About the Living Wage Calculator
The Living Wage Calculator was first created in 2004 by Dr. Amy K. Glasmeier.
INTRODUCTION
Analysts and policy makers often compare income to the federal poverty threshold in order to
determine an individual’s ability to live within a certain standard of living. However, poverty
thresholds do not account for living costs beyond a very basic food budget. The federal poverty
measure does not take into consideration costs like childcare and health care that not only draw
from one’s income, but also are determining factors in one’s ability to work and to endure the
potential hardships associated with balancing employment and other aspects of everyday life.
Further, poverty thresholds do not account for geographic variation in the cost of essential
household expenses.
The living wage model is an alternative measure of basic needs. It is a market-based approach
that draws upon geographically specific expenditure data related to a family’s likely minimum
food, childcare, health insurance, housing, transportation, and other basic necessities (e.g.
clothing, personal care items, etc.) costs. The living wage draws on these cost elements and the
rough effects of income and payroll taxes to determine the minimum employment earnings
necessary to meet a family’s basic needs while also maintaining self-sufficiency.
The living wage model generates a cost of living estimate that exceeds the federal poverty thresholds.
As calculated, the living wage estimate accounts for the basic needs of a family. The living wage model
does not include funds that cover what many may consider as necessities enjoyed by many Americans. The
tool does not include funds for pre-prepared meals or those eaten in restaurants. We do not add funds
for entertainment, nor do we incorporate leisure time for unpaid vacations or holidays. Lastly, the
calculated living wage does not provide a financial means to enable savings and investment or for the
purchase of capital assets (e.g., provisions for retirement or home purchases). The living wage is the
minimum income standard that, if met, draws a very fine line between the financial independence of the
working poor and the need to seek out public assistance or suffer consistent and severe housing and food
insecurity. In light of this fact, the living wage is perhaps better defined as a minimum subsistence
wage for persons living in the United States.
FAMILY COMPOSITIONS
The living wage calculator estimates the living wage needed to support families of twelve different
compositions: one adult families with 0, 1, 2, or 3 dependent children, two adult families where both adults are
in the work force
with 0, 1, 2, or 3 dependent children, and two adult families where one adult is not in the work force with 0,
1, 2, or 3 dependent children.
For single adult families, the adult is assumed to be employed full-time. For two adult families
where both adults are in the labor force, both adults are assumed to be employed full-time. For
two adult families where one adult is not in the labor force, one of the adults is assumed to be
employed full-time while the other non-wage-earning adult provides full-time childcare for the
family’s children. Full-time work is assumed to be year-round, 40 hours per week for 52 weeks,
per adult.
Families with one child are assumed to have a ‘young child’ (4 years old). Families with two children are
assumed to have a ‘young child’ and a ‘child’ (9 years old). Families with three children are assumed to have a
‘young child’, a ‘child’, and a ‘teenager’ (15 years old).
TECHNICAL DOCUMENTATION
For a more detailed description of the methodology used, please see the technical documentation here.
