What is a living wage? - Activate World

What is a living wage?

The living wage is often confused with the national minimum wage since they are often used interchangeably. The minimum wage is an amount set by law. A living wage is the amount of income needed to provide a decent standard of living. It should pay for the cost of living in any location, and It should also be adjusted to compensate for inflation.

Lunchtime Conversations:      

  • Activists have helped to push seven states to enact $15 wage floors. How can business leaders and politicians come together to implement an effective living wage policy?
  • What factors in capitalism would solve the living wage problem with no intervention? Some argue that when the economy grows and unemployment is low, employers will be forced to raise wages.
  • A strong and healthy society is one where everyone feels appreciated and fairly compensated. Besides economics, what benefits ripple through with a living wage?

Noteworthy:

  • Making “enough” money is a nebulous concept that’s constantly changing. Earning a living wage — however that is defined in your area — isn’t the same as living comfortably.
  • 2020 Democrats are embracing a $15 U.S. minimum wage as a way to win over working-class voters.
  • Studies have linked higher minimum wages to decreases in low birth-weight babies, lower rates of teen alcohol consumption and declines in teen births. 

Storyline:

The minimum wage roughly aligns with federal poverty guidelines which say that a two-person household with a total annual income below $16,910 is considered to be living in poverty. In order to clear the poverty line, one of those two people would have to make $8.13 an hour or more. 

At least 17 states have higher minimum wages. For example, the $15-per-hour minimum wage in New York City translates to an annual income of $31,200, or almost twice the federal poverty level for a household of two.

New York City residents would point out how little $32,000 per year is for a single-income household. And $17,000 may be a poverty-level wage in much of the country, but that doesn’t mean $18,000 is enough to get by. This problem with the federal poverty guidelines was first noted by the woman who developed them, Mollie Orshansky, an employee of the Social Security Administration.

Ms. Orshansky was responsible for analytical studies to measure income adequacy, family welfare and patterns of family income.  In 1963 and 1964, she developed the poverty thresholds that later became the official measure of poverty used by the U.S. government.  

In 2004, Amy Glasmeier, now a professor of economic geography and regional planning at the Massachusetts Institute of Technology, developed the Living Wage Calculator. The calculator shows costs for each of the 50 states and the living wage needed to pay those basic costs. It compares this to the minimum wage and the poverty wage. It also shows which occupations in the area pay less than the living wage. 

Calculators can help you figure out the minimum you need to get by, which will be higher than what the U.S. government claims. As Dr. Glasmeier put it: “The question is, can you live on a minimum wage? And the answer is basically, no.”

Sources: CNBC, The Balance, The New York Times, Vox

Photo by Corey Agopian on Unsplash