Everything You Ever Wanted to Know About the Living Wage

Can you live on a living wage? The answer depends on who you are, where you are and what we mean by a living wage. These three things are connected.

Let's begin with the last and, in some ways, most fundamental.

When people talk about a living wage, they generally mean a wage high enough to give a full-time worker with a family enough to meet at least basic needs without public benefits. For example, the Glossary of International Economics defines it as "a real wage high enough for the worker and family to remain healthy and comfortable."

This, I think, is what commenter jan Lightfootlane has in mind when she calls for a living wage that covers all "survival type bills" — not just the standard four basic needs (housing, food, clothing and utilities), but personal grooming items, household supplies, over-the-counter medicines, transportation, insurance, repairs, etc.

We see something different when we turn to actual living wage laws that local governments have adopted.

ACORN used to maintain an up-to-date list. Since it's fallen on hard times, we've got no ready source to tell us how many of these laws there are. The National Employment Law Project puts the total at somewhere over 140. As the Economic Policy Institute has observed, they vary considerably. But they do have some things in common.

All living wage laws establish a required minimum wage higher than the regular minimum wage. A number have two rates, one for businesses that provide health care benefits and a somewhat higher rate for those that don't. The difference usually isn't very big — not enough, I suspect, to cover the costs of a private health insurance plan.

The living wage requirements apply to all or most businesses that have service contracts with a government agency. Some also cover businesses that benefit from publicly-funded subsidies — tax abatements, for example, or economic development grants or below-market bonds or loans. Some cover the city's own employees as well.

A couple are considerably broader. Santa Fe, New Mexico, for example, extends its annually-adjusted living wage requirements to all businesses that are required to have a license or registration and also to nonprofits. Berkeley, California extends its requirements ($12.20 per hour with health benefits; $14.23 per hour without) to businesses operating in a particular part of the city and, even there, not the smallest.

All living wage laws are based on the principle that public funds shouldn't support poverty-level wages. There's a strong ethical component here, dating back to  late 19th century Catholic teachings on social justice.

But there's also a practical element. As the Drum Major Institute's John Petro has testified, "when tax dollars are used to subsidize low-wage jobs, the city ends up paying twice: once on the development subsidy, and then again to provide public assistance to the working families who cannot afford rent, food and other necessities."

Look beyond the principles and you find that far from all living wage laws enable a working family to meet even basic needs. An overview by the Partnership for Working Families says that they generally peg the wage to the minimum needed to lift a full-time worker supporting a family of four above the poverty level.

How far above is a different issue. And, as we who've been reading about the new poverty measure know, the current measure, which is used to establish the federal poverty level, doesn't factor in geographic differences in living costs.

We can glimpse the difference by looking at cost-of-living estimates for a couple of cities that have living wage requirements.

Los Angeles, for example, has a living wage law (pdf) which covers most employers that provide contract services to the city or benefit from public funds in other specified ways. The living wage rate (pdf) last year was $10.30 per hour, plus $1.25 per hour in health benefits. The total of these would have been enough to lift a family of four $1,974 over the federal poverty line.

But Pennsylvania State University's living wage calculator (great tool!) shows that the wage without health benefits is $1.69 less per hour than the take-home pay a single adult would need to meet basic monthly expenses. For a family of two adults and two children, the living wage falls short by $23.77 per hour.

Monthly expenses here include food, housing, child care, health care and transportation, plus an unspecified "other" to accommodate incidentals and occasional expenses. The inclusion of health care is the reason I'm using the LA rate for employers that don't provide health benefits.

What about New York City, where the mayor is fighting a new living wage requirement? This one would apply only to developers who receive public subsidies. They'd have to pay their workers a minimum of $10 per hour, plus an additional $1.50 if they didn't provide health insurance. The PSU calculator tells basically the same story as for LA. This "living wage" without health insurance would be $20.30 less than what would be needed by a family of four.

As I recently observed, minimum wage rates reflect political rather than economic realities. The same thing is obviously true for living wage requirements. Though some use the federal poverty line as a reference point and a few use another standard, many seem pulled out of the air — the best supporters could get under the circumstances.

So when we advocate for a living wage, we've got to be clear what we're talking about.

Is it paying enough to lift a family of some specific size to some specific level over the federal poverty line? This is the approach taken by St. Paul, Minnesota, which sets the wage at 130 percent of the FPL or 110 percent if the employer provides a basic health insurance package.

Or is the living wage supposed to be enough to cover the costs of basic needs? What are these? How are they calculated? And what ensures they keep pace with inflation?

The Campaign for a Universal Living Wage proposes a simple solution — a variable federal minimum wage based on area-specific housing costs. The wage would be set so that someone working full time would earn enough to be able to afford the rent on a one-bedroom apartment at the U.S. Department of Housing and Urban Development's fair market rate. The standard for affordability here is the usual 30 percent of income.

This would still leave it up to local governments to require a wage sufficient for the worker to afford housing and other expenses for a family. So we might still have a patchwork of living wage requirements. And we'd still have the politics reflected in current requirements. But the standard seems sensible and is worth a closer look.

Yes, this is all pretty complex. But if current living wage laws and proposed laws teach us anything, it's that the devil is in the details.

Photo credit: cohdra