A Living Wage describes an annual income that provides an individual or family with comfortable living standards. The term is used in discussing minimum wage laws, government contracts, income redistribution, and welfare programs. The federal government has not defined a Living Wage like they have a poverty level (see Poverty Threshold Page). As a result, many think tanks, universities, and non-profit groups have established and recommended living wage amounts. The chart below shows various Living Wage calculations.
A Living Wage is earned through jobs. It differs from welfare programs, universal basic income, or negative income tax. These programs distribute benefits from the government to individuals or families.
Here is how a living wage contrasts with the purpose of welfare.
Comparison of Living Wage Calculations
A living wage is usually a yearly income of at least 150% to 200% of the Poverty Threshold. The argument is that the Poverty Threshold is not a sufficient level of income on which to live comfortably. Many people feel it is too low to afford rent, food, and other living expenses.
The following chart compares the Poverty Thresholds for 2022 with various living wage levels for a single person, a single parent with two children, and a married couple with two children. The federal minimum wage is $7.25 per hour, which equals an annual income of $15,080 with a standard 2,080-hour work year. Many cities have established minimum wages of $15.00 an hour. The MIT living wage is a program that calculates a living wage in every county of America based on the local cost of living in that area [i]. The chart shows the living wage of Washington County, Maryland, a middle-of-the-road case. Places like New York City and Alaska have higher living wages, and most rural areas have lower living wages.
The Living Wage Gap for the Entire United States
The Living Wage Gap for the entire U.S. population totaled $911 billion for 2022, assuming a living wage equal to two times the poverty threshold. This is calculated from poverty statistics released by the Census Bureau, as discussed below. The Living Wage Gap is the annual income necessary to move an individual or family up to the level of a living wage. For example, a family of four with a yearly household income of $20,000 is $39,900 below the living wage of $55,580. Therefore, the living wage gap is $39,990 for the family. The Living Wage Gap to boost all Americans to a living wage totaled $911 billion in 2022.
Chances of New Living Wage Federal Program Are Remote
While there is talk of income redistribution to achieve a living wage, it is not practical. Such a program would be twice as large as the entire welfare system created by the federal government (See U.S. Welfare Programs). The program would be as large as the defense budget and about twice as large as the Medicaid Program. See the Entitlement Spending Page. That is why a living wage is usually proposed as a change to minimum wage laws, union contracts, etc. Such laws pass the cost of a living wage to the private sector instead of creating an extensive federal program.
Living wage gap spreadsheet
The Living Wage Gap in the U.S. is calculated using the same methodology as the Poverty Gap. See the Poverty Gap Page for the methodology, including the Census Bureau information used to calculate the Living Wage Gap. A download of the calculations and source material is available below.
[i] Dr. Amy K. Glasmeier and the Massachusetts Institute of Technology. Living Wage Calculator [Internet]. Wage per hour times a 2080-hour standard work year. Retrieved April 25, 2023. Available here.