Frequently Asked Questions
About Livable Wages:

What is a livable wage?

How much is a livable wage?

How many Vermonters don't earn a livable wage?

I often hear that the economy is booming with unemployment being so low. How can this be true and yet there is such a problem with livable wages?

How do people not earning a livable wage get by?

What is the minimum wage in Vermont?

Are there other states with higher minimum wages?

If the minimum wage had kept up with inflation over the last thirty years, it would be 7.80 an hour today, according to Department of Labor.

Isn't it mostly just young people starting out who aren't earning livable wages?

I never thought the minimum wage was supposed to be a livable wage.

Won't increasing the minimum wage lead to inflation with prices going up and mean that people end up no better off than before?

If wages go up, won't businesses just leave Vermont and go elsewhere?

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?

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?

But do all Vermonters deserve a livable wage?

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?

Aren't there some businesses out there that would like to pay living wages, but really can't?

How does not earning livable wages effect Vermonters?

Taxpayers Are Subsidizing Businesses That Don't Pay Livable Wages:

If not now, when?

Increasing the minimum wage will be good for businesses.

Plus, it's fair.

Increasing the minimum wage will be good for taxpayers.

Won't increasing the minimum wage make it harder for Vermont businesses to compete with New Hampshire and other border states?


More Livable Wage Facts CLICK HERE

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, and insurance.

How much is a livable wage?
According to a 1999 Legislative Study on Livable Income, a livable wage in Vermont is $10.47 /hr. ($21,778/yr.) for a single person. For a single parent with one child, it is $12.35 /hr. ($25,688/yr.). For a single parent with two children, a livable wage is $15.89 /hr. ($33,051/yr.) For a family with two parents and two children, but only one person working for pay, it is $19.08 /hr. ($39,686/yr.) For a family with two children and both parents working for pay, a livable wage is $10.06 /hr. for each earner ($41,850/yr. total). (These are averages of figures for rural and urban Vermont. See Act 21 Legislative Study on Livable Income at http://www.leg.state.vt.us/jfo under "Publications and Reports" for budget breakdowns.)

How many Vermonters don't earn a livable wage?
According to the Vermont Department of Employment and Training's 1999 OES data, 68,930 (25%) jobs in Vermont pay less than $8.50 /hr. ($17,680 /yr.). Many of these workers are earning well below livable wage rates. Vermont's median hourly wage (with half of Vermonters earning above and half of Vermonters earning below) is $10.10 an hour. Since a livable wage for a family with two working parents and two children is $10.06 an hour for each earner, we know that at least half of working Vermonters do not earn enough to support a traditional, nuclear family.

I often hear that the economy is booming with unemployment being so low. How can this be true and yet there is such a problem with livable wages?
It is true that the unemployment rate is very low. In 1998, the statewide average was 3.4%. Traditionally, many economists considered anything less than 5%, full employment. The problem with this is that by focusing on people without jobs, we assume that those of us with jobs earn enough to support ourselves and our families.

According to Larry Sudlow, a manager at the Vermont Department of Employment and Training, "I don't recall a time when we've had so many families working multiple part-time jobs, with no benefits, to make ends meet. And it just seems like many of the new jobs that we see here are part-time jobs with no benefits at pretty close to the minimum wage. A family would have to work several of those to make ends meet. Not a good situation." (Times-Argus, 6/17/99)

Adding to this problem is that while the unemployment rate may be low, the underemployment rate is increasing. The underemployment rate is the sum of the unemployed, marginally attached, new entrants, discouraged and involuntary part-time workers. According the Vermont Job Gap Study, while the number of Vermonters who are unemployed shrank by 2,400 from 1995 to 1997, the number of involuntary part-time workers increased by 2,000 (see page 4 in Phase 5).

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, 40,000 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?
$6.25 an hour ($13,000 /yr.). Nationally, it 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 $7 to $8 an hour range. If the minimum wage had kept up with inflation over the last thirty years, it would be $7.85 an hour today, according to the US Department of Labor. 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. Oregon has a minimum wage of $6.50 an hour. Massachusetts recently decided to increase its minimum wage from $5.25 an hour to $6.75 an hour over the next two years. 134,000 Massachusetts residents earn the minimum wage. (Boston Globe, 7/30/99). Connecticut's minimum wage is now $6.70 an hour. Washington state's is $7.09 + an annual cost of living increase.

If the minimum wage had kept up with inflation over the last thirty years, it would be 7.80 an hour today, according to Department of Labor.
However, because it has not, the extremely low minimum wage is helping to pull wages down for everyone.

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 Vermont Job Gap study, 66 % of full-time workers earning less than $6.50 an hour are between the ages of 30-65. 85.9% are between the ages of 23-65, fully 99.9 % are 19 or older.

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 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-living 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-living 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 effect Vermonters?
Not earning livable wages effects Vermonters in many terrible ways-too many to count. Here are a few of them:

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-wages 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, leading to increased economic growth for everyone.

Plus, it's fair.
Right now businesses paying a livable wage because 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
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.

More Livable Wage Facts CLICK HERE

Vermont Livable Wage Campaign Homepage Last updated 04/02/01 jbaker@sover.net