Doing the Numbers on a Living Wage

Money is always a sensitive topic, but it's also one we can't afford to ignore. It's widely understood that the current minimum wage is a long way from being a wage that you can live on. There's a lot of discussion about companies paying a living wage to their employees, but what is a living wage? What does that look like and how do we calculate it? Is there one number that's going to work across the whole country, or will it be different from state to state, county to county or even person to person? What would a living wage look like for you?

Variables to Consider

There are a lot of variables that need to be accounted for when you're talking about a living wage. What's the cost of living in your area? Think about how much tax is deducted from a paycheck. That can affect your take-home pay vs your hourly wage. Inflation is an important one that has long been ignored by those calculating the minimum wage. The minimum wage has not kept up with inflation at all, which makes it all but impossible to live on minimum wage work.

Cost of Living

First, look at the cost of living in your area. Rent is a huge expense for many minimum wage workers, followed closely by things like health insurance, car maintenance and insurance and utility bills. Cost of living is also going to include things like groceries and gas. The rent may be higher in urban areas, but it's also easier to get places without a car, which can save you money on gas and car insurance. The most important thing to remember about the cost of living is that it's going to vary wildly from place to place, even within the same state or within the same city. The cost of living in old town is going to be very different from the cost of living next to an industrial park.

Debt

Another important consideration is any debt payments that need to be made. This is where your personal living wage may differ from other people's living wage, even if they live in the same area as you. If you have student debts to pay, or mortgage payments to make, or even a car loan to pay off, your living wage will have to accommodate those payments. It's an important thing to consider any time you take on debt, as well as when you're assessing potential salaries.

Dependents

Furthermore, your living wage will have to take into consideration any dependents you have, whether they are children or parents or spouses. If you are responsible for more than just yourself, then your living wage will have to include their lives as well.

Savings

Savings are often shoved to the bottom of these lists when people make calculations about a living wage. It is vitally important that your living wage include enough money that you are able to put some aside, not just for emergencies but for retirement, and hopefully to help your children get an education and avoid accruing student debt themselves. Having money leftover to put into savings isn't actually optional: it provides an important security buffer against unexpected expenses that would otherwise put you substantially in debt or even lead to bankruptcy.

Calculating a living wage is not a simple calculation. There are a lot of factors to consider, from where you live, to the cost of living, to any debt you have and any dependents you're responsible for, to how much you need to be able to put aside for savings. The truth is that a living wage isn't going to be the same from person to person. The one thing that can be agreed on: the federal minimum wage isn't a living wage. It hasn't kept up with inflation, it isn't sufficient to support even one person living by themselves in a relatively inexpensive area. It needs to change.