Living Wage vs Minimum Wage

living-wage-vs-minimum-wageThe discussion of wages is always a heated one. First, there are the geographic factors, then the competitive factors, and of course, the greed factors. Wages most often become the topic of discussion in one of two ways: the idea that some don’t make enough – minimum wage – or the idea that some make too much. Downright envy!

In 1938, the first Federal law to establish a minimum wage was the Fair Labor Standards Act. Today’s federal minimum wage is $7.25/hr. Many states have risen above that level, while some states actually have “loopholes” that allow people in certain jobs for certain employers to be paid less (see a map of which states are where.)

Minimum wage, however, is NOT the only topic of interest in today’s discussions. Some believe that eliminating minimum wage would solve our unemployment problems, including many politicians and at least one of the current presidential candidates. Even distinguished AZ Sen John McCain voted against raising minimum wage 19 times in his career. What is fast becoming the bigger issue in our widely divergent society is the concept of “Living Wage”. What is the difference? What determines a Living Wage?

Living wage is dependent upon many factors, as we mentioned earlier. However, some parameters can be used to help decide. Certain costs, while not fixed in terms of amount, have commonly been set as factors in determining economic health. For instance, for decades economists, bankers, government agencies, and credit and mortgage companies have had a guideline allowing for up to approximately 30% of income to be used for housing. A little math applied here would show that 40hrs/wk @ $7.25 is around $300/week or about $1200/month. If our housing allowance is no more than one-third of that, then rent should be at something in the vicinity of $400/month. Probably not the case in your town!

Critics will say that in these days we have come to accept that ALL families will include two wage earners. So, does doubling that amount get into the range of housing costs where you live? Instead, let’s look at another parameter, Poverty Level. Federal poverty standards were first set in 1964 using calculations provided by Mollie Orshansky of the Social Security Administration, the basis for which was a Department of Agriculture 1955 Household Food Consumption Survey. It showed that families of three or more persons spent about one third of their after-tax income on food. For the sake of discussion we will figure that taxes take about 25% of gross income; this brings our two-income (minimum wage) family down to $1800/month NET. Using the government findings, then this family could reasonably expect to spend about $600/month on food, leaving $1200 to pay $750 rent and $450 to cover ALL other costs for the month.

Obviously, the determinants in these discussions are never based on reality, but rather political whim and financial influence. The global economy argument has left some thinking that Americans should actually work for the type of wages that the “Third World” receives. It has long been the contention of “Organized Labor” that the solution is NOT in bringing down those with respectable standards of living, but rather, in raising the standards of those struggling to grasp “the American Dream”! Many have studied the situation, and campaign to promote the “Living Wage”. Penn State University has developed a living wage calculator, applicable to 50 states, with many locales and other factors built in.

Cheap Labor Regressives (those intent on moving wages backward) must not be allowed to prevail. The American ideals of unity and community must rise up to succor one another. We must consider the plight and livelihood of those around us as we make our shopping decisions, and far more importantly , our voting decisions! Support Organized Labor, Support re-building America’s middle class!