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Campus Living Wage Resources: What's a Living Wage?

» What's a Living Wage?
» What is a "just wage", "competitve wage", or "prevailing wage"?
» What's included in a living wage?
» Why assume a family of four?
» What's wrong with how the government calculates poverty?
» Talking points: Common Arguments Against the Living Wage

What's a Living Wage?

A living wage is a decent wage. It affords the earner and her or his family the most basic costs of living without need for government support or poverty programs. With a living wage an individual can take pride in her work and enjoy the decency of a life beyond poverty, beyond an endless cycle of working and sleeping, beyond the ditch of poverty wages.

A living wage is a complete consideration of the cost of living. Wages vary according to location, as costs of living vary. A living wage in rural Louisiana is around $9.33, while in Washington, DC it's closer to $15 an hour. (learn how to calculate a living wage here: Living Wage 101) A living wage as opposed to the federal poverty line, takes into account the many necessary factors in calculating the actual costs in a specific geographic area. Both the Economic Policy Institute’s “Basic Family Budget” and Wider Opportunities for Women’s “Self Sufficiency Standard” use thorough research into the seven components of the cost of living to arrive at similar minimum incomes. You would do best to read the two organizations’ own descriptions and detail of their data and approach, but both are summarized here.

Find the original texts for EPI in their publication Hardships in America: The Real story of Working Families. You’ll have to buy the book from EPI for about $7, but it’s worth it if you are in any way working with these numbers in order to understand where they came from. The book’s intro and executive summary are online at: http://www.epinet.org/content.cfm/books_hardships

All of WOW’s information is free online. Read any of their Self Sufficiency Standards and data background online at: http://www.sixstrategies.org/sixstrategies/selfsufficiencystandard.cfm

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What's a "just wage", "competitive wage", or"prevailing wage"?

A living wage is not a just wage! Since a living wage cover only the very basic necessities and don't even account for savings or emergencies, it is only one small step towards a truly just wage. Many religious traditions and political philosophies relate the concept of just wages to a radically fairer redistribution of wealth.

"Prevailing wages" are established by the US Dept. of Labor and reflect what most people doing the same job are earning. "Competitive wages" are also based on what others doing the same job are earning. Since most service workers' wages are far below a living wage, it doesn't mean much when employers claim to pay prevailing or competitive wages.

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What's included in a living wage?

The seven factors in calculating the basic cost of a safe and decent standard of living are:

Housing
Food
Childcare
Transportation
Healthcare
Taxes
Other basic necessities

read more about the seven factors and sources for each: Living Wage Breakdown

EPI and WOW use federal and local data to calculate each of these. EPI bases food calculations, for example, on the Dept. of Agriculture’s “low-cost food plan”. Transportation data is based on the different driving distances for a given area or, if available, the cost of public transportation. While most of the data used by both WOW and EPI are from federal sources, it is sometimes supplemented with local research where federal research is not available, as is the case for the cost of childcare in Washington D.C.

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Why assume a family of four?

A family of four is an average. In reality low wage earners have more complicated networks of family and dependents. Most recent immigrant low wage workers send remittances to family’s abroad, and many workers support partners, other relatives, more than two children or elderly parents. Some live alone without dependents. Some are single mothers or fathers, or are teenagers contributing to their family’s income. Thus, the guideline of a family of four is a meeting point for the varying networks of dependents on the income of a low wage worker. Note that it assumes both parents work for a living wage.

EPI and WOW's two studies are reliable assessments of the actual cost of living for an individual or family. They take into detailed account the seven most basic factors of living in a given area. Federal minimums and poverty assessments are reckless and simplistic. The federal minimum wage is based on little more than precedent. Minimum wage earners, however, cannot eat precedent. Read further to understand why the federal poverty thresholds are pitiful underestimates of poverty.

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What’s wrong with how the government calculates poverty?

The federal poverty line is outdated, skewed and unreliable. It is the general consensus among economists to abandon it as a reliable gauge of families in need. It’s best to avoid it if possible when calculating a living wage for your campaign. While many municipal living wage campaigns have used the federal poverty line or multiplications of it as the basis for their local living wage levels for lack of other research or for the sake of political compromise, the standards do not reflect a decent annual income. Real living wages must be based on the real cost of living!

The government developed the federal poverty line standard in 1963. At the time Americans spent on average 1/3 of their income on food, and thus the federal poverty line was simply the cost of a minimal nutritional intake, the “thrifty food plan”, multiplied by three. According to the USDA, the thrifty food plan, the cheapest of four plans developed by the Department of Agriculture, was meant for temporary or emergency use, and only when funds were low. Since 1963 housing costs have skyrocketed, and other costs of living have increased such that the simplified 1/3 ratio is woefully insufficient to determine the cost of living in the US.

The federal minimum wage is in no way connected to even government measures of poverty. It is instead an arbitrary rate dependent on congressionally mandated raises instead of the actual rate of inflation or the cost of living. Because of this detachment from inflation, the real value of the minimum wage has steadily declined since 1968. The 1968 federal minimum wage in 200 dollars is $8.98. The last time it was updated was 1997. In 1968 the minimum wage was 117 percent of the poverty threshold for a family of three (though inadequate as the poverty threshold calculation is), while in 1998 it was only 80% of that same threshold.

For more information, history and fuel for talking points, read Jessie Willis’s article, “How We Measure Poverty”, found at http://www.ocpp.org/poverty/how.htm

Also read the beginning of Chapter 1 in the Economic Policy Institute’s Hardships in America

Some brief talking points on the federal poverty line (taken from Hardships in America):

• Families no longer spend 1/3 of their income on food. The measure has undergone minimal adjustment in its approach, and as a result this assumption is grossly outdated.
• The federal poverty line has not been adjusted for the growth of real income.
• Those who fall below the poverty line today are worse off than families below the poverty line thirty years ago.
• The poverty threshold takes no account of geographical differences in cost of living
• Congress acknowledged the insufficiency of the standard in the 1990’s, but the majority of recommendations resulting from its commissioned study by the National Research Council of the National Academy of Sciences went unheeded. Their suggestions included geographic adjustments, inclusion of value of non-cash federal benefits to income threshold, and the subtraction of costs of childcare and healthcare from income.

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