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A certain amusement about living wage calculations

Summary:
The Guardian tells us that the “living wage” for West Virginia is an hour or so. This is ludicrous:Despite Manchin’s insistence on an minimum wage, according to MIT’s living wage calculator, even a minimum wage would only provide a living wage for single West Virginians without children. For a West Virginia family with two working parents and two children, both parents would need to be making at least .14 an hour to make ends meet.That’s ,782.40 per year for that household of four people, 2 adults and 2 children. The calculation runs:The living wage model is an alternative measure of basic needs. It is a market-based approach that draws upon geographically specific expenditure data related to a family's likely minimum food, childcare, health insurance, housing,

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The Guardian tells us that the “living wage” for West Virginia is $20 an hour or so. This is ludicrous:

Despite Manchin’s insistence on an $11 minimum wage, according to MIT’s living wage calculator, even a $15 minimum wage would only provide a living wage for single West Virginians without children. For a West Virginia family with two working parents and two children, both parents would need to be making at least $20.14 an hour to make ends meet.

That’s $83,782.40 per year for that household of four people, 2 adults and 2 children. The calculation runs:

The living wage model is an alternative measure of basic needs. It is a market-based approach that draws upon geographically specific expenditure data related to a family's likely minimum food, childcare, health insurance, housing, transportation, and other necessities (e.g., clothing, personal care items, etc.) costs. The living wage draws on these cost elements and the rough effects of income and payroll taxes to determine the minimum employment earnings necessary to meet a family's basic needs while also maintaining self-sufficiency.

The living wage model exceeds the poverty level as measured by the poverty thresholds, but it is a modest 'step up,' which accounts for individual and family needs. The living wage model does not include funds for what the public considers the necessities enjoyed by many Americans. It does not incorporate funds for pre-prepared meals or those eaten in restaurants. It does not contain money for leisure time or unpaid vacations or holidays.

Lastly, it does not provide a financial means for planning for the future through savings and investment or for the purchase of capital assets (e.g., provisions for retirement or home purchases). The living wage is the minimum income standard that, if met, draws a fine line between the financial independence of the working poor and the need to seek out public assistance or suffer consistent and severe housing and food insecurity. 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.

The median household income for the US is $68,703 per year. West Virginia is by no means the most expensive state - given property prices it’s pretty cheap in comparison with many others.

That is, this calculation of “a minimum wage covering necessary costs for persons living in the United States” is insane. Good grief, that’s within the top 5% of all global incomes. The idea that 5% of the global population - the US population is about that - should all be in the top 5% of the global income distribution is taking American exceptionalism a step or three too far.

Even the people proposing this as the “minimum income” don’t believe it. For if they did they’d be demanding the stripping away of every rule, regulation and tax that weighs even slightly upon economic growth. For that would be the only way of achieving the desired goal. And, obviously, our friends on the left do not advocate such policies - or lack of them.

The idea of a living wage, as with Adam Smith and the linen shirt, is fine but every calculation of the desired world does require that occasional look out the window at reality. Calling $80k a year the minimum necessary income takes us well beyond Lake Wobegon territory.

It’s even possible to do a small error check. That $83,000 is about £59,000. What portion of The Guardian’s staff is paid that much even in London, a much more expensive place to live? Is The Guardian castigating itself for paying poverty wages? Well then….

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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