Business Math Series: Paying Employees a Living Wage

With all the talk about Obama raising the Federal minimum wage to $10.10 per hour, business owners are thinking about living wages and how to ensure that they are paying their employees enough money to satisfy their basic needs, whether or not the democrat’s bill goes through.

Coming up with a blanket “living wage” might be a good start for helping lift millions of Americans out of poverty, but I think it’s worth noting that a living wage is personal and will vary. For any given person a living wage will be different. For someone with children, obviously, the living wage would be slightly higher than for someone with no children. And a single mother will have a higher living wage requirement than a married mother. For a person who lives in an expensive location like San Francisco the living wage will be higher than for someone who lives in rural Kansas. Anyone with health problems will require a slightly higher wage to pay for doctors visits and prescriptions.

These wage differences do not change the living standards for individuals with greater need, and paying one person more than another isn’t necessarily favortism. In order for the employee to be healthy, wages must cover their basic needs.

Business owners can determine fair “living wages” for employees based on their location, health, and family size. There are always other factors that drain funds such as emergencies and care for relatives and, while these factors do influence our monetary needs, they are probably beyond the scope of most most boss’ concern. But it is reasonable for an employer to consider her employee’s wages based on a few of the most influencing factors like location, health, and children.

An employer can consider rent prices in the area, day care costs, and prices of food. The employee’s wage could be increased slightly with regard to these factors. Talk to your employees and find out more about their situations. Then, wherever in the country you are, adjust the minimum wage accordingly.

You can see the income limits for poverty lines based on family size on the Federal Poverty Guidelines page. This might be helpful when determining wages for single parents.

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