Living Wage vs Minimum Wage


Difference Between Living Wage and Minimum Wage

If you are using living wage and minimum wage interchangeably, then you must know that it is not correct as these are two different measures of wage. The primary difference is the calculation criteria used in the determination of living wage and minimum wage. The living wage refers to the income level required to sustain a decent standard of living based on the family size and the location. On the other hand, the minimum wage refers to the income level authorized by the law that ensures that the employees are not pushed into poverty.


Key Summary

  • The criteria used for the calculation of the living wage is different than that of the minimum wage. While the living wage is determined based on factors like location, marital status, and no. of children, the minimum wage is decided on the basis of the overall economy.
  • There is no well-defined body for regulating the living wage. On the other hand, the minimum wage is decided by the federal and state/ local governments.
  • In the US, the living wage is adjusted to compensate for inflation, while the minimum wage has never changed since its inception in 2009.

What is a Living Wage?

The living wage is the amount of the least possible wage that is required to sustain the livelihood of a family. Effectively, the living wage is inflation-adjusted employee compensation and it differs based on the employee’s marital status, no. of children, debt position, location, etc. It may also include general benefits, such as overtime pay, health care, and other similar benefits. Although there is no federal law for the living wage, a large number of cities in the US have established their own law for the living wage. Policymakers and economists usually compare the living wage to the cost of living to ascertain the relative financial health of the employees.

What is the Minimum Wage?

The minimum wage is the lowest wage that an employer is legally required to pay to its employees. It is authorized by the federal government as per the Fair Labor Standards Act, state government, or local government. The federal minimum wage was established on 24th July 2009 at $7.25 per hour and since then it has never changed. Thus, a full-time employee who works around the year is eligible for a minimum pay of $15,080. However, the concept of the minimum wage has become futile over the period as it failed to keep pace with the ever-increasing cost of living, which has forced many workers to live below the poverty level. The state governments reserve the right to increase the minimum wage as compared to the federal minimum wage and all employers are supposed to pay the higher of the two – federal minimum wage or state/ local minimum wage.

Living Wage vs Minimum Wage Infographics

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Comparative Table – Living Wage vs Minimum Wage

Particulars   Living Wage   Minimum Wage
Criteria used for Calculation   It is calculated based on the cost of living, which is a function of housing, food, location, child care, transportation, health care and other necessities It is determined based on raises approved by the Congress, which is again dependent on the overall economic condition.
Regulation   There is no established governing body for living wage. It is governed by federal and state/ local governments.
Inflation Adjustment   It takes into account various cost-of-living considerations, which are already inflation-adjusted. It is not adjusted to compensate for the rising inflation.
Amount   The amount of living wage varies based on marital status, no. of children, debt position, location etc. The amount of minimum wage is the same across all the states in the US. Currently, the minimum wage is lower than the living wage in the US.

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