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Be careful what you ask for or at least understand it.
The words “living wage” keep popping up in my reading, even on HD, but mostly on social media when complaining about pay. It’s also a good trigger phrase in politics.
Everyone should earn a living wage we may be told. Of course, typically without understanding what that means, how it could be achieved or the possible consequences.
After I wrote the following, I read and re-read it and concluded I was going in circles. There is no way, no logic to providing a livable wage because it doesn’t actually exist.
A living wage is the minimum income that a full-time worker needs to earn to afford basic necessities like housing, food, transportation, and healthcare for themselves and their family. It’s calculated based on the cost of living in a specific location. Advocates for a living wage argue that it helps reduce poverty, improve worker well-being, and boost the local economy.
I can’t help thinking that universally applied it would also trigger inflation and thus be self-defeating.
The median household income in the US is about $80,610. According to the US Bureau of Labor Statistics, American workers make a median wage of $59,228 per year. Is that a living wage? For many Americans that amount and less is what they live on.
As I mentioned in a recent HumbleDollar post, in the county in NJ where I live the living wage according to the MIT Living Wage calculator for a single parent with one child is $82,784 per year. Should we pay every such worker $80,000 plus a year? What about workers being paid through citizen’s taxes? The median teacher salary in NJ is $80,196. Should a waiter be guaranteed the same?
The median household income in my county is $74,994, but in my town it is $215,000. Half the households in my county earn far less that a living wage according to the numbers. How could a living wage possibly be applied?
Zip recruiter says the average salary in New Jersey is $59,022. The living wage for a single person in NJ is supposedly $51,500, but what if there is a two income family?
Let’s jump to Kentucky where the living wage for a single worker is $40,352. Zip recruiter says average salary is $52,875, but another site says $55,000. On the other hand, the median household income in Kentucky is reported to be $60,183.
Frankly I can’t make sense out of any of this. The numbers are questionable at best. Go to three different sites and you get three different answers.
The very idea of a living wage is a red herring in my opinion and just like calls to raise the minimum wage, we fail to consider the consequences not just on the individuals affected, but on all workers, employers and the economy.
Our capitalist economy works fairly well some of the time. When its inevitable cycles occur, for whatever reason, our government tries to mitigate the macro effects of these cycles on inflation and employment.
During the Covid pandemic, the Fed reduced the cost of money to zero. This governmental action was a big contributor to a huge disruption to the cost of housing in our area.
In 2016, my current next-door neighbors bought their 2100SF home for $513K. By 2022 the value of this home had more than doubled. This same more than doubling of values affected rentals as well. It now takes more than $10/Hour of full time employment just to pay for the rental of an efficiency apartment. Unfortunately, wages did not double.
So, this is the conundrum; the government created through monetary policy a set of economic winners and losers. If you happened to be a property owner you were a winner and if you were not, you are a loser. I don’t see how it can just be left to losers themselves to deal with this situation.
The existing system that requires people to strive for greater freedom through hard work and increased education works well for most people. We should look at the reasons that some people are left behind and try to help them learn how to succeed in the current system. Changing the system to accommodate the ones left behind is a mistake in my opinion. “It’s just too hard” seems to be the quote of the day.
Wait until AI takes your (or your grandchild’s) job, as NAFTA took many blue collar jobs.
How about this twist to the conversation?
Should someone living in the richest county in the world have the dignity of being paid at least enough when working 40 hours a week to meet the poverty line?
Poverty is defined as, “is the minimum level of income deemed adequate in a particular country. The poverty line is usually calculated by estimating the total cost of one year’s worth of necessities for the average adult.”
Th