Beyond Minimum Wage: Are You Paying or Being Paid a “Living Wage?”

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A term you’ll often hear in conjunction with minimum wage is “living wage”, which is the amount an individual must earn to cover a normal standard of living.  Living wage is becoming the standard for how the minimum wage should be calculated.

On the policy front, a $10.10 federally mandated minimum wage is being pushed in Washington.  Supporters say making the change would push nearly 60% of people who work full time jobs but earning below the poverty line out of poverty.  The federal bill is unlikely to get through The House, but 13 states approved plans to increase their minimum wage last year and several cities are going even further. For example, Washington DC raised minimum wage to $12.50, San Francisco is at $10.50, and there’s a push in Seattle for $15.00.

Ikea announced that it will be adopting a new wage scale in the US based on a living wage calculator developed by MIT professor Amy Glasmeier.  Want to see what might be coming down the pipe for your business?  MIT’s calculator is available for everyone to use. Check it out here.

To get a sense of what to expect, the following information was generated at nGroup’s corporate headquarters in Fort Mill, SC.

 

The living wage shown is the hourly rate that an individual must earn to support their family, if they are the sole provider and are working full-time (2080 hours per year). The state minimum wage is the same for all individuals, regardless of how many dependents they may have. The poverty rate is typically quoted as gross annual income. We have converted it to an hourly wage for the sake of comparison. Wages that are less than the living wage are shown in bold and italic. 

Hourly Wages 1 Adult 1 Adult, 1 Child 1 Adult, 2 Children 1 Adult, 3 Children 2 Adults 2 Adults, 1 Child 2 Adults, 2 Children 2 Adults, 3 Children
Living Wage $9.61 $17.85 $21.34 $26.05 $14.70 $17.53 $18.94 $21.95
Poverty Wage $5.21  $7.00  $8.80  $10.60  $7.00  $8.80  $10.60  $12.40 
Minimum Wage $7.25  $7.25  $7.25  $7.25  $7.25  $7.25  $7.25  $7.25

 

Typical Expenses 
These figures show the individual expenses that went into the living wage estimate. Their values vary by family size, composition, and the current location.  

Monthly Expenses 1 Adult 1 Adult, 1 Child 1 Adult, 2 Children 1 Adult, 3 Children 2 Adults 2 Adults, 1 Child 2 Adults, 2 Children 2 Adults, 3 Children
Food $242 $357 $536 $749 $444 $553 $713 $904
Child Care $0 $342 $533 $725 $0 $0 $0 $0
Medical $129 $387 $403 $384 $278 $385 $362 $372
Housing $670 $806 $806 $1,016 $726 $806 $806 $1,016
Transportation $318 $618 $712 $764 $618 $712 $764 $777
Other $77 $160 $200 $256 $131 $164 $186 $212
Required monthly income after taxes $1,436 $2,670 $3,190 $3,894 $2,197 $2,620 $2,831 $3,281
Required annual income after taxes $17,232 $32,040 $38,280 $46,728 $26,364 $31,440 $33,972 $39,372
Annual taxes $2,748 $5,098 $6,103 $7,451 $4,206 $5,020 $5,419 $6,275
Required annual income before taxes $19,980 $37,138 $44,383 $54,179 $30,570 $36,460 $39,

 

Typical Hourly Wages 
These are the typical hourly rates for various professions in this location. Wages that are below the living wage for one adult supporting one child are bold and italic.

Occupational Area Typical Hourly Wage
Management $39.16
Business and Financial Operations $25.00
Computer and Mathematical $28.02
Architecture and Engineering $31.68
Life, Physical and social Science $24.20
Community and Social Services $16.70
Legal $25.43
Education, Training and Library $20.80
Arts, Design, Entertainment, Sports and Media $16.91 
Healthcare Practitioner and Technical $24.89
Healthcare Support $10.88 
Protective Service $14.57 
Food Preparation and Serving Related $8.56 
Building and Grounds Cleaning and maintenance $9.56 
Personal care and Services $9.20 
Sales and Related $10.47 
Office and Administrative Support $13.69 
Farming, Fishing and Forestry $11.78 
Construction and Extraction $15.48 
Installation, Maintenance and Repair $17.57 
Production $14.68 
Transportation and Material Moving $12.32 

 

What does the calculator say about your city?  What should minimum wage be?