Below is a graph prepared by the Secretary of Public Welfare for the State of Pennsylvania. It was designed to show how government financial aid is uneven along the earned income continuum producing illogical "welfare cliffs". However, the graph also reveals the great extent to which working families need government assistance to bridge the gap between what they make and what they need. The entire area to the left of earned income represents the gap between living wage compensation and what families actually earn.
Some examples here might be useful. First, consider a case where a Pennsylvania company hires a single mom and pays her the federal minimum wage, $7.25 per hour. Working 40 hours per week, 52 weeks per year, she would gross approximate $15,000 per year. Subtract income taxes and payroll taxes and she would clear about $13,000 per year. Using the Welfare Benefits and Wages graph above we see she would require an additional $42,000 per year in government subsidy to meet her families basic needs.
The only reason her employer can pay her minimum wage and count on her coming to work every day is because so much tax money is spent to supplement her wages. If there were no aid to the working poor her employer would have little choice but to pay this woman a living wage. In this sense, all government aid to the working poor is really a hidden tax break for businesses.
For another example, consider a family of four living in Harrisburg, PA, making a living wage. Using the Living Wage Calculator we find that the living wage in Harrisburg is approximately $51,000 per year. This corresponds to about $24 per hours (more than 3 times the minimum wage). Subtract payroll and income taxes from the living wage and this family's net income is around $38,000 per year. Using the PA Welfare Benefits and Wages graph above it appears that this family might still need some assistance paying for child care if both parents worked, and possibly for health care as well. However, if increases in hourly compensation had kept pace with hourly productivity over the last forty years this same family would be earning more than $100,000 per year. They would be contributing to state and federal revenue rather than being a drain on tax revenue.
If wages had doubled since 1977 (productivity rose 1.5 times) median family wages would be closer to $48 per hour and as many as 50 million American's who now receive subsidy would instead be contributing to federal revenues. It is about time we began pressing the case for passing a living wage law.
Below you will find a living wage calculator. Developed by Dr. Amy K. Glasmeier and Pennsylvania State University, the calculator estimates the hourly wages a person needs to meet their basic human needs. The calculator estimates living wages for each state or county, and many municipalities, in the United States. Check out what a living wage looks like near you.
Introduction to the Living Wage Calculator
In many American communities, families working in low-wage jobs make insufficient income to live locally given the local cost of living. Recently, in a number of high-cost communities, community organizers and citizens have successfully argued that the prevailing wage offered by the public sector and key businesses should reflect a wage rate required to meet minimum standards of living. Therefore we have developed a living wage calculator to estimate the cost of living in your community or region. The calculator lists typical expenses, the living wage and typical wages for the selected location.