Definition of a Living Wage

The dictionary states that a living wage is a minimum income an individual or family needs to meet their basic needs. The needs that are included in the living wage are housing, food, utilities, transportation, and other essential items. The living wage allows an individual or family to afford a basic but decent standard of living.

The living wage is flexible as it differs from city to city, region to region, state to state. What is a living wage in one area may be considered poverty in another. The living wage is NOT a minimum wage. Minimum wage often does not cover the basic needs of a family and often forces the family into poor credit and depending on government agencies to get through each month. Research shows evidence that if a country legislates that all must earn a living wage, it can help reduce poverty. If the country only has legislation around minimum wage, poverty often increases and it becomes a vicious circle for those trapped into working for a minimum wage rather than a living wage.  When an individual and/or family does not earn enough, it sets them up for debt, collections, a lower credit score and possibly bankruptcy.  Who do they pay this month and who do they not pay.  As the unpaid bills stack up, the creditors begin to register these missed payments and collections on their credit report.  They are now a target for lenders that charge high-interest rate loans for those that have poor to bad credit.  It becomes a cycle that is hard to break.  Knowing what the living wage is in your area helps you take preventative steps so you do not become one of the 12.3% of Americans living below the poverty line.

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Minimum Wage

It is easy to confuse minimum wage with the living wage and the two are definitely connected. If you only earn minimum wage in the state you live in and it does not meet the requirements for the state's living wage, it is considered poverty wages. In the United States minimum wage is set by the Fair Labors Standard Act (FLSA). The current Federal minimum wage is set at $7.25 per hour.Many states have set their own minimum wage and according to the FLSA employers within those states must pay employees the higher of the two rates. For instance, the minimum wage in California is currently set at $11 per hour for companies with fewer than 26 employees. All other companies within the state of California by California state law must pay their employees a minimum of $12 per hour. There are exceptions for employers whose employees wages include tips - this would apply to service industries such as restaurants, valet services etc. The employers are only obligated to pay the Federal minimum wage of $7.25. Twenty-five States adhere to the minimum wage set by the FLSA, and the other states minimum wage range from $8.46 to $12.00 per hour.

Poverty Thresholds 

A poverty threshold, limit or line, is the minimum annual income required to meet all of a person's or family's basic needs - food, shelter, clothing education, and healthcare. For a family, the poverty threshold will vary depending on the number and age of children within a family. Whereas, a poverty guideline does not look at the variances within a 'family unit'. Poverty guidelines are issued by the Department of Health and Human Services and are used to determine a person/family's eligibility for government programs. The Census Bureau statistics state that in 2017 there were 12.3% of all Americans living below the poverty line or 1 in 8 citizens. The 12.3% equates 39.7 million Americans. The federal poverty level for a family of four set the annual income at $28,100 $2,342 per month which does not meet any of the living wage statistics. 19% of all children living in the United States live in families that are considered poor. Only 9% of seniors live in poverty and this is due partly to Social Security and Medicare programs.

How does the Living Wage Affect Me

The living wage is becoming more of an issue within the United States as the gap between the top earners and those of middle-class and lower-income earners becomes greater. The minimum wage becomes very important to those in the lower income brackets as it affects their financial well-being which ultimately affects every area of their life. The anxiety, the fights, the worry that often result from not being able to meet the basic needs of your family can cause family break-ups and even illnesses. If you are a family of 4 (2 adults, 2 children) with only 1 wage earner, you must earn at a minimum $30.48 an hour ($63,805 annually) to make a living wage. If both adults work, the hourly wage for the living wage decreases to $19.48 per hour ($81,056 annually)to make a living wage. The pressure is less if both adults are working earning a minimum of $19.48 per hour. If you live in San Francisco the same family of 4 (1 earner) would need to earn $37.72 per hour (a difference of $7.24 per hour. 


Example 1: You are a teacher in California with a family of four (2 adults, 2 children- 1 earner) earning $56,024 annually. You need to be earning $77,410 annually to make a living wage. Now you are a teacher living in San Francisco earning $58,914 (same 2 adults, 2 children- 1 earner) you would be living closer to the poverty line. Living on a teachers salary would mean both adults would need to work full-time. Not be able to earn a living wage puts this family at risk. What choices do they make to cut back - food, clothing, definitely holidays, where they live, what they drive. This is when these families are at risk of being in 12.3% of Americans living in poverty. They struggle to pay bills, have collections, credit scores below 590. It becomes a vicious circle that is hard to break.

Typical Expenses in California

Example 2: You are a single parent with two school-age children living in Arizona. You must earn $30.24 per hour to reach a living wage. Minimum wage is $10.50 whereas the hourly wage to put you under the poverty line is $9.99. You need to be earning an annual salary of $62,903 every year to cover your family's basic needs. Here is a sample of some annual salaries in the state of Arizona - Education $41,982, Business & Financial - $63,276, Healthcare Practitioner & Technical - $70,704, Protective Services - $43,072, Management - $88,295, Office & Administrative - $34,925, Service Industry - $22,333.

Typical Expenses in Arizona

Example 3: You and your partner are retired living on your savings and your 401k pension plan. Your income is now fixed for the remainder of your life. The Bureau of Labor Statistics shows that the median salary for a retired couple over the age of 65 is $45,756 a year (roughly $3,800 a month). 44% of Americans that retire have a mortgage and 17% don't plan to pay it off. This couple would be able to make all of their monthly payments, pay their bills and live comfortably, especially if the title on their home was clear. A few of the places they could live within the living wage would be Arizona - $38,932, Yuma, Arizona - $36,514, Los Angeles -$46,781 (no mortgage), Columbia County, New York - $39,221, Georgia (average for state) - $39,904.

Typical Expenses in New York State:

How Can This Knowledge Benefit My Family

If a person and /or family do not earn enough to make the living wage standard it puts them at risk of poverty, fewer choices of where to live, where to send their children to school, let along consider college. They become a target for payday loans and look to government subsidies to help them manage month to month. If you are graduating high school and not sure what profession you want to pursue, take a look at the living wage calculator (listed in the references below) to see what the median wage is for that profession in the states you would like to live. Then look at what the living wage is for that area. Is it worth the cost of your education to pursue a profession that doesn't enable you to live comfortably or should you enroll in a different field? If you are already working and have the ability to move, should you. Is it worth the move?

Awareness and knowledge is everything when it comes to a person's finances and what they are looking for in life. If you are retired or thinking of retiring and don't want to worry about finances, should you move to an area that is less expensive? Where do you want to raise your children - do both of you work, or is one of you able to stay home while the children are young? These are all important things to think about when making those important decisions in your life and for your future. It can be discouraging at first when assessing your wages against the living wage, but it is a great tool to help you. Making a move can help you in so many ways - less chance of slipping below the poverty line, quality of life, a better chance of getting a loan with better terms and rates with a solid credit score.

- Education $41,982, Business & Financial - $63,276, Healthcare Practitioner & Technical - $70,704, Protective Services - $43,072, Management - $88,295, Office & Administrative - $34,925, Service Industry - $22,333.

  1. U.S. Poverty Statistics - Federal Safety Net
  2. HHS.gov - U.S. Department of Health & Human Services
  3. Living Wage in California - Living Wage in California
  4. United States Census - United States Census
  5. Bureau of Labor Statistics - Bureau of Labor Statistics - California