Living Wage Breakdown!
The following is
a breakdown of how both the Economic Policy Institute
(EPI) and Wider Opportunities for Women (WOW) calculated
a living wage for Washington, DC. The methodology is
nearly identical in all of both organizations' studies
and can be used to clarify how one arrives at the wage
rate for a given area.
Calculating
a living wage | Non-wage
benefits | Examples
of living wage policies
Housing
WOW and EPI
Both WOW
and EPI provide a figure based on Fair Market Rents (FMRs) as described in
the WOW report. The U.S. Department of Housing and Urban Development
annually calculates housing costs for every metropolitan housing market and
non-metropolitan county and publishes FMRs for these given areas. “FMRs are
gross rent estimates. They include the shelter rent plus the cost of all
utilities, except telephones... FMRs determine the eligibility of rental
housing units for the Section 8 Housing Assistance Payments program. Section
8 Rental Certificate program participants cannot rent units whose rents
exceed the FMRs.”
Child care
WOW
The 1988
Family Support Act required states to fund or reimburse child care needed by
those on welfare or leaving welfare at market rate, which was defined as the
75th percentile.
This rate was calculated by a mandated survey of childcare costs. This
survey is conducted in Washington, DC as well as most states.
EPI
Child care
costs are the average cost per state at child care centers. While ideally
EPI would have like to use child care costs by county no consistent data
source for child care by county is available. Therefore, EPI used average
child care costs by state. Most state averages are from the Children’s
Defense Fund’s “The High Cost of Child Care Puts Quality Care Out of Reach
for Many Families.”
Food
WOW
The USDA
Low-Cost Food Plan is calculated by the U.S. Department of Agriculture,
which calculates it to be 25% more than the Thrifty Food Plan. While both
plans satisfy minimum nutrition standards, the Thrifty Food Plan was meant
for emergency use only. The Low Cost Food Plan is a minimum but sustainable
nutrition standard intake.
EPI
Food costs
are also based on the USDA’s Low-Cost Food Plan. Again, the USDA food plans
represent the amount families need to spend to achieve nutritionally
adequate diets. Food cost estimates are the same for the whole nation (the
Bureau of Labor Statistics found that food costs vary little by region).
Transportation
WOW
This
calculation assumes residents of Washington, D.C. use public
transportation. Data for public transportation costs are based on the
average cost of commute using both metro and bus.
EPI
Transportation costs are based on the costs of owning and operating a car.
EPI derived these costs from the average miles driven per person according
to the size of the DC area (from the Nationwide Personal Transportation
Survey).
Costs per mile are from the IRS cost-per-mile rate, which includes the cost
of gas, insurance, vehicle registration fees, maintenance, and depreciation.
Health Care
WOW
This
calculation assumes that the employer provides health insurance coverage and
that the employee will pay one third of the cost of the health insurance
premium, which is the average national proportion. Data is based on the
National Medical Expenditure Survey and the Families USA report.
EPI
In
calculating health care costs, EPI took into account the fact that 40% of
families do not receive health insurance through their employers. EPI
assumed that workers who do not have health insurance through their
employers or through Medicaid would purchase health insurance through a
non-group plan. Thus, health care costs are based on a weighted average cost
of employer-provided health insurance and the cost of purchasing a non-group
plan. EPI used the same cost of health insurance for the whole state, as
they found that non-group plans did not vary significantly within states.
Data also obtained from the Medical Expenditure Survey; out-of-pocket costs
are from “Hidden from View: The Growing Burden of Health Care Costs” from
Consumer’s Union (1999 dollars).
Taxes
WOW
Taxes
include state sales, federal, state income and payroll taxes. Data is found
in the 1998 Commerce Clearinghouse State Tax Handbook and takes into account
property, low-income and child and dependent tax credits.
EPI
Citizens
for Tax Justice (CTJ) computed the taxes for the tax year 1999. Taxes
include federal personal income taxes, federal Social Security and Medicare
payroll taxes. CTJ calculates taxes based on the after-tax incomes necessary
to meet basic needs. It calculated the pretax incomes necessary for families
to achieve this after tax income.
Other Necessities
WOW
Other
necessities are calculated to be 10% of all other costs, and include items
such as clothing, shoes, paper products, diapers, nonprescription medicine,
cleaning products, telephone and personal hygiene items. This percentage is
a conservative estimate in comparison to other estimates in basic needs
budgets, which use 15%.
EPI
The cost of
other necessities includes the cost of telephone, clothing, personal care
expenses, household supplies, reading materials, school supplies, union
dues, bank fees, television, music, and toys. EPI derives these costs from
the Federal Communications Commission and the Consumer Expenditure Survey,
and calculates that these costs are 31% of housing and food costs.
---
As of extensive studies
done by Wider Opportunities for Women in 1998 and the Economic Policy
Institute in 1999, the below defined costs are calculated assuming a family
of four with two working adults. All costs are monthly, unless otherwise
indicated.
Living Wage for Washington, D.C.
|
WOW |
EPI |
Housing |
$807 |
$820 |
Child care
|
$1,426 |
$1,042 |
Food
|
$501 |
$510 |
Transportation |
$189 |
$221 |
Health care
|
$223 |
$329 |
Taxes
|
$1,106 |
$768 |
Other
necessities
|
$315 |
$412 |
Monthly total |
$4,394 |
|
Annual total |
$52,728 |
$49,218 |
Hourly total
compensation per adult (1998) |
$12.48 |
$11.87 |
An hourly wage of
$12.48 was a living wage in 1998 for WOW and $11.87 for EPI. Calculated for
the local D.C. rate of inflation, a sufficient 2004 total
compensation per hour would be $14.93 for WOW and $13.95 for EPI
(2004 D.C. and Baltimore rate of inflation divided by 1998 rate of inflation
multiplied by 1998 WOW self sufficiency standard: 120.9 / 101.0 x $12.48 =
$14.93 and 2004 DC and Baltimore rate of inflation divided by 1999 rate of
inflation multiplied by 1999 EPI Living Wage: 120.9 / 102.8 X $11.87=
$13.95)
|