NEW DATA UP: Calculation of the Living Wage

Written by Dr. Amy K. Glasmeier on 01/26/2018

A Calculation of the Living Wage

While the minimum wage sets an earnings threshold under which our society is not willing to let families slip, it fails to approximate the basic expenses of families in 2017. Consequently, many working adults must seek public assistance and/or hold multiple jobs in order to afford to feed, clothe, house, and provide medical care for themselves and their families.

Establishing a living wage, an approximate income needed to meet a family’s basic needs, would enable the working poor to achieve financial independence while maintaining housing and food security. When coupled with lowered expenses, for childcare and housing in particular, the living wage might also free up resources for savings, investment, and/or for the purchase of capital assets (e.g. provisions for retirement or home purchases) that build wealth and ensure long-term financial security.

An analysis of the living wage, compiling geographically specific expenditure data for food, childcare, health care, housing, transportation, and other basic necessities, finds that:

The living wage in the United States is $16.07 per hour in 2017, before taxes for a family of four (two working adults, two children), compared to $15.84 in 2016.

The national average pretax income for part-time families went up by 2% (across all family compositions). The greatest percentage change was for a 1 part-time adult, 1 child, which went up by 6% (from $47480 in 2016 to $50305 in 2017)

The minimum wage does not provide a living wage for most American families. A typical family of four (two working adults, two children) needs to work nearly four full-time minimum-wage jobs (a 75-hour work week per working adult) to earn a living wage. Single-parent families need to work almost twice as hard as families with two working adults to earn the living wage. A single-mother with two children earning the federal minimum wage of $7.25 per hour needs to work 135 hours per week, nearly the equivalent of working 24 hours per day for 6 days, to earn a living wage.

Across all family sizes, the living wage exceeds the poverty threshold, often used to identify need. State minimum wages provide for only a portion of the living wage. For two adult, two children families, the minimum wage covers 69.4% of the living wage at best in the District of Columbia and 41.6% at worst in Virginia. This means that families earning between the poverty threshold ($24,793 for two working adults, two children on average in 2017) and the living wage ($66,842) on average for two working adults, two children per year before taxes), may fall short of the income and assistance they require to meet their basic needs.

Carey Anne Nadeau, opendatanation.com