February 12, 2005

Economic Justice: Earning a fair living wage

This has always seemed so simple to me – living wages. Call it a living wage, fair-housing wage, or just the regular old minimum wage, but whatever it’s called I believe people deserve to be paid enough to afford decent housing, food, clothing, and so on. And the current minimum wage doesn’t even come close to that.

What is a living wage? It’s the hourly wage, based on a 40 hour work week, that a person is to be paid so as to afford decent housing. There are various formulae for determining that hourly wage, but here’s one that I like and is easy enough to understand. I simplified it a bit:

HUD fair market rent / 0.30 / 170 = Living Wage Hourly Rate

The Housing and Urban Development agency (HUD) recommends people spend at most 30% of their gross income on housing, which is where we get the 0.30 factor. And on average, there are about 170 working hours in each month. The fair market rates are available from HUD.

In my area of the country (Hamilton County, Ohio) the living wage for a single person comes to $9/hr. In the rural Kansas county I grew up in, the living wage is $5.57/hr. I ran the numbers for all the counties (hey, I have an MBA, I do these things) and the minimum living wage came to $4.22/hr in Clay County, KY and the maximum was $20.10/hr in the Boston metro area, for a single person.

The Federal minimum wage is $5.15/hr – only 60 of the 3,266 counties listed had a living wage that was under $5.15/hr. Some states and local governments have minimum wages higher than what is set at the Federal level. And, there are a variety of housing subsidies that may be used in certain situations.

There are two reasons to pay higher wages. First, from a Catholic social justice perspective, it is an offense against human dignity for people to work full-time and not have enough money to live a decent life. It’s unjust and suggests some level of manipulation or being taken advantage of.

The second reason is both social and economic – it would be good for businesses, the economy and society. I’ll explain my arguments for that in my next posting.