What is a Living Wage?
I define a living wage as one that allows a person working approximately 40 hours a week to have enough income to pay for housing, food, and clothing. Ideally, the person would also have enough funds to pay for health care and save some money.
Talking about a living wage on a national scale is tough. The cost of living, prevailing wages, and the type and number of jobs available vary greatly from state to state, city to city, and urban to rural. Nationwide there has been a push for a $15 an hour minimum wage and several states and cities have passed laws requiring this rate. In some areas, $15 an hour and 40 hours a week would pay enough for a person to meet the basic needs of food, housing, and clothing. Unfortunately, in many of the high-cost regions of the U.S., $15 an hour and 40 hours would still not be enough to provide a living wage.
A person earning $15 an hour and working 40 hours a week would earn $600 a week and $31,200 annually before any deductions. In the New York metro area, a single person can expect to pay on average $1500 a month for housing. This is more than half of the monthly earnings. This is extremely unaffordable when compared with the average housing cost of $585 in Little Rock, AR. Housing has become unaffordable in many cities. People cannot afford to live near where they work. There are several businesses that have cost of living calculators on their websites. Using these can help compare the true cost of living in one location or another. Here are two you might want to check out.
Cost of Living Calculators
Family Budget Calculator
EV Tax Credit
From 2010-2018 a person purchasing a Tesla electric vehicle would receive a federal tax credit of $7500. Beginning in 2019 the credit will be reduced to $3750. Tesla currently offers 5 models with prices ranging from $36,200 for a model 3 to $200,000 for the Roadster. See the complete lineup and prices at Car and Driver.
Much like the Mortgage Interest tax deduction, these programs benefit wealthy buyers the most. This report on Tesla buyer demographics by Hedges and Company notes that the average income of Tesla Model X buyers is $143,177. The Model X price starts at $88,000. Tesla buyers are also more likely to own a new home. Tesla’s Model 3, priced at $36,200 is supposed to help the company attract buyers with more modest income levels.
In many areas of the country, there is a shortage of public transit and a vehicle is often a necessity for working people. Maybe it is time for a tax credit for low-income workers that would allow them to purchase reliable transportation.
The Employer as Provider
Several recent news articles have pointed out that a large number of Americans have no money saved for retirement. An article on cnbc.com cites data from a new report by the U.S. Government Accountability Office revealing that 48% of American households over the age of 55 have no retirement savings. Many people rely on Employer-sponsored retirement programs such as a 401k to build retirement savings. The many workers who find themselves working for companies that do not match retirement contributions are on there own to save for retirement. The recession of 2008 forced many to use retirement funds to survive the economic downturn that left so many without work. The net wealth of the average American declined significantly in the years following the recession.
This 2017 article from The Motley Fool cites Census Bureau data indicating that only 32% of Americans are saving money for retirement in an employer-sponsored 401k. The article also states that only 14% of employers offer a 401k.
People with full-time jobs at employers who offer good benefits such as a 401k plan are in the best position to be prepared for retirement. The employer has become the provider for retirement savings and health insurance. For those who work in the gig economy or for employers with no 401k, saving for retirement is a challenge.
It is no wonder that many people are stressed about funding retirement. Skyrocketing health care and housing costs combined with little savings is going to make life difficult for many older Americans. It is time for these benefits to become portable and to make sure that every American has the opportunity to save for retirement.