NCPA - National Center for Policy Analysis

A "Basic Needs" Wage Of $24.59

January 20, 1999

A minimum wage "that meets basic needs and allows for some discretionary income" for a typical minimum-wage earning household -- adjusted for the cost of living in various areas -- has been proposed by the leftist Council on Economic Priorities (CEP).

  • Such a wage mandate would require paying workers at least $24.59 an hour in the Manhattan borough of New York City, according to an analysis by the Employment Policy Foundation.
  • In San Jose, Calif., the wage would be $16.83 an hour; in Portland, Ore., $12.14; in Austin, Texas, $11.23; and in Minneapolis, Minn. $10.97.
  • By comparison, the current federal minimum wage is $5.15 per hour, and the average hourly earnings of production and non-supervisory workers is $12.87.

The CEP defines a basic market basket ("food plus basic needs") as the cost of a "basic food basket" divided by the percent of household income spent on food. Using the U.S. Department of Agriculture's "thrifty" food plan, the Employment Policy Foundation estimates the annual cost of a basic food basket for an individual in an average household is $1,420. The Bureau of Labor Statistics reports that on average, consumers spend about 13 percent of income on food.

Thus, the CEP's basic market basket costs about $10,924 per year per individual. Adjusting for average household size (2.64 members in 1997), assuming two workers per household, and allowing an extra 10 percent for discretionary income gives a "basic needs wage" of $15,862 per worker per year.

If minimum wage workers worked full-time, year-round, the minimum wage would have to be $7.93 per hour in order to earn $15,862. However, the typical minimum wage worker only works part-time, and would have to be paid a minimum of $11.13 per hour in order to earn $15,862 per year.

Wage rates would then be adjusted for geographic variations in the cost of living as noted above.

Source: "A $24.59 Minimum Wage," Economic Bytes, January 12, 1999, Employment Policy Foundation, 1015 15th Street, N.W., Suite 1200, Washington, D.C. 20005, (202) 789-8685.


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