Living Wage vs Minimum Wage

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Difference Between Living Wage and Minimum Wage

If you use living wage and minimum wage interchangeably, you must know it is incorrect as these are two different wage measures. The primary difference is the calculation criteria used to determine living and minimum wages. 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.

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  • The criteria used to calculate the living wage differ from the minimum wage. While the living wage is determined based on location, marital status, and no. of children, the minimum wage is decided based on the overall economy.
  • There is no well-defined body for regulating the living wage. On the other hand, the minimum wage is determined by the federal and state/ local governments.
  • The living wage is adjusted to compensate for inflation in the U.S., while the minimum wage has never changed since 2009.

What is a Living Wage?

The living wage is the amount of the least possible wage required to sustain a family's livelihood. Effectively, the living wage is inflation-adjusted employee compensation. It differs based on the employee's marital status, no. of children, debt position, location, etc. It may also include public benefits, such as overtime pay, health care, and similar perks. Although there is no federal law for the living wage, many cities in the U.S. have established their 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 legally requires to pay its employees. The federal government authorizes it as per the Fair Labor Standards Act, state government, or local government. On 24th July 2009, at $7.25 per hour, they established the federal minimum wage. 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 forced many workers to live below the poverty level. The state governments reserve the right to increase the minimum wage compared to the federal minimum wage. All employers should 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

ParticularsLiving WageMinimum Wage
Criteria used for CalculationIt 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 Congress, which depends on the overall economic condition.
RegulationThere is no established governing body for a living wage.Federal and state/ local governments govern it.
Inflation AdjustmentIt considers various cost-of-living considerations, which are already inflation-adjusted.It is not adjusted to compensate for the rising inflation.
AmountThe amount of living wage varies based on marital status, no. of children, debt position, location, etc.The minimum wage amount is the same across all the states in the U.S. Currently; the minimum wage is lower than the living wage in the U.S.