What is $15 an Hour as a Salary?: Is Your Pay Worth It?

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Increasing the minimum wage in the United States has been a major topic of discussion recently. There are many who want to have the minimum hourly wage for workers raised to $15 an hour, compared to the $7.25 which it’s set at now. Many might be wondering what $15 an hour would be as an annual salary and just how much that would be after taxes and other deductions. 

How Much Income is $15 an Hour?

With many in the United States negotiating for an hourly rate of $15 per hour, it’s important to consider what that would be as an annual salary. If you work full-time, 40 hours a week, 52 weeks a year, the gross salary would be $31,200. 

Gross vs. Net Salary

Knowing the difference between gross and net salary is helpful for determining what your employer is paying you for your time and what you will be taking home, whether you’re making $15 an hour, more, or less.

Gross Salary

Typically, gross pay is the highest amount that you will see on your pay stub or when a salary is listed. A gross salary is what an employer pays and what an employee earns before deductions. 

If you’re an hourly employee, use our Hourly to Salary Calculator to determine your annual salary. 

Deductions From Gross Pay

Some of the deductions that come out of salaries are voluntary, like insurance or retirement. While other deductions are compulsory, like taxes. Deductions that are taken from the gross salary in the United States are:

  • Federal tax
  • State tax
  • Local tax
  • Payroll tax
  • Medicare tax
  • Social Security

Adjusted Gross Income 

Adjusted gross income—or AGI—is the gross income minus some specific criteria. You’re likely to encounter AGI when filing for annual taxes. These criteria include educational expenses, student loan interest, alimony payments, or contributions to a retirement account. 

There are some stipulations when using your AGI, such as limitations when filing jointly—like income levels, so it’s important to check with an accountant or review documents like Wage and Tax Statements, annual payments on student loans, and other end-of-year statements sent by financial institutions to be sure you’re completing your taxes correctly. 

Net Salary 

Net pay or net salary is the amount that you receive after all the taxes, insurance, or other deductions stated previously are taken out. This would be the amount that is deposited directly into your account. Net pay can also be referred to as take-home pay. 

To estimate what your net salary might be for a certain income, you can look into the IRS’s tax brackets and subtract the matching percentage. The tax brackets are capped at 35 percent for couples filing jointly. The lowest tax bracket and individual could be in is taxed at 10 percent. 

Breaking Down $15 an Hour Salary 

When looking at the gross income of a salary of $15 an hour, it helps break this down in different ways to see what that would look like on a weekly and monthly basis. A $15-an-hour yearly salary for a full-time worker would be: 

  • $120 per day 
  • $600 per week
  • $2,600 per month
  • $31,200 per year 

However, the net pay would reduce that annual pay by about 12 percent. According to the IRS taxable income brackets, a person making $31,200 annual would be taxed at 12 percent. Using a Percentage Calculator, the net pay is determined to be $27,456. That means that $3,744 would be withheld.

Living and Minimum Wages 

A living wage is an amount that a person would need to make to maintain a normal standard of living. This would give people enough money to buy necessary items such as food and clothing. There has been a push across the United States and other countries to make sure that their citizens are getting paid living wages.

Living wages vary greatly depending on where you are living. For example, in the United Kingdom, it has been determined that the living wage is £9.90 to £11.05 an hour. Meanwhile, the minimum wage in the UK is currently set at £9.19 an hour. 

It is important to keep in mind that the living wage minimum is determined based on various factors like family size and location. In cities where the cost of living is higher, like New York or Los Angeles, it is important that hourly wages reflect how much rent and groceries cost.  

According to research conducted by MIT, the living wage in the United States should be set at $16.14. That’s a far cry from the current federal minimum wage which is currently at $7.25 an hour and was introduced in 2009—that’s 45 percent less than what people in the United States need to live. In many states, the minimum wage is higher than the national minimum, but in the case it is lower, the federal minimum wage is applied. 

States With the Highest Minimum Wage: 

  • District of Columbia: $15.20 
  • Washington: $14.49
  • Massachusetts: $14.25
  • California: $14 

There are currently 21 states whose minimum wage is set at $7.25, the lowest amount that an employer can pay an employee. 

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Why Is There a Need for $15 an Hour?

In 2021, Democrats in the United States introduced a bill to raise the minimum wage to $15 by 2025. Called, Raise the Wage Act of 2021, this would have all workers make a federal minimum wage, including tipped workers and others who are currently exempted from earning minimum wage. 

As the latest federal minimum wage was set in 2009, this is the longest period of time without a federal wage increase since the federal minimum wage was first introduced in 1938. 

According to the Economic Policy Institute, a federal wage increase would affect 32 million Americans. Those that would be affected by a federal minimum wage increase are those that are currently making less than what the wage would be increased to. It’s estimated that the rise of the minimum wage would lift over three million Americans out of poverty. 

If you get paid an annual salary and want to know what your hourly rate is, try out our Salary to Hourly Calculator

Can You Live Off of $15 an Hour? 

This really depends on what your living situation is like, including where you are living in the United States. In some cities, like New York or Los Angeles, some people may find it difficult to pay for housing, food, and medical expenses while making $15. That’s why in counties where cost of living is known to be higher, the local minimum wage reflects this. For instance, in Los Angeles, the minimum wage is 25 cents higher than the state’s minimum. 

Knowing Your Worth

Whether you are making $15 an hour, or not, it is important to know what your net and gross salary is so you can plan your monthly and yearly budget accordingly. Comprehending what you are earning is crucial and using various financial calculators can help you figure out exactly what you’re earning. 

This entry was posted in Finance, Lifestyle, Money and tagged , , , , . By Emily DiFabio