PERCENT OF HOUSEHOLDS EARNING BELOW A LIVING WAGE

June 4, 2019

The federal definition of poverty, first created in 1964, was based on data that indicated family food costs were about one-third of a family’s budget. The federal government estimated the cost of a nutritionally adequate diet in 1964 and multiplied that by three to come up with a minimum family budget. Housing costs have risen much faster than food costs since 1964. Moreover, poverty rate calculations are not adjusted for differences in standards of living in different parts of the country. Neither does the official poverty rate take into consideration non-cash government aid, such as Medicaid or housing subsidies. Several experts have worked to develop an alternative measure to identify families above the Federal Poverty Level who still do not earn enough to meet their most basic needs. Examples include United Way’s ALICE (Asset Limited, Income Constrained, Employed) report and Massachusetts Institute of Technology’s (MIT) living wage calculator. Notably, ALICE and MIT’s living wage thresholds do include childcare and health care costs, which are determining factors in many adults’ ability to work. Both thresholds are still conservative because they do not factor in the need to save for retirement and higher education.^[i]