Minimum wage is going up next year. With inflation, will the gain be real?

Minimum wage in Rhode Island is set to continue its slow climb to $15 an hour as the wage increases from $12.25 an hour – the rate for 2022 – to $13 an hour on Jan. 1, 2023.

While the minimum wage is increasing a dollar a year, up to $15 an hour just over two years from now, gains made by increasing wages are being eaten away quickly by the highest inflation rate in over 40 years, along with rocketing rents. Those increases are woefully inadequate to get workers paid enough to live, according to a report from the Economic Progress Institute.

The increase in the minimum wage is the result of legislation from 2021 that established gradual increases over four years.

Report: Minimum wage is well below living wage in Rhode Island

While minimum wage is set to increase slowly, it does not represent a living wage for someone working full time in the state, according to an analysis by the Economic Progress Institute.

In a report released Thursday, the group outlined its findings, put out every two years, about the amount of money a single adult, a single parent and a family needs to make to be able to live in the Ocean State.

A single adult needs to make $34,913 a year, or $16.79 an hour working 40 hours a week, to make enough money to live in the state – and add a child into the mix and the cost goes up dramatically, according to the report.

Read the report:Economic Progress Institute report on the 2022 'standard of need' in Rhode Island

A two-parent family with two kids needs to make $85,914 a year to make ends meet.

Child care costs are a huge stumbling block for families, and state subsidies, through the Child Care Assistance Program, are capped at an eligibility level of 200% of the federal poverty level – $46,060 for a family of three or $55,500 for a family of four. The report estimates child care for two young children costs $1,807 a month.

The state could increase the limit to 225% of the federal poverty line. Another benefit, the Supplemental Nutrition Assistance Program, or SNAP, formerly called food stamps, is tied to 185% of the federal poverty line, which the state could increase to 200%.

The federal poverty line for a single person is $13,590 or $27,750 for a family of four and is woefully inaccurate at actually measuring poverty, as it is based on a 1960s formula tied to the cost of food, which at the time represented a third of a family's budget.

"Housing and child care, necessary for parents to work, take up a larger share of a household budget than does good," according to the report.

The census undercounts the true number of people living in poverty because of its outdated guidelines, according to the report.

"Working families with young children need more than double the income identified by the Federal Poverty Level to meet basic needs," according to the report.

Wage disparity hits women across race/ethnicity

The group's findings also underline great disparities among the state's low wage workers, with Black and Latino workers far more likely to not make enough to make ends meet.

Racial and ethnic disparities were joined with across-the-board gender disparities. The report found single women without children were "much less likely" to make enough for their basic needs than their childless male counterparts.

Most people in Rhode Island do not make enough money to "meet basic needs," including 61% of adults without children, 70% of single parents with two children and 25% of two-parent households with two children, according to the report.

Minimum wage:Everything you need to know about Rhode Island's minimum wage in 2023

Disparities based on race and ethnicity are starker, with 75% of Latino adults without children living below the basic needs guideline, 72% of Black adults, 60% of Asian/Pacific Islander adults and 59% of white adults.

For two-parent households with children, the number of white families not making enough fell, to 19%, compared with 51% of Latino families.

Women in all groups were more likely to be earning below their basic needs, 66%, compared to 55% of men.

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Minimum wage remains well below a living wage

The Massachusetts Institute of Technology calculates a living wage in Rhode Island is $17.80 an hour for a single person, $34.45 for a single person with a child, $26.98 for two adults when only one is working and $13.49 for two adults when both are working.

The "living wage" is described on the Institute's website as "hourly rate that an individual in a household must earn to support his or herself and their family."

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The MIT living wage estimate is based on costs in any given state. The calculation is based on spending needs of single person, on a yearly basis. Expenses for Rhode Island include: $3,891 ($324 a month) for food, $11,142 ($928 a month) for housing and $4,244 ($353 a month) for transportation.

RI lags Conn., Mass., in boosting the minimum wage

Report author Alan Krinsky said Rhode Island is behind Connecticut and Massachusetts in raising the minimum wage, which could pull workers away from the smallest state in the nation. Massachusetts's minimum wage will hit $15 an hour in January 2023, with Connecticut's reaching that level in June 2023.

According to the report, that means a minimum-wage worker, for example can work across the state line in Massachusetts, earning $4,000 more a year, or $80 a week, doing the same job.

In 2024, when Rhode Island's minimum wage will increase to $14 an hour, Connecticut will join 13 other states and the District of Columbia in chaining future wage increases to inflation. For Connecticut, they will be tied to the employment cost index.

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Inflation hovered around 2% for the last few years and has spiked to record 40-year highs only since the onset of the pandemic.

While Rhode Island lawmakers have applied specific and gradual increases to the minimum wage, the state Constitution has legislators' pay set to increase or decrease with "changes in the cost of living" as determined by the federal government. When the new budget year started in July, that meant the part-time legislators received a 4.7% increase in pay. Their annual salaries went up by $791.26, from $16,835.37 to $17,626.63 a year.

Rhode Island Working Families Party Organization Director Zack Mezera said the fight to get minimum wage to $15 in 2021 was long and hard-fought, although the bill was missing automatic increases based on inflation. Automatic increased based on inflation would eliminate the need for future lobbying.

Tipped workers left out of minimum-wage increases

While minimum wage is going up, there's a giant carve-out in the law for tipped workers, such as servers and bartenders. The minimum wage for tipped workers is $3.89, and it is not rising. It was last increased in 2017.

The assumption behind the lower minimum wage for waiters, waitresses and other "tipped employees" is that they make at least as much if not more with gratuities as they would if Rhode Island guaranteed them the same $12.25 an hour, $490 a week, $25,480 a year minimum wage as other 40-hour-a-week employees.

2022 State House debateIs $3.89 minimum wage enough for tipped workers?

In the last legislative session, lawmakers were urged by advocates, and service industry workers, to increase the minimum wage for tipped employees and Rep. Leonela Felix sponsored a bill to get rid of the "sub-minimum wage" by Jan. 1, 2028.

Mezera said one big change he would like to see is the elimination of the exemption for tipped workers, who rely on the literal kindness of strangers to make ends meet.

According to the Department of Labor and Training, tipped employees, being paid $3.89 an hour, need to make enough tips to make their hourly rate of pay the same as the current minimum wage. If they make less than that, their employer is required to pay them the difference.

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If a tipped employee makes more than the minimum wage in tips alone, their employer must still pay them the hourly wage of $3.89, according to the Department of Labor and Training.

Increasing the minimum wage and eliminating the $3.89 minimum wage for tipped workers would go a long way toward bringing people out of poverty and allowing them to live with more margin than paycheck to paycheck, according to the report.

Is RI's rising minimum wage keeping up with inflation?

The increases in Rhode Island's minimum wage, which excludes tipped workers, bumped up the value of the wage compared to inflation in 2015, when it went from $8 to $9 an hour, according to The Providence Journal's analysis of the minimum wage as adjusted for inflation with Consumer Price Index data from the Bureau of Labor Statistics, starting in 1984.

The inflation-adjusted value of the minimum wage hit its peak in 2020 at $11.50 an hour, which in inflation-adjusted dollars up until last month is worth just under $13 an hour.

While the minimum wage increased to $12.25 an hour this year, it is worth less than it was in 2020 as inflation continues to rise.

With the minimum wage adjusted for inflation, it stayed steady between 2000 and 2010, hovering around $10 an hour in 2022 dollars before sliding to about $9.50 an hour in 2012, then increasing back up to $10 an hour in 2014. In 2015, the minimum wage went up a dollar, from $8 to $9 an hour, which in 2022 dollars meant it went from $10 an hour to $11 an hour.

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Reach reporter Wheeler Cowperthwaite at wcowperthwaite@providencejournal.com or follow him on Twitter @WheelerReporter.

This article originally appeared on The Providence Journal: Is minimum wage in RI enough to live on? Report says state is behind