Wages are too Low to Live On—What can be Done?

As mentioned in the previous post, payday loans aren’t a problem; they’re just the symptom of one. Minimum wage isn’t enough to cover the cost of living. It makes sense: the federal minimum wage hasn’t been raised since 2009. That means for seven years, inflation has reduced the buying power of those who earn the least. Although certain commodities have become cheaper, such as food or gas, expenses like rent are at ridiculously high levels. As seen in Nickel and Dimed by Barbara Ehrenreich, blue-collar workers had to take on multiple, menial jobs just to get by; forget HSA’s or retirement plans. This way of life is unsustainable and unjust; change needs to be made.

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Temporary Cement: What Payday Loans say About the Wage System

Payday loans are short-term and high-interest loans that also come with fees. As long as one has “a bank account and a job”, they’re pretty easy to obtain. Although these loans seem like a quick, over-the-counter way for lower-income individuals to procure necessary funds, they’ve repeatedly come under fire for several reasons. Opponents claim that payday loans ensnare borrowers in a cycle of taking out new loans to pay the costs of older loans, forcing America’s poorest workers to pay exorbitant fees on far more than what they had originally borrowed.

However, are these loans really so bad? As discussed in Freakonomics Radio, the majority of borrowers know what they’re getting themselves into, and are simply choosing the lesser of two costs. If a late phone bill would cost more than interest on a loan, who wouldn’t go with the loan? Regardless if payday loans are further regulated  or left alone, there is a more significant takeaway from the episode: the fact that working Americans need to take out high-interest loans when faced with extra expenses illustrates that their wages simply aren’t enough.