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.
Table of contents
- 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 wageLiving WageThe Living Wage is the money that a worker must earn to meet their basic needs by society's standards. The living wage is not the same as a minimum wage which is the lowest income that the law guarantees to lead a life out of poverty. 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, debtDebtDebt is the practice of borrowing a tangible item, primarily money by an individual, business, or government, from another person, financial institution, or state. 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 livingCost Of LivingCost of Living Calculator is meant to compare the cost of the goods or, in other words, the expenses an average individual will expect to incur to acquire shelter, food, transportation, healthcare, energy, education, clothing, entertainment, and childcare in various regions., 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.
Now you can Master Financial Modeling with Wallstreetmojo’s premium courses at special prices
Best Financial Modeling Courses by Wallstreetmojo
Financial Modeling Course
* 12+ Hours of Video
Financial Modeling & Valuation
* 25+ Hours of Video
* Certificate of Completion
* 12+ Hours of Video
Living Wage vs Minimum Wage Infographics
Reading time: 90 seconds
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 Congress, which depends on the overall economic condition.|
|Regulation||There is no established governing body for a living wage.||Federal and state/ local governments govern it.|
|Inflation Adjustment||It considers 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 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.|
This article is a guide to the Living Wage vs Minimum Wage. Here, we discuss the top differences and similarities between the two with infographics. You may also have a look at the following useful articles: –