Facts & Figures

Frequently Asked Questions

Last updated 2/7/07

 

Basic Livable Wage Questions

1. What is a livable wage?
2. How much is a livable wage?
3. Who uses the livable wage figures? Does anyone?
4. How many Vermonters don't earn a livable wage?
5. Do women in Vermont make less than men?
6. I heard on the national level people of color make less than whites. Is that true in Vermont?
7. How do people not earning a livable wage get by?

Minimum Wage Questions

8. What is the minimum wage in Vermont?
9. Are there other states with higher minimum wages?
10. What is a COLA?
11. Isn't it mostly just young people starting out who aren't earning livable wages?
12. I never thought the minimum wage was supposed to be a livable wage.
13. Increasing the minimum wage will be good for businesses.
14. Plus, it's fair.
15. Increasing the minimum wage will be good for taxpayers.
16. Won't increasing the minimum wage make it harder for Vermont businesses to compete with New Hampshire and other border states?

What about the Economy and the "Impact'?

17. Won't increasing the minimum wage lead to inflation with prices going up and mean that people end up no better off than before?
18. If wages go up, won't businesses just leave Vermont and go elsewhere?
19. If the minimum wage is increased, couldn't that lead to businesses having to fire workers in order to pay those that are left more? And if employers have to pay more, won't they just hire less people, meaning that more people will be unemployed?

The Issues of Fairness from Workers' and Business' Perspectives:

20. But are people earning low wages really worth it? Isn't the problem really that they aren't skilled enough to be worth living wages?
21. But do all Vermonters deserve a livable wage?
22. But why do we have to require businesses to pay a livable wage? What about the business argument that a free market, increasing worker productivity, and minimal regulation are the best way to a strong economy with livable wages for all?
23. Aren't there some businesses out there that would like to pay living wages, but really can't?

The Big Picture: How Not Paying a Livable Wage Impacts ALL of Us:

24. How does not earning livable wages affect Vermonters?
25. Taxpayers Are Subsidizing Businesses That Don't Pay Livable Wages.
26. If not now, when?

What is a livable wage?
A livable wage is the hourly wage or annual income sufficient to meet a family's basic needs plus all applicable Federal and State taxes. Basic needs include food, housing, child care, transportation, health care, clothing, household and personal expenses, insurance, and 5% savings.

How much is a livable wage?
Because a livable wage is based on family size, these is no one livable wage number. Since 2001, the State of Vermont Joint Fiscal Office (JFO) has estimated the cost of basic needs and the equivalent livable wage, based on methodology first developed in Phase 1 of the VT Job Gap Study and expanded by a 1999 Special Legislative Committee.  As part of Act 59 ö passed during the 2005 VT Legislative Session ö JFO updates these calculations every odd numbered year on or before January 15^th.  The report  will be updated during the interim year to reflect any significant economic, policy or statutory changes that impact the information within the report. Read the current JFO report.

The Vermont Livable Wage Campaign uses the average between the urban and rural figures.

*HH = Household

2007 LW Source:  Basic Needs Report 2007. Vermont Joint Fiscal Office, March 2007 Revised Study.
http://www.leg.state.vt.us/jfo/Reports%20by%20Subject.htm#Livable%20Income/Basic%20Needs

Note:  The JFO assumes the employer pays 84% of health insurance premium for single persons and 73% for families' premium costs.  Without health insurance, workers must pay these costs out of pocket and the livable wage increases by $2 to 6/ hour.

Who uses the livable wage figures? Does anyone?
Many Vermont businesses, employers, non-profits, public service organizations and local governments use the livable wage calculations every year. Data collected by the JFO sets a standard wage for employers and the state to help businesses set fair and adequate compensation levels. The livable wage data also provides a guideline for non-profits and public service organizations when conducting community needs assessments. Many more organizations use the livable wage figures to set various policies including scholarship qualifying criteria for students and Vermont families. Moreover, the State of Vermont is leading the country in providing a needed alternative economic indicator which reflects Vermontersâ basic needs compared to the antiquated federal poverty measure÷an unrealistically low indicator of poverty.

How many Vermonters don't earn a livable wage?
According to information from the Vermont Department of Employment and Training, 45% of jobs in Vermont have a median wage that pays less than $11.58/hr ($24,086/yr.), the livable wage for a single person in 2003.  [Note: This figure does not include tipped employees such as waitresses/waiters and bartenders.]

The Peace & Justice Center recently released Phase 8 of the Vermont Job Gap Study. The Study revealed that one out of four full-time workers (26%) earned less than a livable wage for a single person ($24,086/yr) in 2003. Moreover, 29% of single people, 72% of single parents with one child, 82% of single parents with two children, 55% of families of four with one wage earner and 35% of families of four with two wage earners do NOT make a livable wage based on their family size here in Vermont. See above for the six different livable wage figures based on family sizes as calculated by the Joint Fiscal Office.

Also, the reality for women and people of color is even more stark. Thirty-five percent of women compared to nineteen percent of men did not earn a livable wage in Vermont. For people of color there is a similar disparity. Thirty-six percent of people of color compared to twenty-four percent of whites did not earn a livable wage for single person.

Do women in Vermont make less than men?
In terms of poverty, almost one-third (31%) of all families headed by a single woman with children under 18 are in poverty (The Vermont Job Gap Study- Phase 8). More than one-third of ALL women who worked full time in 1999 did not earn a livable wage for a single person. Thirty-five percent of women compared to nineteen percent of men did not earn a livable wage in Vermont.

I heard on the national level people of color make less than whites. Is that true in Vermont?
According to phase 8 of the Vermont Job Gap Study, the unemployment rate for non-whites was more than twice that of whites. More than one out of five Blacks and North American Natives were in poverty in 1999 (phase 8). Thirty-six percent of people of color compared to twenty-four percent of whites did not earn a livable wage for single person. White median household income was 51% higher than that of Native Peoples in 1999 and 30% higher than Black households.

How do people not earning a livable wage get by?
Many people don't make up the difference and do without basic necessities. (For example, over 60,000 Vermonters have no health care.) Others rely on public assistance programs like food stamps, the Low Income Heat Assistance Program, Temporary Aid to Needy Families (TANF), and Medicaid. Some of us live in substandard housing, or pay a large percentage of our income for housing. People receive help from family members, work two jobs, barter, or work under the table. More and more people depend on credit, which then means that meeting payments becomes more and more difficult. The total effect of this picture is that many Vermonters lack basic economic security, depend on state and federal public assistance programs and face a declining standard of living.

What is the minimum wage in Vermont?
Currently the minimum wage in Vermont is $7.53 an hour ($15,662 /yr. (2007)). In the future, it will increase every Jan 1st based on a cost-of-living adjustment (COLA) using the national CPI-U (Consumer Price Index-Urban) figure.  Nationally, the minimum wage is $5.15 an hour ($10,712 /yr.). The minimum wage is important even to those earning considerably above it. Because the minimum wage sets a limit on how low wages can go for most people, it also sets the starting point for where wages move up from. Since the minimum wage is so low, it helps keep wages in general lower -even for those of us earning in the $8 to $9 an hour range. If the wage had just kept pace with inflation since 1969 when it was a $1.60 an hour, minimum wage would be $8.00 an hour in 2005.  However, because it has not, the extremely low minimum wage is helping to pull wages down for everyone.

Are there other states with higher minimum wages?
Yes. Several states have higher minimum wages than Vermont. Vermont's rate is the fourth highest rate in the country as of January 2007. Many state legislatures are currently debating increases to their state minimum wage rates. For the most up to date list of state rates go to: http://www.dol.gov/esa/minwage/america.htm

What is a COLA?
A cost of living adjustment (COLA) is a tool used to increase wages based on inflation. The Consumer Price Index (CPI) is used to adjust dollar values for inflation. There are several ways to calculate a COLA for the minimum wage rate. Some states, such as Washington, base their COLA for the minimum wage rate on changes in the Consumer Price Index for Union Wage Earners and Clerical Workers (CPI-W). In other cases, such as the Federal Poverty Measure, an alternative CPI is used to calculate annual increases. There are currently minimum wage COLA's in Vermont, Oregon, Washington, and Florida.

Isn't it mostly just young people starting out who aren't earning livable wages?
This is a favorite argument of businesses- the only people earning the minimum wages or low wage in general are teenagers living with their parents. But it just isn't true. According to the phase 8 of the Vermont Job Gap study, Sixty-one percent (61%) of all year round full time workers in Vermont who earned less than $15,000 ($7.20/hr) in 1999 were over 29 years old. Over 10,000 full time workers over 29 earned less than $15,000 per year.

I never thought the minimum wage was supposed to be a livable wage.
When originally passed as part of the Fair Labor Standards Act in 1937, the minimum wage was supposed to be enough for one working parent to support a family of four. President Franklin Delano Roosevelt declared, "No business which depends for its existence on paying less than living wages to its workers has any right to continue in this country. By living wages I mean more than a bare subsistence level-I mean the wages of decent living."

Won't increasing the minimum wage lead to inflation with prices going up and mean that people end up no better off than before?
There is no good evidence one way or the other that increasing the minimum wage will lead to increase inflation. There are examples over the last thirty years when wage hikes did not spur inflation and other times when inflation occurred with no wage hikes.

In any event, what does it tell us that we are always hearing from politicians, business organizations and the media about the possible inflationary effects of increasing wages at the low end of pay scale but no concern is mentioned about the effects of the enormous concentration of wealth by the richest Americans, or the obscene speed at which pay for corporate executives is increasing.

The average annual compensation of a CEO of a large company in 1998 was $10.6 million, 419 times what the average worker makes, according to the organization United for a Fair Economy. That ratio has risen from 49 times to 1 in 1980. Had workers' pay risen at the same rate, the average worker would earn $110,000 today, not the $29,000 that an average worker makes. Had the minimum wage increased at the same rate as CEO pay, it would be $22.08 today, according to the Institute for Policy Studies. (Washington Post, 8/30/99)

The bottom line is that inflation is constantly on the rise, whether workers get a wage increase or not. Blaming inflation on those who make the least is nothing short of shameless. Since the last time the minimum wage was raised nationally in 1996 the economy has created 3.9 million new jobs and inflation has fallen from 2.7% to 1.9%--its lowest level in a generation. According to John Schmitt, an economist with the Economic Policy Institute in Washington, D.C., "The fact is that we have seen and will continue to experience price increases in cities and nationwide that have little or nothing to do with the minimum wage. In reality, proposed efforts to raise the wages of America's lowest paid workers will help wages catch up with price increases that are happening independent of wage fluctuation."

If wages go up, won't businesses just leave Vermont and go elsewhere?
In general, this is not a big concern. Interestingly, even some business groups are beginning to recognize that wages must go up. One member of the Central Vermont Chamber of Commerce recently said, "From our view point, the economy is not doing well in Central Vermont. We need to raise the wage structure in the area." (Times-Argus, 9/16/99)

The reason why businesses won't simply leave is that the vast majority of low wage jobs are in industries-particularly the retail and service industries-that are geographically dependent. This means that the food has to be cooked here, and offices cleaned here. The business can't be moved far away. Since a minimum wage increase effects all businesses equally, few, if any jobs should be lost or businesses closed.

Nationally, 76% of low-wage jobs are in the geographically dependent service industry. 24% are in manufacturing, which is more mobile, but typically manufacturing already pays well above the minimum wage.

While there is often much exaggeration in the dire predictions of businesses, a certain amount of concern is deserved, particularly along the border with New Hampshire. New Hampshire is currently conducting a Job Gap Study, which will look at what livable wage rates are there, and provide more information on how to deal with this problem. In any event, this problem should not be used as an excuse for businesses to not pay livable wages. Do we want to race to the bottom, or pull everybody up?

If the minimum wage is increased, couldn't that lead to businesses having to fire workers in order to pay those that are left more? And if employers have to pay more, won't they just hire less people, meaning that more people will be unemployed?
If the minimum wage was raised as high as $8.50 an hour, there could be an extremely modest impact, on the order of 1% to 3% "dis-employment." Dis-employment is when people get laid off or businesses reduce hiring due to higher wages. At lower levels, such as increasing the minimum wage to $7.00 an hour, there is no expected impact.

The same businesses that now hire low-wage workers will still need those jobs done, and the same pool of workers will still apply for those jobs-except now they will be working for livable wages. Oregon's experience in raising the minimum wage shows this. Between 1997 and 1999 Oregon raised its minimum wage from $4.75 an hour to $6.50 an hour. A recent study by the Oregon Center for Public Policy found that "Oregon's 'highest in the nation' minimum wage continues to raise wages for former welfare recipients and other low-wage workers without harming their employment opportunities. The increase has reversed years of declining wages for welfare recipients and other low-wage workers."

But are people earning low wages really worth it? Isn't the problem really that they aren't skilled enough to be worth living wages?
Job training is a good thing, and we can all use more skills. But all the training in the world won't help if most jobs aren't paying livable wages. According to the 2002 Vermont Job Gap Study, 40% of all jobs require only short-term, on-the-job training. The three fastest-growing jobs in Vermont are waitresses and waiters, retail sales, and cashiers. These are jobs that are low-paying (median wage of $5.60 an hour), often part-time, without benefits, and are not highly skilled. Half of all non-livable wage jobs are in the retail (sales), food & beverage, education, and health care industries. Regardless of whether people gain more job skills and move into better paying jobs, someone will work these low-paying jobs. Shouldn't they get paid a living wage?

But do all Vermonters deserve a livable wage?
Well, that's the heart of the issue. The Addison Eagle doesn't think so: "Since when does the lowest common denominator in our working society deserve to earn enough to live off?" (Editorial, 7/16/99). The Vermont Livable Wage Campaign believes that all Vermonters deserve a livable wage or income, and especially Vermonters who are working hard to get by-often two or three jobs. People, businesses, and institutions like the Addison Eagle who are opposed to livable wages are essentially saying that all Vermonters do not deserve enough food, housing, clothing, and heat to survive. They are saying that it is okay to pay starvation wages and expect people to do without basic necessities. An essential point that people opposed to livable wages are missing is that non-livable wage jobs are not just the 'lowest common denominator.' They are often socially important positions, like being an educational assistant with developmentally disabled students, or working in childcare. And even if the job is working as a cashier, what's wrong with that? It's real work, hard work, and a job someone has to do. People deserve a livable wage for doing it.

It's also worth saying again that when businesses do not pay a livable wage, public assistance often makes up the difference. So when Vermonters turn to food stamps or heating assistance because they are not making livable wage, our tax dollars are subsidizing those businesses.

But why do we have to require businesses to pay a livable wage? What about the business argument that a free market, increasing worker productivity, and minimal regulation are the best way to a strong economy with livable wages for all?
Wouldn't that be nice? Unfortunately, it just isn't so-for several reasons. According to a survey of businesses throughout Vermont performed by Vermont Businesses for Social Responsibility, "There are a significant number of employers currently paying at minimum wage levels without benefits who, regardless of their ability to pay their employees more in wages and benefits, will not do so until they are required to." How else are the employees of these businesses going to earn a livable wage besides the minimum wage being increased?

Secondly, history shows that as the productivity of workers increases due to increasing skill levels and new technology, and the profits of businesses go up, that this doesn't necessarily translate into better wages. The productivity of American workers increased significantly from 1973 to 1997. However, during the same period wages fell by 16% (when adjusted for inflation), corporate profits hit record levels, CEO salaries have skyrocketed, and the richest 1% of Americans now control 42% of the nation's wealth. So, in this example, increased productivity and profits did not result in increased wages and wealth for all but only for business owners and management. Arguing for a "free" market really means allowing employers to do whatever they want, regardless of what's right.

It should also be mentioned that the free market is hardly free. For example, over 250 billion in taxpayer dollars is given out annually as subsidies to US corporations. US arms merchants alone get $500 million a year to advertise and promote their products. When was the last time that you heard business complaining about this interference with the free market? There are countless numbers of examples of ways in which our economy is already managed and subsidized through political policies. The only question is, who is going to benefit from these policies? Working people-the vast majority of Americans-or a wealthy few?

Aren't there some businesses out there that would like to pay living wages, but really can't?
Undoubtedly there are. And for these businesses, we need to figure out solutions. Perhaps employers who genuinely can't afford to pay a livable wage could qualify for tax cuts that would allow them to pay livable wages. There are other solutions as well, and there needs to be much discussion as to what the solution is. But the days of balancing the books of businesses on the back of their employees are over. Every Vermonter deserves a livable wage.

How does not earning livable wages affect Vermonters?
Many working Vermonters have no choice but to do without some of the basics, including health care. Others rely on public assistance such as food stamps or fuel assistance even though many work full-time jobs. Some live in substandard housing or pay a high percentage of their income for housing. Many take second jobs (7.3 million nationally) or receive help from family members for such things as child care.

As a result of insufficient income, the standard of living for many working Vermonters is one of insecurity, dependence, and in some cases deprivation.

• 61,000 People, Including 15,000 Children Fall Below the Official Federal Poverty Rate in Vermont: One out of every six children under the age of 18 were in poverty in Orleans, Essex, and Caledonia County (Phase 8- Vermont Job Gap Study).
   
• 13% of Vermont Children Live in Poverty: According to the Vermont Commission on Childhood Poverty, 13% of Vermont's children are living in poverty, or 19,000 of 146, 000 children. Each month 8,000 children receive food from food shelves and 3,000 eat at soup kitchens. Children also make up 40% of the population staying at homeless shelters across the state. (Times-Argus & Free Press 1/13/99) This has helped create a situation in which, according to the food-bank organization, Second Harvest, 40% of households seeking emergency food aid in 1997 had at least one member who was working. Low-paying jobs were the most frequently cited cause of hunger.
   
• Human Costs of Poverty on Children: Poor children are 1.3 more times likely to suffer infant death, 3 times more likely to suffer childhood death, 1.2-2.2 times more likely to have low birth weight, 2-3 times more likely to have stunted growth, 2-3 times more likely to have fatal accidental injuries, 2 times more likely to have severe asthma, two times more likely to drop out of high school, and five times more likely to be abused (Wasting America's Future, Children's Defense Fund, 1994)
   
• 43 Million Americans (Including Over 60,000 Vermonters) Have No Health Insurance, Especially Women: Most of the uninsured are working Americans who don't get offered insurance by their employers and aren't eligible for government programs. Working-age women who are separated, divorced, never married, or widowed are most likely to have no health insurance and not received needed health care, according to a study by the Commonwealth Fund. The most significant factor is income: the dividing line for those without health coverage is $35,000.
   
• Americans Working 3 Weeks More A Year Than in 1989: According to the Economic Policy Institute, the average worker is working 123.5 hours more in 1998 than in 1989, or more than 3 weeks a year. When we don't make a livable wage we have to work more hours, or take a second (or third) job. This cuts down on the time that we have to spend with our families and get involved in our communities. (Times-Argus, 10/4/98)
   
• Credit Card Debt and Personal Bankruptcies Are Growing: National data reveals that 45% of households with income between $20,000 to $39,999 had credit card debt in 2001.

Taxpayers Are Subsidizing Businesses That Don't Pay Livable Wages:
When businesses protest increases in the minimum wage because they want a 'free market', they are ignoring the fact that low-wage employers are already heavily subsidized by our tax dollars. When an employer doesn't pay livable wages, the workers often become eligible for programs like the Vermont Health Access Program, Dr. Dynasaur, heating fuel assistance, and food stamps that allow them to get the basic necessities. All these programs are paid for with our tax dollars, and amount to subsidies for low-wage employers.

If not now, when?
Sometimes people make the argument that this is not the best time to guarantee all Vermonters a livable wage. However, our economy has been undergoing an expansion for the past few years. It is one of the longest periods of strong economic growth since 1945. Job growth is continuing and inflation is low. If not now, when? There isn't ever going to be a better time to increase the minimum wage.

Increasing the minimum wage will be good for businesses.
We all know that when we have more money we will spend more. This will work with a minimum wage increase too. Higher wages will mean more discretionary income that people can choose what to do with. So while businesses will have to pay that higher wage, they will get their money back in increased business. This money will circulate in the economy and multiply, leading to increased economic growth for everyone.

Plus, it's fair.
Right now businesses paying a livable wage because they believe it's the right thing to do have to compete with businesses that don't. This will put all businesses on a level playing field and allow businesses to compete on the basis of the quality of their products and service.

Increasing the minimum wage will be good for taxpayers.
When people are paid below a living wage, they are forced to receive public assistance or go without necessities. This helps drive up taxes for everyone. If businesses paying a living wage directly to employees, it could mean lower taxes for everyone.

Won't increasing the minimum wage make it harder for Vermont businesses to compete with New Hampshire and other border states?
No. A 1992 study by Princeton University economists examined changes in employment at 410 fast food restaurants on the border area of New Jersey and Pennsylvania before and after New Jersey increased its' minimum wage from $4.25 to $5.05-a 18.8% increase. Their study found no significant differences in employment in these businesses after New Jersey raised the minimum wage.

Soon there will be a Job Gap Study that determines livable wage amounts for Maine and New Hampshire, and will provide us with much more information on this issue. Preliminary results show that Maine's livable wage levels are comparable to Vermont's. Perhaps, instead of competing among the northern New England states, we could work to pass minimum wage rates that are similar across the region.

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