One day in late 2021, the MIT economic geographer Amy Glasmeier, who runs a highly influential “living wage calculator,” received an exasperated email from a woman named Mary in New Mexico. Glasmeier’s calculator generates a living wage based on the number of children and working adults in a household, using county- and state-level data on the cost of housing, childcare, transportation, out-of-pocket health care costs, food, and other typical expenses (such as cleaning products). Citing her own life and circumstances, Mary told Glasmeier that her calculations were “wrong, wrong, wrong.” (In early 2023, Glasmeier’s calculator estimated a living wage for one adult with no children living in Albuquerque at $15.97 an hour.)
Mary noted that most people did not live in the parts of cities where housing was as cheap as the calculator’s estimates. She also said that groceries cost hundreds of dollars more than the calculator budgeted for food. (The calculator estimates the annual cost of food for a single adult in Albuquerque at $4,686, or $12.84 per day.) “Therefore,” Mary concluded, “I believe that your survey for other states is just as inaccurate as New Mexico.” If Mary is right, Glasmeier’s “living wage calculator” has a profoundly misleading name.
Mary is not a lone critic. Every month, Glasmeier told me, she receives similar emails from people across America making the same point: they can’t afford to live on her estimate of a living wage. In fact, Glasmeier thinks her critics may be right. She agrees that the wages of millions of Americans, even those who work full-time and earn a so-called living wage, are inadequate to cover the basic costs of life.
After receiving critiques from workers for more than a decade, Glasmeier recently changed some assumptions behind her calculator. In 2021, she included the cost of broadband and cell phone service, incorporated more data on childcare costs for all 3,142 counties in America, and added a “civic engagement” category that includes the costs of things like recreation activities, pets, some cultural pastimes, and children’s sports teams.
Defining a living wage is a double challenge. There’s the moral and political task of deciding what constitutes living and the empirical question of how much this actually costs in America or around the world.
Glasmeier’s tool still makes no provision for eating in a restaurant, buying gifts for loved ones, repaying loans, saving for retirement or unexpected expenses, or taking a vacation, however brief. This is not to mention the absence of any savings to buy a home or afford higher education for children. By adopting the term living, Glasmeier and the companies she advises are presenting a misleading picture of the meager life these wages provide.
This is a useful misunderstanding for companies that want to claim the moral credit for paying living wages without having their consumers think too closely about the details. The MIT Living Wage Calculator effectively hands companies a tool on a silver platter—one engraved with the letters MIT, so to speak—that lets them pay people inadequately while appearing generous.
Defining a living wage is a double challenge. There’s the moral and political task of deciding what constitutes living and the empirical question of how much this actually costs in America or around the world. The empirical question presupposes political and ethical judgments about what living involves. Should people earning a living wage be able to buy a home? Pay for health care? Eat dessert or go to restaurants? Should their children have a separate bedroom? A living wage calculator is not like any other sort of calculator.
America’s federal minimum wage of $7.25 an hour remains unchanged, but an increasing number of employers, workers, and consumers regard such low wages as unacceptable. Some three dozen places in America—many in California—already have mandatory minimum wages of at least $15 an hour. But a living wage is always relative to two factors: our definition of living and what it costs to afford such a life. Campaigns like the “fight for 15,” while catchy as slogans, risk being outpaced by moral progress, not to mention inflation. Even with very minimal definitions of living, companies would have to pay at least $50 per hour in a growing number of American cities and regions to let workers afford healthy food, safe housing, transportation, health care, and occasional rest and relaxation.
What many now call the living wage is better defined as a minimum wage.
The vagueness of the term living is both a blessing and a curse. It allows the concept to expand as moral and material circumstances change: cell phones, for instance, were not widespread before the early 2000s but are now ubiquitous. But corporations also abuse the concept to justify inaction. McDonald’s CEO Chris Kempczinski told a journalist in 2021, “Our people deserve to be paid well. . . . The question is what is the living wage? Is there one living wage? Is it a different living wage depending on where you are? Those are all complicated and important questions.” Complicated questions—like the rate at which climate is changing in different regions and how we should adapt to these changes—can still have better and worse answers.
A good place to look for a more generous and humane definition of a living wage is American history. The labor leader Samuel Gompers argued in 1898 that a living wage should be “sufficient to maintain an average-sized family in a manner consistent with whatever the contemporary local civilization recognizes as indispensable to physical and mental health or as required by the rational self-respect of human beings.” For anyone alarmed by the direction that our “contemporary local civilization” is trending, it’s worth asking whether all of our fellow citizens have access to jobs that pay what “the rational self-respect of human beings” requires.
Calculations by economist Robert Pollin show that the U.S. minimum wage peaked in 1968, more than half a century ago. In 2021 dollars, adjusting for inflation, the federal minimum wage in 1968 was worth $11.90, 64 percent more than today’s $7.25. To underscore the stagnation of wages, Pollin offers a provocative hypothetical. Imagine that wages every year since 1968 had increased in proportion to economic productivity. If they had risen in lockstep with America’s 1.9 percent average annual growth in productivity as well as with inflation, the federal minimum wage in 2021 would have been $31.67 an hour—over four times the actual figure.
The decline in real wages for American workers does not reflect their low productivity so much as the increasing concentration of wealth within companies. Between 1979 and 2000, worker productivity in America rose 61.8 percent while hourly pay increased only 17.5 percent. Those gains from extra productivity have enriched those at the top of the economic pyramid. In 1965, the average top chief executive made 21 times as much as a typical worker in America. In 2020, the ratio was 351 to 1. Many executives could still be very wealthy while also paying their workers much better.
Surviving on today’s federal minimum wage would require literally superhuman capacities. Glasmeier’s team calculated that a typical American single parent of two children earning $7.25 per hour would need to work 138 hours per week to earn her living wage standard. Even with two working adults earning federal minimum wage, each would need to work 75 hours a week to make the living wage (an annual total of $68,808).
The living wage calculator makes no provision for eating in a restaurant, buying gifts for loved ones, repaying loans, saving for retirement, or taking a vacation.
Glasmeier’s definition of a living wage, as she admits, is not adequate to support a decent life. The introduction to her calculator acknowledges that “the living wage model does not include funds for what the public considers the necessities enjoyed by many Americans.” She even proposes changing the name: “In light of this fact, the living wage is perhaps better defined as a minimum wage covering necessary costs for persons living in the United States.” This is a striking admission: what many now call the living wage is better defined as a minimum wage.
Reasonable people can disagree on what sort of life a living wage should make possible. But if it feels wrong that the person who cares for your children or delivers your packages is not paid enough to go out to dinner once a month, save anything for retirement, or take a vacation, then a living wage should include more than Glasmeier’s current categories. To deserve its name, the living wage needs a dramatic expansion.
There is already an astonishingly large gap between many starting salaries and Glasmeier’s living wage figures across America. For a single working parent of one child in Santa Clara County, California, Glasmeier’s calculator generated in 2023 a living hourly wage of $53.03. The actual average salary for a janitor in Santa Clara County was $16.98. A McDonald’s employee in the same region reported a salary of $14.90 an hour.
The Bay Area is famously expensive, but the discrepancy between living and actual wages is still stark in areas with more reasonable costs of living. For a single parent of one child in Kansas City, for instance, a living hourly wage in 2023 was $33.96. The average hourly wage for retail work in Kansas City was about $14.36. These figures show the inadequacy of a campaign for a $15 minimum wage; in many expensive coastal cities in America, a more realistic figure in 2023 would be a $50 minimum wage.
If it feels wrong that the person who cares for your children is not paid enough to go out to dinner once a month, save anything for retirement, or take a vacation, then a living wage should include more than Glasmeier’s current categories.
The Living Wage Calculator has been extremely influential. Glasmeier told me that companies with hundreds of thousands of workers use her tool to guide their wage setting. She said that she has hundreds of thousands of visitors to the site per month. It’s consistently one of the first results for any search of the term living wage and has been for years. It’s influential in nonprofit and policy circles and has helped shape the campaigns run by think tanks and nonprofits like the Brookings Institution and JUST Capital. IKEA and Patagonia are just two of the many companies that acknowledge using the calculator. It’s not much of an exaggeration to say that Glasmeier’s categories have defined the meaning of a living wage in contemporary America.
Surrendering so much influence to one person is deeply undemocratic. Did the meaning of the term living suddenly change in 2021 when a single economist decided to adjust the categories in her calculator? If Glasmeier had decided not to include any budget for civic engagement, would it be acceptable for the children of working Americans never to be able to join a sports team, go to the movies, or attend a summer camp? Conversely, how might recent history have changed if long before 2021—the tool was created in 2003—she had made her definition of a living wage more capacious, and major employers had followed her advice?
More broadly, what might America be like today if Congress in the late 1960s had adopted Pollin’s reasonable suggestion of pegging the minimum wage to increases in inflation and annual productivity? Indeed, how did so many politicians, economists, business leaders, and citizens come to believe it was morally acceptable to pay workers less than what it costs to lead even a highly impoverished life?
Excerpted from The Alternative: How to Build a Just Economy by Nick Romeo. Published by PublicAffairs. Copyright © 2024 by Nick Romeo. All rights reserved.
