What is a Living Wage?

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Just last month, the federal minimum wage — currently at $7.25 an hour — celebrated its three-year anniversary. At that rate, a security guard, retail store clerk or nanny working full-time for minimum wage makes just $15,080 a year. That’s barely above the poverty line for a single person ($11,344) and far below it for a family of four ($22,314).

In this week’s episode, Sister Simone Campbell talks about our poverty crisis and her belief that we need to replace minimum wages with “living wages.” Sister Simone is not alone in advocating for the living wage concept. Economist Robert Pollin wrote his book, The Living Wage: Building a Fair Economy, in 2000. It chronicled the living wage campaigns that swept the country in the 1990s. At the time journalist Robert Kuttner, co-editor of The American Prospect , noted in a back-of-the-book blurb that “The living wage campaign is the most interesting (and under-reported) grassroots enterprise to emerge since the civil rights movement.”

We called Pollin to find out more about the concept and why it’s important not to sacrifice the welfare of workers in tough economic times.

About 100 immigrant janitors marched through downtown Houston to protest a local cleaning company accused of withholding paychecks from its employees and not paying them for all hours they worked. June 2006 (AP Photo/David J. Phillip)
About 100 immigrant janitors marched through downtown Houston to protest a local cleaning company accused of withholding paychecks from its employees and not paying them for all hours they worked. The march took place after a federal lawsuit was filed against Houston-based Professional Janitorial Service. (AP Photo/David J. Phillip)

Theresa Riley: What is a living wage?

Professor Robert Pollin

Professor Robert Pollin

Robert Pollin: Conceptually the idea of a living wage emerges out of social movements and thinking about what it takes for people to live a minimally decent life. There’s a great book by Lawrence Glickman – it’s called A Living Wage: American Workers and the Making of a Consumer Society– and he defines it as “a wage level that offers workers the ability to support families, to maintain self-respect, and to have both the means and the leisure to participate in the civic life of the nation.”

And if you’ve ever heard of Amartya Sen, an economist — he’s probably the most eminent living economist. And what made him eminent was he tried to focus on what we really mean when we talk about welfare and the well-being of people. Amartya Sen’s definition of what constituted welfare is almost identical to what Glickman defines as a living wage: the emphasis on self-respect, supporting your family, and being able to participate without shame in your community, that was really the point that Sen got to.

Theresa Riley: How is it typically calculated? I believe it’s different in different areas of the country, right?

Pollin: If we’re talking about what it takes to live at a minimally decent level to support a family and to participate in the community, it depends on the cost of living in any given community. (And, if we really want to get specific it depends on how many people you’re supporting, how many people are in a family, as well as the cost of living.) I’ve done research on that exact question and the biggest variable is the cost of housing in a community.

Let’s take for example Boston and Omaha, Nebraska. There’s going to be a very large disparity in the cost of housing, and so that would have to be reflected in the cost of a living wage. So there isn’t a single number, but I would say in today’s economy a decent number would be somewhere between 10 and 20 dollars an hour. If we have to pick one number as a minimally decent minimum wage, my colleague Jeannette Wicks-Lim came up with the number $12.40 an hour.

There is a point at which, if you raise the minimum wage enough, it will create problems in terms of employment. Businesses will start to think about whether to hire somebody, or start to think about laying off people.

Riley: How many cities have living wage ordinances?

Pollin: Many municipalities, over 140, have some kind of living wage measure. The fact is that states have taken some action to establish a higher standard, not as high as living wage standards in municipalities, but the coverage is much broader. Right now, 18 states plus the District of Columbia have minimum wage rates above the federal minimum, and the range is in between $7.40 an hour in Rhode Island to $9.04 in the state of Washington. The total number of people who are covered by minimum wages above the federal minimum is 134 million — that’s 43 percent of the population.

Riley: And for the municipality ordinances, is there a standard way of calculating based on all the factors that you mentioned earlier?

Pollin: I would say it’s kind of scattershot. When the living wage movement started in the mid-to-late 1990s, it wasn’t like there was any really systematic effort in determining what constituted a living wage in different communities. One of the interesting things in all the work that I did was just getting communities to talk about stuff like that. They hadn’t really thought about it.

I think the closest thing would be to say what is the poverty line for a family size and then maybe we should set the living wage at a level that puts people above the poverty line for at least a family of three, something like that. Now, the problem in doing that is that the poverty line itself is very low and really has not ever been refined since the time it was first established in the mid-1960s. Another simple complication is — what if you don’t have a family of three? What if you’re just working for yourself, what if you’re a teenager, and so what does the living wage mean for such a person? Should it be set in the same way? So these are the issues that unfortunately are unavoidable in trying to set this up.

Riley: In your new book, Back to Full Employment, you offer short- and long-term solutions for getting to four percent unemployment. Would a living wage fit into those recommendations, and what are the pros and cons of a higher minimum wage in this economy?

Pollin: When we talk about full employment, it has to be full employment at decent wages. Because the easiest thing to do is to get to full employment at terrible wages. That’s the approach where you eliminate the welfare state altogether and you tell people you’re on your own; people are desperate, and you can bargain down wages. So you can have a full employment economy at destitution level wages. I would consider a decent minimum wage around $12. It’s something we could establish without creating a lot of negative effects on job opportunities.

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  • Anonymous

    What has been the percentage of ‘raises on wages’ Congress has voted for itself (and occurs automatically because of legislation Congress voted for) along with the percentage of raises the CEO’s have gotten in just the past 12 years and reflect that as a basic living wage. (Read ‘Pigs at the Trough’ just to see the greed on both sides of the aisle in Congress, Wall Street, Big anything, Hedge Funds and see how skewed pay/wages/salary have been deemed to be ‘FAIR’.
    We have a group of 1-5% who really think they have gotten there all by themselves..lol. Their level of entitlement is beyond all that is reasonable. So then they bring in certain language (listen to them closely) to imply how their level of entitlement was gained by what they do/on their backs. Then look at what they actually have done again read Pigs at the Trough or read Greenspans autobiography and listen to what he actually did. ..how they ‘created’ their wealth.
    If you read and follow up you will see how the ‘conned'(much like the Bernie Madoff) the world into believing that it could not have been done without them but the actual work was done by the ‘average JOE and JANE. Joe and Jane have been squeezed down much like the serfs of olde. Some even vote against their own best interest for those who would continue this belief that the select few at the top are Entitled to this grossly abhorrent over payment of Salary/Bonuses.

  • http://www.facebook.com/john.burke.98837 John Burke

    If everyone made $15. / hr, with advancement potential to $30. / hr, then we may see a ‘democracy’ that works for all. Of course the taxes would help the poor and disabled, as well as the elderly, and single payer health coverage … the doctors, lawyers and banker / financiers may be the ones who want more …

  • http://www.facebook.com/karen.l.bonner Karen L. Bonner

    I truly wish that our country was one where it valued all it’s workers but it does not. The poor (which includes the working poor) and the issues critical to basic survival are seen as an embarrassment and an impediment to real progress by certain elements of this nation. As long as people at the ‘top’ measure and judge those at the ‘bottom’ as being lazy and undeserving of improving their lot in life, the status quo will remain entrenched. Too many in this nation feel that all it takes to get ahead is hard work which is one of the greatest lies perpetuated in these times. I personally don’t know exactly what it would take in actual $ per hour to get so many Americans out of the ranks of the poor and working poor but I hope it happens soon before those at the lower end of the socioeconomic scale realize just how screwed they are and revolt en masse. If we value our society and nation, we MUST take care of all our citizens and having some sort of realistic minimum wage is essential. I think that most people WANT to work and to be able to be compensated justly for their work. Would those at the higher end of society be able to accomplish what they do without someone else doing their yardwork, housework, daycare, fast-food jobs etc? I wish that Congress, state governments and municipal governments would work together to adequately address this and many other issues

  • Brian Kilpatrick

    I think other minimum wage should be a financial balance between where it is now and what small businesses could absorb. MORE important to meis that it be indexed to inflation in the future so this argument does not become political every 4 years.

  • Anonymous

    $12 per hour is the least anyone should be paid. Maybe, MAYBE, if someone is just starting out in the workforce, you’d pay that person $10 per hour, but not for more than six weeks. After six weeks, $12 per hour is the least anyone should be paid.

  • Mary Alice Tanner

    We the people have to show our Congress that their bad behavior has consequences.. If that does not happen their partisan stupidity will continue.

  • http://www.facebook.com/H.GaryPope Gary Pope

    The group that is left out of this discussion are those teens and early twenties who are in the “underclass”, who represent the largest group of unemployed in this country. Their skills and experience may not even rise to the level of the minimum wage, so they are not considered by employers because they do not provide the work benefits, as least in the beginning of employment, of the minimum wage. A lower wage scale for them would allow employers to hire them economically. Once they have proven themselves, then they graduate to a “living wage”.

  • Lindi

    In 1982 Federal Minimum Wage was $3.35. Thirty years later it is $7.25 which is twice the 1982 amount plus .55 cents. This is ludicrous! No one can live on this and it is insulting to all of us that this government sanctioned tradition of underpaying American workers continues. This is just another device to keep the poor people poor in America.

  • Peter Rickman

    This is a topic very near and dear to me. I organize low-wage workers, on issue campaigns and for union recognition.

    ‘Minimum wage’ and ‘living wage,’ two issues on which I work extensively, are separate. This piece here conflates the two. The difference implies a distinction that has tremendous real-world impacts for low- to moderate-income people — and the sort of struggles that can be built by organizers like me to win higher wages for working class and poor people.

    The writer here should have consulted some of the activists, organizers and leaders who are involved in this work to draw out the topic further.

  • Rob

    If $12 an hour is good, then $20 an hour is better. Why not $100 an hour? How about $1,000? — that would put everyone in the top 10% tax bracket.

  • http://www.facebook.com/david.slater.167 David Slater

    what consequences? do you think these charlatans give a flying #$%$#$ about what you “think”?
    put guillotines in front of the doors of their offices to truly get their attention

  • http://www.facebook.com/david.slater.167 David Slater

    very insightful

  • Tiffany

    One of the things that bothers me the most is places like Walmart that pay their workers a minimum wage . . . and then those workers qualify for public assistance because they are living below the poverty line. And then, the owners of Walmart (and other corporations) make so much profit they take it offshore. Is that crazy or what? So we the tax payers are subsidizing the owners of Walmart . . . wow, what a scheme.

  • S.Kate

    It depends on whether the employers provide benefits and 401Ks. Some other factors need to be taken into account if the median rent for a two bedroom is over $900 a month it would be impossible for a minimum wage employee to survive. Geography is also a huge factor. I agree with Pollin, however many small businesses cannot afford to even pay one worker if the minimum wage gets any higher. WE need to scale back inflation not raise the bar to prices that employers can’t afford.

  • http://www.facebook.com/profile.php?id=100001862493106 Kristin Wolter

    The problem lies not within what a minimum living wage should be but rather with the fact that top earners in this country are who sets the standard of living. That, we as citizens of this country have created class warfare by believing that doctors and lawyers and CEOs lives are worth more than teachers, grocery clerks and farm laborers.

  • http://www.facebook.com/terry.mcmanus.7 Terry McManus

    What I find interesting is the American companies like Wal-Mart , Target etc. who want to come up here to Canada and pay a minimum wage that is 3 dollars per hour higher than in the USA …. and they still make money! That says to me that much of the profit of these big companies in the USA is being made on the backs and out of the pockets of the people who work for them. Then they give millions to the Republican party to keep the gravy train going.

    I can see a time when people get tired of talking about it.

  • http://www.facebook.com/terry.mcmanus.7 Terry McManus

    That is a great point John… but of course that would put some financial power in the hands of the middle class and the elite don’t want that. George Carlin said it best when he said that “the owners” don’t want you to have anymore. Now they are going after your Social Security!

  • Anonymous

    Personally I think teachers, grocery clerks and farm laborers contribute more to the country then highly overpaid CEOs.

  • Nan

    Fascinating information. Is the information regarding discrepency of wages documented somewhere?
    I have always felt that the electorate would be more interested in becoming better informed if they felt respected. One means for demonstrating respect is remuneration for work that is a fair living wage. If a small business can document that they can not afford to pay a living wage, why not supplement the wage instead of having one more unemployed person on welfare. It is absurd to expect a citizen to fully participate in their family and community and try to work at two or three part time jobs. Employment and continuing education allows the individual to respect themselves and those with whom they live and work. Imagine what an extraordinary nation we might be!

  • Anonymous

    I’m as liberal as they come, but I’ve never bought this line of argument. It is much more complex than points of decision about the “worth” of various professions in most cases. And the generalizations don’t hold. For example, lawyers in small solo practices or working for certain nonprofits DON’T make more money than unionized bus drivers, and some of the lawyers are paying thousands for private insurance policies.

  • Anonymous

  • Anonymous

    If you think you should be paid more, find a way to get somebody to pay you more, whether your current employer or somebody else. Almost anybody can make their job sound difficult and important, and most jobs do require skill, effort, and/or risk and create benefits for people; otherwise, why would anybody pay somebody else for doing that job?

    “…like any other entrepreneur, you struggle in the beginning and with luck and lots of hard work, your business prospers. Much more potential to make those big bucks than school bus drivers.” Yes, entrepreneurs can make more. They could also experience the failure of their business and lose everything they invested in it. Bigger upside, bigger downside. That path is available to anybody who is willing to take the risk; most people aren’t, so they don’t get the reward.

  • Anonymous

    No. The additional $3/hr is being paid by Canadian consumers. Walk into a Walmart in Canada and a Walmart in say Texas. Check the prices for similar items, and you will see who is paying.

    Look in the mirror. It is probably you.