Author Topic: What is a fair and living wage? (Read 2830 times)

jlamos · « **on:** May 07, 2012, 09:17:19 PM »

I have read with interest several topics here on the subject and none that I recall gave a specific number.

When I lived in Minneapolis in 2000 I read a report that said a single person living alone would have to make $12.50 an hour to provide for his basic needs without going into debt. That would be $26,000 per year full time.

I adjusted the figure for the cost-of-living difference between Minnesota and Arizona and adjusted for inflation. The new amount would be 15.72 per hour, or $32,697.60 per year.

Then I read this post, the relevant portion of which is:

Quote

Is the minimum just wage a personal wage or a family wage, that is, must it be only enough for the worker alone or also enable him to support his dependents? It must be a family wage. The just price of labor, as of anything else, is determined in the open market by the common estimate of men, and the ordinary reason given by men for judging that a wage is too low is: "A man cannot support a family on such a wage." Besides, in the normal arrangement of nature the husband is the support of the family, and to fulfill this function he is not only urged by a strong natural instinct but also bound by a strict obligation of the natural law. Therefore a wage sufficient only for the worker's personal support is not really sufficient even for this, for, since he is bound to share it with his family, not enough of it would be left even to support him personally. So the obligation of the natural law is clear: an employer who monopolizes all the earning-power of the father of a family is obliged by the natural law to pay him a wage that will enable him to fulfill his duties to his family under the same natural law. This is an obligation not in charity but in commutative justice, because commutative justice is the virtue that regulates contractual exchanges.

I also remember someone else saying (elsewhere on this forum) that a family can live on $40,000 per year.

So if I increase the hourly pay to $20, or $41,600 per year, is that a fair wage?

Marcelino · « **Reply #1 on:** May 07, 2012, 10:56:16 PM »

You gotta take into account all the stupid programs that make it so much more expensive to support a family today. For example, wrecking cities and forcing people out to the suburbs (car, lawn tools, expensive utilities, etc). Offshoring jobs like crazy, so demand for labor plummets. Intemperant expansion of the money supply, resulting in inflation, which "destroys" savings. Gads of taxes on ordinary people, like property taxes and excise taxes on gasoline and ciggarrettes. Ubelieveably high costs for healthcare. What's a dental cleaning and exam cost for a dad with a wife and 5 kids? Too much! Where does the government spend its money? A trillion for wars we don't need to fight every year, plus half a trillion in interest payments we don't need to make every year. Seven hundred billion to bail out banks, when it could have gone to good jobs reparing roads and making it easier and safer to get around. So, what's a realistic wage for a family man, with a wife and six kids? 100k per year, sounds a lot more realistic to me, than 40k. And that doesn't include eating steak!

MaterDominici · « **Reply #2 on:** May 08, 2012, 01:29:12 AM »

Matthew and I were discussing something along these lines the other night. As the average number of children per family has decreased in this country, the ideas of what normal family living should look like have also changed. If you're trying to live like other families around you, you won't be able to make it on $40K, but if you set your standards to that of two generations ago, you might be able to get by on that.

As the employer, you'd also need to consider the benefits provided in addition to the wage. If you're providing health insurance for example, you can pay less than if you're not.

jlamos · « **Reply #3 on:** May 08, 2012, 10:39:51 PM »

Thank you both. I have much to think about.

jlamos · « **Reply #4 on:** May 11, 2012, 10:57:47 PM »

Let me run some numbers by you.

Yearly salary: $89,856.00

Which breaks down to:
Monthly: $7,488.00
Weekly: $1,728.00
Hourly: $57.60

This is based on a 30 hour workweek.

Rent should be no more than one third of post tax income. A 4-bedroom house or apartment can be had for around $1,500 per month.

The tax rate for a man with this income in Arizona:

Social Security: 6.2%
Medicare: 1.45%
Federal income tax: 28%
Effective AZ income tax: 4.24%
for a total effective tax rate of 39.89%

100 - 39.89 = 60.11 so
89,856.00 x 0.6011 = 54,012.44
54,012.44 / 12 = 4,501.04
4,501.04 / 3 = 1,500.35

This is, theoretically, a just and living wage in Arizona.

Thoughts?

MaterDominici · « **Reply #5 on:** May 11, 2012, 11:37:41 PM »

Quote

Thoughts?

30-hour work week? Would this be salaried or contract?

Fed tax isn't flat rate, so even reaching 28% doesn't mean all of your income is taxed at that. (Also, you're going off of a large-family premise here, so it would be fair to consider the $1,000 tax credit per child.)

Why did you divide the monthly income by three?

jlamos · « **Reply #6 on:** May 12, 2012, 12:08:46 AM »

Quote from: MaterDominici

30-hour work week? Would this be salaried or contract?

Salaried.

Quote from: MaterDominici

Fed tax isn't flat rate, so even reaching 28% doesn't mean all of your income is taxed at that. (Also, you're going off of a large-family premise here, so it would be fair to consider the $1,000 tax credit per child.)

I can not assume that every employee will be able to take the necessary deductions to be taxed at a lower rate. As for the tax credit, as I don't have any children (yet) I didn't even know about it.

Quote from: MaterDominici

Why did you divide the monthly income by three?

Because rent should never be more that one third of one's income, or so I've heard.

MaterDominici · « **Reply #7 on:** May 12, 2012, 01:01:54 AM »

Quote from: jlamos

Quote from: MaterDominici
Fed tax isn't flat rate, so even reaching 28% doesn't mean all of your income is taxed at that. (Also, you're going off of a large-family premise here, so it would be fair to consider the $1,000 tax credit per child.)

I can not assume that every employee will be able to take the necessary deductions to be taxed at a lower rate. As for the tax credit, as I don't have any children (yet) I didn't even know about it.

Just this point is throwing your numbers way off, so I'll address it alone.

(I'm using 2012 tax rates here.)

First, with a $90,000 salary, you'll never reach the 28% tax bracket. Even if you were single with zero children, your single exemption and standard deduction alone will put you in the 25% bracket.

More realistic would be something along these lines:
$90,000 income
married with 3 children
$90,000 - ($3,800 x 5) - ($11,900) = $59,100

He would pay 10% on the first $17,400 and then 15% on the remaining $41,700. This would make his income tax $7,995.

From there, he'd get a $3,000 credit for his three children bringing his income tax down to only $4,995 or an effective income tax rate of 5.5%

jlamos · « **Reply #8 on:** May 12, 2012, 02:39:48 AM »

Of course, I know that taxable income and actual income are different, but when ever I have to deal with it my brain seizes. :scared2:

Quote from: MaterDominici

More realistic would be something along these lines:
$90,000 income
married with 3 children
$90,000 - ($3,800 x 5) - ($11,900) = $59,100

He would pay 10% on the first $17,400 and then 15% on the remaining $41,700. This would make his income tax $7,995.

From there, he'd get a $3,000 credit for his three children bringing his income tax down to only $4,995 or an effective income tax rate of 5.5%

This reminds me of an episode of Gilligan's Island when the Professor tries to explain something to Gilligan and then asks him "Do you see?" and Gilligan replies "I see just fine, but I don't understand a word you said".

If you don't mind, pretend that I'm a tax idiot (shouldn't be difficult) and walk me through that minefield.

Matthew · « **Reply #9 on:** May 12, 2012, 02:46:47 AM »

Quote from: jlamos

Of course, I know that taxable income and actual income are different, but when ever I have to deal with it my brain seizes. :scared2:

Quote from: MaterDominici
More realistic would be something along these lines:
$90,000 income
married with 3 children
$90,000 - ($3,800 x 5) - ($11,900) = $59,100

He would pay 10% on the first $17,400 and then 15% on the remaining $41,700. This would make his income tax $7,995.

From there, he'd get a $3,000 credit for his three children bringing his income tax down to only $4,995 or an effective income tax rate of 5.5%

This reminds me of an episode of Gilligan's Island when the Professor tries to explain something to Gilligan and then asks him "Do you see?" and Gilligan replies "I see just fine, but I don't understand a word you said".

If you don't mind, pretend that I'm a tax idiot (shouldn't be difficult) and walk me through that minefield.

If it makes you feel any better, Mater used to be a licensed CPA (certified public accountant).

While she didn't actually do taxes in her days as a CPA, she could have.

I guess it's like being a lawyer -- once you pass the "Bar", you have to/get to specialize in a certain area, though you technically can practice whatever area you prefer.

MaterDominici · « **Reply #10 on:** May 12, 2012, 02:46:50 AM »

Quote from: jlamos

If you don't mind, pretend that I'm a tax idiot (shouldn't be difficult) and walk me through that minefield.

I was hoping you'd just take my word for it.

I'll write it out for you with more detail, but I think it will have to wait until tomorrow.

jlamos · « **Reply #11 on:** May 12, 2012, 12:38:53 PM »

Quote from: Matthew

If it makes you feel any better, Mater used to be a licensed CPA (certified public accountant).

:detective: I deduced that already (right after you mentioned the fact elsewhere on the fora).

:smile:

jlamos · « **Reply #12 on:** May 12, 2012, 12:48:11 PM »

Quote from: MaterDominici

Quote from: jlamos
If you don't mind, pretend that I'm a tax idiot (shouldn't be difficult) and walk me through that minefield.

I was hoping you'd just take my word for it.

I'll write it out for you with more detail, but I think it will have to wait until tomorrow.

Fuhgeddaboudit. A little sleep helps unseize the brain.

$59,100 salary - $4,995 tax / 12 months / 3 = 1,502.92 for rent.

I've budgeted for a CPA, so, assuming I get the financing I need, I'll be set.

Thanks for your help!

:dancing: :dancing-banana:

Traditional Guy 20 · « **Reply #13 on:** May 12, 2012, 01:22:56 PM »

A fair living wage is one where a husband can support his wife and children without the wife doing work outside the home.

Marcelino · « **Reply #14 on:** May 12, 2012, 06:43:38 PM »

I guess if you're married, with 3 kids and you make around 30k per year, your effective tax rate is negative, with the earned income tax credit.