FREE NEWSLETTER
Go to main Forum page »
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.”
The Congressional Research Service in a 2023 report stated, “there are two newer data sources that may be used to provide poverty estimates for all U.S. counties: the American Community Survey (ACS) and the Small Area Income and Poverty Estimates program (SAIPE).”
I don’t know how this would work, but I think it at least is worth investigating.
Shouldn’t we be suspicious of any govt bureaucracy that creates statistical reasons for their own expansion? It reminds me of putting the fox in charge of the hen house.
Have they spent a minute of their time considering whether the poverty line isn’t a moving target that just encourages an empty spiral, that locks people without assets, without a home into a spiral that makes them repetitively poorer?
The living wage is pretty much the definition of being able to pay bills for necessities, housing, food, clothes, medical care, etc.
What poverty line? The one applicable to Kentucky, or NYC or LA?California’s minimum wage is $16 an hour while most of the southern states rely on the federal MW of $7.25.
I love the phrase richest country in the world. That’s like describing the family on your street with the largest house, pool in the yard, luxury cars and in debt up to their eyeballs and no savings.
Yup, the price-wage spiral makes the idea of a living wage a bit like a dog chasing it’s tail. (as wages go up, unless they generate extra profit, you end up seeing price increases which in turn need more wages to maintain that living wage)
Turns out that the UK has a National Living Wage, but it’s just the minimum wage for those over 21:
“The National Minimum Wage is the minimum pay per hour almost all workers are entitled to. The National Living Wage is higher than the National Minimum Wage – workers get it if they’re 21 and over.”
Next year the UK Living Wage will be 12.21 GBP/hour, or $15.31.
I do favor an increase in the minimum wage in the US. If it causes the price of a Big Mac to go up a quarter, I can probably still swing that.
I agree and it should be indexed to CPI. Not sure what the number should be. $16 per hour may be too much, but $7.25 per hour is way to little.
Agreed, the numbers are useless, especially if you drive through the areas you mentioned and see how people actually live. When talking about a living wage, it is also important to talk about how to live. Understanding the consequences of life decisions, both today and in the future, is an important part of that discussion. When hedonism overrules the living wage, we generate new problems, such as credit card debt, car loans underwater, lack of affordable housing, unwanted pregnancies and more. The discussion needs to be an affordable life, not a living wage.
Is a “living wage” similar to a “universal basic income”? And how would you decide what was “fair”? When we were younger and lived in a HCOL area, we never made the median income for our county. We didn’t live like many of our friends. We moved to a lower cost of living area and things got better for us. But it was our choice. Other family members decided to live in our hometown growing up and their job opportunities were more limited than ours. Again, their choice. Now we are retired and our income is lower again. Are we going to be hit with SS means testing in the future b/c it is more “fair”? Who knows? Chris
Although we all have some similarities we also have differences. I value some things more than other people value them. Other people value some things more than I value those things. It doesn’t seem possible to me to have a certain amount of money that everyone would agree is “livable” to have.
Even when it comes to something simple like food and shelter, the amount that some people live on now – or have lived on through history – and which is livable for them, won’t seem livable to someone who wants a different standard of living I.e. someone who values free time more than comfort or someone who values travel more than expensive or healthy food.
I consider other viewpoints, but at this time, I am not convinced to support Joseph Biden or Donald Trump or someone else determining what is “livable.”
While living wage may be thrown around politically, what it is by variables is not. How accurate, I don’t know, but MIT has been calculating it for many years.
I just googled living wage to attempt to prove you wrong. But you’re right, the living wage calculations are all over the place. The disparities don’t seem to be as great when comparing by state as opposed to by county. Still the estimates vary between 30k and 50k per year.
I would have you consider that the government has to spend a lot of our money subsidizing low paid workers via refundable tax credits, Medicaid, and other forms of assistance. Is it as though companies with low paid employees consider government subsidies to be their fringe benefit package? In other words, would living wage reduce stress on the federal budget?
I think the incidents of what you describe are very minor in the overall picture. But if stress on the federal budget was reduced, where would it go?
Higher prices, inflation including pressure on all wages to be raised. Seems to me that when we don’t allow markets to set wages we create more problems.
Like tariffs, consumers are the ones who would end up paying the price, as opposed to the federal government just adding to the national debt. Having said that, given the disparity of the COLA across the country I don’t ever see a living wage agreed on and implemented.