Philadelphia’s ‘real minimum wage’ is among the worst in the U.S.

For minimum-wage workers, Philadelphia is one of the U.S. cities where it’s most difficult to make ends meet.

Philadelphia has the fourth lowest “real minimum wage,” according to a recent study by SmartAsset, a personal finance website.

The study recorded the minimum wage in 79 cities, adjusted that wage to account for the cost of living in each city, and ranked them.

Minimum wage in Pennsylvania is $7.25 per hour, matching the federal rate. Philadelphia is bound by the state’s minimum wage law. Adjusted for cost of living, that comes out to about $6.69 per hour, SmartAsset found.

The only cities that ranked lower than Philadelphia were New Orleans ($6.54); Plano, Texas ($6.47); and Honolulu ($6.47).

Across the state in Pittsburgh, the minimum wage is the same as in Philadelphia, but the cost of living is lower, making for a real minimum wage of $7.20.

Pennsylvania is one of 20 states where the minimum wage is not higher than the federal minimum wage of $7.25, which was set in 2009.

Gov. Josh Shapiro, who was inaugurated Tuesday, wants to change that. He has advocated for raising the minimum wage to at least $15 per hour.

Shapiro’s predecessor, Tom Wolf, also wanted to raise the minimum wage, urging the state legislature to pass bills introduced by Democratic lawmakers. Neither bill made it to a vote last session, but Wolf did raise the minimum wage for state workers to $15 per hour last year, using an executive order that does not require legislative approval.

The circumstances may be different for Shapiro, who may not have to convince two Republican-majority chambers in Harrisburg. Special elections next month to fill three Pennsylvania House vacancies will determine which party controls the House, and all three seats are in Democratic-leaning districts.

In Philadelphia, specifically, city lawmakers have made efforts to increase wages for workers despite the state’s minimum wage.

In 2018, Mayor Jim Kenney signed a law requiring a gradual increase in the minimum wage for city workers, contractors and subcontractors, which brought it up to $15 per hour last year. In 2021, City Council passed a wage increase for airport workers that brought their pay up to $15.06 per hour and added a benefits supplement.

The cost of living in Philadelphia is often touted as being low, compared with other large cities on the East Coast, such as New York and Washington.

But the minimum wage in those cities is $15 and $16.10, respectively. By SmartAsset’s calculation, that makes the “real minimum wage” $8.05 in New York and $10.43 in Washington. Newark, N.J., has both beat, with a minimum wage of $14 and “real minimum wage” of $11.48.

By more than one measure, the federal minimum wage is not a living wage in Philadelphia.

The MIT Living Wage Calculator estimates that in Pennsylvania, single adults with no children need $16.67 per hour to support themselves; a single adult with one child needs $32.42 per hour; and a household with two working adults and two children needs $23.28 per hour, per adult.

Wolf pointed to the MIT calculator last year when arguing that the minimum wage in Pennsylvania must be increased.

Another measuring stick, more specific to Philadelphia, is the self-sufficiency standard developed by economic inequality expert Diana Pearce. It’s now used in 37 states.

According to a self-sufficiency calculator from Pathways PA, using Pearce’s methodology, a single adult in Philadelphia working 40 hours a week requires $11.38 per hour to be self-sufficient. A single adult with one infant requires $25.16 per hour, and a household with two adults, one newborn and one preschooler needs $17.97 per hour, per adult.

Against this minimum wage backdrop, employers are struggling to acquire, retain and pay talent in the Philadelphia area.

Three of the four top concerns of business leaders region are related to labor, according to a recent survey of the Chamber of Commerce of Greater Philadelphia, conducted by the Federal Reserve Bank of Philadelphia.

Leaders’ top problem in 2022 was labor availability, followed by worker wages, then financing, followed by labor quality, at fourth, the survey found. Less than 30% of the respondents said they have been able to hire without difficulty in the last three months, and more than one-third said they had difficulty hiring because candidates were not satisfied with the pay they offered.

“Firms’ wages and benefit costs rose, with nearly all respondents reporting slightly or significantly higher labor costs in 2022 than the year before,” Philadelphia Fed President Patrick Harker said Friday at a Chamber event where he discussed the survey results. “To hire new workers or retain existing staff, many respondents have raised compensation, introduced a remote work policy, or promoted existing employees.”

The Philadelphia Inquirer is one of more than 20 news organizations producing Broke in Philly, a collaborative reporting project on solutions to poverty and the city’s push toward economic justice. See all of our reporting at brokeinphilly.org.