 weeks out of the year. A lot of them might not even be working full-time 40 hours a week. So, ultimately, what our study shows is that even if we’re being generous, if we’re saying people are working and earning a little bit more money than they probably actually are, they can’t afford to rent a house or own a home in any of the nation’s 50 states.

Elissa Branch: Yeah, I think that is something that…even in like the general discussion of this, a lot of people gloss over, it’s making the most generous assumption of how workers are able to work. Nobody can work 40 hours a week, 52 weeks a year. Like, that’s just not really realistic for most people. So, I think that really highlights just how unaffordable because, like, I mean, it’s just crazy how expensive things are. But the study, kind of in a more narrow view, also looked at affordability now versus 20 years ago in 2000 and found that it’s become less affordable. I think, to nobody’s surprise, this study is quoted as saying the average difference between an affordable monthly payment for a minimum wage worker and the median monthly homeowner costs for a home with a mortgage was $771 in 2000. Well, the difference between an affordable payment and the median gross rent was $296. In 2010, those differences were $1,072 and $423. So why do you think that this difference has jumped so significantly over the past two decades or is it significant or is it just kind of like, everything is getting more expensive? How are those numbers comparing?

Jacob Channel: Well, I do think that it’s significant, especially if you’re in a situation where you’re struggling to afford a house. You know, we say $100 or $200, and I guess in the grand scheme of things, that’s not a lot of money, but it’s certainly a lot of money to someone who is struggling to make ends meet. I think the big thing that’s driving these numbers to get worse over the years is a combination of rising housing prices, which have started rising even more over the past year-and-a-half with COVID. And then stagnant minimum wages. Well, there are a lot of states that have raised minimum wages over the past few years. The federal minimum wage, which I believe is at $7.25 an hour, has not been raised since 2009. So if you look at stagnant minimum wages plus rising home prices, you end up with less affordable housing.

Elissa Branch: Yeah. And I just wanna say is, we here at HousingWire, we are headquartered in Texas. And the minimum wage in Texas is still $7.25 an hour. And you would… I see people online saying, “Oh, no place actually is hiring people for$ 7.25 an hour, just find a better job.” But you would be incredibly shocked to see just the sheer amount of people who are hiring people at $7.25, $7.50 an hour. So it is very much a reality for a lot of retail and foodservice workers. It’s not like this inflated number, I feel like.

Jacob Channel: Yeah. Well, and to add on to that real quick. So if you look at, like, the total number of minimum wage workers versus the total number of other workers, they do make up a small portion. So I think about 1.5% of all hourly workers are paid at or below federal minimum wage. But if you do the math, that’s over a million people across the country who are being paid at or below minimum wage. And then if you actually look at, say, the median hourly wage, even if you’re being paid more than minimum wage, more than $7.50, that doesn’t mean you’re going to be paid a lot of money.

Elissa Branch: Yeah. For sure. And kind of on that same idea of, like, states with the minimum wage and states with a higher wage, the study also compiled a list of the top 10 most affordable and least affordable. And you guys had like a list of all 50 with the respective minimum wages and the median gross rent. So, with all of these compiled, did you guys find any trends, or what did you guys see?

Jacob Channel: Well, I think the biggest trend we’ve found is that pretty much no matter where you go, housing is not affordable, at least to minimum wage workers. Now, it is important to note that there are some nuances here, for example, say, for instance, New York. The New York state minimum wage might be lower than the minimum wage in certain locality. So, for example, in New York City, the minimum wage, I think is about $15 an hour, which is higher than the minimum wage for New York state as a whole. So you might find some places where things could be maybe a little bit less affordable or a little bit more affordable, depending on where exactly you look or what kind of firms you’re looking at. That being said, like I just said, the big trend that we found is that no matter where you went, no matter how rural or how urban a state was, renting and owning a home is unaffordable to minimum wage workers. And that’s especially true, I think to no one’s surprise, that the more expensive states, the states like New Jersey, or Hawaii, or California, are the places where affordability is the most challenging. But even in states where affordability is a little bit easier, Arkansas, West Virginia, some of these southern states, that doesn’t mean that housing is all that affordable to minimum wage workers, if affordable at all.

Elissa Branch: That’s interesting. I didn’t know that, like, certain cities could have a different wage out of the whole state. So with that $15 an hour minimum wage, we’re talking about increasing the federal minimum wage to $15 an hour has been quite a hot topic of debate for the past couple of years. And the Lending Tree report analyzes kind of what that wage boost would mean for a full-time worker. According to the report, even with the boost in wages, a full-time worker could still only afford to spend $780 a month on housing. That is that, like, 30% assumption, as national rent has obviously surpassed this total by a longshot. And in most states, it’s not a stretch to say that $780 is not very much. Do you think that the wage increase, like a federal wage increase can really affect housing affordability as a lot of people might believe?

Jacob Channel: Well, certainly having more money will probably make a lot of people’s lives at least a little bit easier, even if it doesn’t make all their problems go away. So, it’s important to note that because our study does define affordability as about 30% of your pre-tax income, that $780 figure could vary from household to household. For example, some households do spend more money on housing, some spend less. But as a general rule, the $15 an hour wouldn’t suddenly make housing affordable for quite a large number of people. So, well, I do think that if $15 per hour minimum wage would be helpful for millions of Americans across the country, it’s not a cure-all. And there’s going to have to be other steps taken to further alleviate home prices, especially for low-income families or individuals.

Elissa Branch: Last question in kind of that same vein of trying to make things more affordable, do you have or does Lending Tree have any advice for minimum or low wage hourly workers to make housing and living more affordable?

Jacob Channel: So, there are a few things you can do. And unfortunately, sometimes it’s easier to give advice than it actually is to follow it, and especially if you are a low-income worker and you’re really struggling to make ends meet. A few things that you could consider, you know, consider living with family or roommates. It’s not always ideal but the more income you have in a house, the more affordable the house is. For example, renting a single bedroom and living by yourself might be less affordable than renting a two-bedroom with your friend or your brother or something like that because you can split the cost. The other thing that I think is important is know how to advocate yourself and know how to ask your employer for more money and be willing to ask for more money. Wages have increased for a lot of people throughout the pandemic. So even if you are a low-income worker, if you are someone who’s historically hasn’t had a lot of bargaining power, now might still be a good time to go to your employer and say, “Hey, look, your profits are up, I need a little bit more money.” It never hurts to ask,

Well, sometimes it can hurt to ask. You know, obviously, make sure that you’re approaching these kind of topics with tact and that you’re not being sort of overly aggressive or off-putting towards your employer. The last thing you wanna do is make them mad and potentially lose a job. But in many instances, it can help to just do something as simple as sit down with your boss and ask, “What do I have to do to get a raise?” And then the other thing I think is important for people to know is that there are low-income housing programs available on the state-federal level. So, do research. You know, look at websites like HUD, like the Housing and Urban Development website. Look for different ways that you can find housing, apply for vouchers, or other programs that could alleviate your month-to-month housing costs.

Elissa Branch: That is some great advice. Well, Jacob, thank you so much for joining us on the show.

Jacob Channel: Yeah. Thank you so much for having me.

Elissa Branch: Of course. And listeners, be sure to tune in tomorrow for more “HousingWire Daily.”