Our living wage rate for 2017 is $13.00/hr or $11.50/hr with employer provided health insurance. We re-figure our living wage rate every year and adjust according to the Universal Living Wage formula. This formula is based on Fair Market Rent as determined by HUD and adjusted using a four year average of the FMR to mitigate any volatile changes up or down. We adjust the wage rate if there is a 3% or greater change from the previous year.
In January 2015, Just Economics increased our living wage rate from $11.85 per hour to $12.50 per hour without employer provided health insurance and $11.00 with employer provided health insurance. The change in 2016 was not greater than 3% so the wage rate remained the same. In 2017, the wage increased to $13.00 and $11.50/hr with insurance. We adjust our wage rate based on the Universal Living Wage Formula which is directly related to the cost of housing. Our area saw a significant rise in the cost of housing that resulted in a notable increase in the Living Wage Rate in 2015 and 2017. As you can imagine, as costs rise for employees, the living wage must increase to keep pace with inflation and the real costs of getting by. Below describes a little bit about how living wages can be calculated, how we calculated ours, and how we arrived at our wage rate.
Any employers added to our list of Living Wage Certified Employers beginning in January 2017 will need to meet the new requirements, but employers previously on our list will be given a grace period during recertification to make the necessary adjustments.
Many living wage ordinances in other cities base their wage off a percentage of the federal poverty line. The Federal Poverty Guidelines do not take into account regional differences in costs of living and it can be difficult to determine which percentage to use as a standard. While we do not use this method, Durham (both in public policy and their voluntary certification program) uses a formula based on the FPL and their rate in 2015 was $12.53/hr (very similar to JE’s rate of $12.50).
Several organizations use the costs of basic needs in an area to determine a living wage. For example, the NC Justice Center calculates its Living Income Standards by estimating the local cost of seven main household expenses (food, housing, healthcare, transportation, childcare, taxes, and miscellaneous) for different family sizes. The results from this type of formula can vary drastically as demonstrated by the differences between the NC Justice Center’s Living Income Standards and the MIT Living Wage Calculator for counties in North Carolina. Just Economics elected not to use this method because we do not have the capacity to use sound but complicated methodology to determine these expenses annually and do not want to rely on a third party to determine our living wage.
This is the formula that JE uses. It is based on the idea that a person who works full-time (40 hours per week) should be able to afford a one bedroom apartment and their other expenses. According to the US Department of Housing and Urban Development (HUD), no more than 30% of a person’s gross income should be spent on housing. The Universal Living Wage Formula is based on local cost of housing according to HUD’s Fair Market Rents (FMR). We chose this formula because it is straightforward, easy to calculate, and reflects local needs.
Just Economics was very intentional about keeping our wage rate tied to housing (based on the federally calculated FMR), as affordable housing is a major concern in our area. JE bases our living wage off of a four year average of the FMR, because the FMR can be volatile. We studied how wage rate changes would be impacted by annually using a four year average of the Fair Market Rent as a base. An average smooths out volatile changes while still being responsive to increases in the cost of living.