Living Wage 101

Calculating a living wage | Non-wage benefits | Examples of living wage policies

» Calculating your Living Wage
» What does "indexing to inflation" mean, and how do I do it?

Introduction:

Own your numbers. Know them inside and out. You wish a living wage campaign could be about the real issues of poverty and worker power, but at points it will inevitably come down to the numbers. Talk to workers on your campus; what do they need to live comfortably? Discuss a wage rate with them and be on the same page about it. You should both know where it came from and why it is the living wage for your locality. Remember to be on top of how each component is calculated in the living wage breakdown. If you have friends in the econ world, enlist their help for the calculations and in literature you produce to explain them.

Do avoid getting into arguments over the minutia of the wage. There are larger issues at hand. And never forget the non-wage benefits here and communicated by workers on your campus.

Calculating your Living Wage

The Economic Policy Institute (EPI) has a convenient Basic Family Budget calculator to help you figure out a living wage for the areas covered in the study. In order to use it, follow these steps:

• Check out EPI’s website, www.epinet.org

• On the left sidebar, under “Web Features”, click on “online calculators”

• Click on “Basic family budget calculator”

• Living wages generally assume two working adults and 2 children. This calculator lets you change the make-up of the family, but it’s generally best to stick to what the national movement uses as its average.

• Select your location and submit info

• The breakdown EPI gives you is helpful for different parts of your campaigning. For a solid wage though, all you need is the “annual total”.

• Because this number assumes two working adults, divide it by 2.

• Then divide it by the number of hours worked per year, which for full-time is 2080 hours.

• Voila. The EPI does it best to keep these numbers up to date, so you shouldn't need to adjust it for inflation. If find out that the numbers are outdated, you can figure out the math to adjust your number in the “Inflation indexing” section.

Wider Opportunities for Women (WOW) has developed the Self-Sufficiency Standard, which is as phenomenal and thorough as EPI’s Basic Family Budget. Differences are nominal. While WOW does not have a calculator on their website, you can download their studies and calculate an hourly wage fairly easily. These, too, will have to be adjusted for inflation. Note the date of publication of your state’s Self Sufficiency Standard and adjust by following the steps outlined in the “Inflation Indexing”.

• Find WOW’s studies at:

http://www.sixstrategies.org/sixstrategies/selfsufficiencystandard.cfm

• Click on “Standard for your State”

• Download the supporting file

• You’ll find the wage for your area within the document. You’ll also need to index it for inflation, so note the publication date and adjust.

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What does "indexing to inflation" mean, and how do I do it?

In negotiating a living wage, one of the most crucial elements is to ensure that it is indexed to inflation. Inflation is an increase in the general level of prices. When the economy experiences inflation (which does not always happen, but usually does), the purchasing power of your money decreases as goods get more expensive. By indexing wages to inflation, wages remain the same on real terms.

Note that indexing a wage to inflation is not the same as indexing to the Consumer Price Index (CPI). The CPI is calculated monthly by the Bureau of Labor Statistics (BLS) based on a basket of goods and services. As its name implies, it is an index of change, with the 1984 price set as the base level. The 1984 level bears no special significance. While the inflation rate and the CPI are different entities they are related and calculated in a similar manner. The difference with the inflation rate is that it allows you to choose your own base level, such as the the difference in price levels since two years ago when your university signed a contract.

This helpful website will help you calculate inflation rates:
http://inflationdata.com/Inflation/Inflation_Rate/InflationCalculator.asp

Visit the Bureau of Labor Statistics to find out the current CPI (it is under the current news releases section): http://www.bls.gov/cpi/home.htm

a. Field Guide to the Bureau of Labor Statistics website – finding the inflation numbers

http://www.bls.gov

Studies with conveniently recent numbers and data can be difficult to find. Most likely you’ll be working with studies from a few or several years back. No problem. Adjust for inflation. For this you’ll be using the national inflation rate or the Consumer Price Index (CPI). There are two ways to do this: the simple, national average calculation, or more area specific calculation. Calculating for inflation in your specific city or region may be more advantageous if you live in a urban or more expensive area, while rural areas may benefit from the simple, national average calculation. The first, easy option is a perfectly decent way of calculating for inflation, according to EPI, but the second is more specific.

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The U.S. Department of Labor has a bunch of economic information available to us through the Bureau of Labor Statistics. The BLS makes the national average inflation calculation incredibly simple.

• Hop onto http://www.bls.gov/ , or http://inflationdata.com/Inflation/Inflation_Rate/InflationCalculator.asp
Both are reliable calculators. Inflation data is self explanatory.

• At the BLS site, click on the “Inflation Calculator” under the first heading, “Inflation and Consumer Spending”.
• Voila! Enter data as appropriate.

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Regional specific CPI inflation rates are a little more complicated. But these steps are easy enough.

• From the BLS website, click on “Consumer Price Index” under the first heading, “Inflation and Consumer Spending”
• Halfway down the page, under heading “Get Detailed CPI statistics”, click on “Consumer Price Index- All Urban Consumers (current series)”
• The 2nd half of the list presented to you is a series of regions and major urban centers. Click on the region/city most appropriate. Retrieve data.
• OK. The numbers might be scary. And they might not go back as far as you need. But the calculation is simple..

• Divide the most current “annual” number (for Washington-Baltimore, for example, this number is 119.5 for 2004) by the “annual” for the year from which you want to calculate inflation (Washington-Baltimore 1998 annual is 102.1). So, for Washington Baltimore, this would be 119.5/102.1 = 1.17.
Multiply this number by the number you’re trying to calculate inflation for. If you had a living wage of $12.48 for 1998, for example, you would multiply $12.48 by 1.17, and get $14.60 in 2004 dollars.

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