Lost in all the bluster about raising New Jersey's minimum wage, from $7.25 an hour to $8.25, is that neither is enough to live on. Today, two adults working full-time, minimum-wage jobs earn $30,000 a year. A new study, by the Economic Policy Institute, estimates the cost of "getting by" for a New Jersey family of four is around $80,000. That's equal to two full-time jobs, each paying at least $19 an hour.
Hilary Wething
Natalie Sabadish
It’s the difference between a wage and a living wage. In New Jersey, many employers are fighting the minimum-wage hike. In Washington, Wal-Mart threatened to boycott the city if it passed a law requiring big retailers pay a “living wage” — $12.50 an hour. Meanwhile, a Gallup poll found 19 percent of two-adult households struggled to buy food during the past year.
EPI research assistants Hilary Wething and Natalie Sabadish spoke with Star-Ledger editorial writer Jim Namiotka about the institute's 2013 Family Budget Calculator, which estimates the cost of "getting by" across the United States.
Q: First, what's your definition of "getting by"?
Wething: To determine “getting by,” we developed a measure of income that families need to secure a basic, yet modest, standard of living in their community. We looked at the costs of basic needs like housing, child care, food, transportation, taxes, etc.
This is not middle class. There’s no savings. This is, literally, how families are able to make ends meet from month to month. There’s no future or long-term financial stability in these budgets. These families are secure, but not saving for retirement or their kids’ college.
Sabadish: We aimed for the 40th percentile — above complete economic deprivation, which is what the federal poverty line measures, but definitely below middle class.
There’s no savings, no dining at restaurants, no fast food. This doesn’t include cable or internet. We aimed right between deprivation and a middle-class lifestyle.
Q: In New Jersey, your "getting by" budget hovers around $80,000 for a family of four. But the federal poverty line for the same family is a little more than $23,000. What's the difference?
Sabadish: The poverty line was set in 1963. Fifty years ago, they looked at what food cost for a family, multiplied by three, and decided that was a standard for a family. Since then, they’ve only adjusted for overall inflation.
Wething: The federal poverty line, as a national measure, only gets at absolute deprivation. Ours is fundamentally different, looking at adequacy and the dollar amounts families need to live modestly — not at which they’re crying for help.
Q: So is the average family making enough?
Wething: That wasn’t part of our research, although we think probably not. We plan to look at that in the future. In Newark, for example, all of the family budgets are at least 300 percent more than the poverty threshold.
Sabadish: All of the family budgets in the United States, at all family sizes, are at least double the federal poverty line.
Q: Are there regions where it's easier to live? Most difficult?
Sabadish: For housing, especially, the more expensive housing is in cities; the less expensive housing for families is in the rural South.
The highest family budget for housing is in Hilo, Hawaii, for a two-bedroom apartment for a two-adult, two-child household at $1,833. The lowest is in rural Tennessee, at $570 per month. That helps to put the Newark numbers, where rent for a two-bedroom apartment is $1,474, in perspective.
Wething: Across the board, with various family types, the most variable cost is child care. Child care for one is less expensive than it is for three children. In Newark, for example, child care at the high end is $1,700 a month for three children. At the low end, it’s $777. Those are the big differences.
Q: What are the differences between living in New Jersey and, for instance, the rural South?
Sabadish: Looking at Newark, the share that a family spends each month on housing is higher in Newark than at the median. For a two-adult, two-child household, housing is 22 percent of the average family budget, where the median is around 14 percent. The share spent on transportation (in Newark) is lower than the median, which makes sense in the urban areas where transportation costs are relatively lower.
Q: What did you have to leave out of your formulas?
Wething: We left out items we deemed frivolous. For example, with transportation, we didn’t include trips to the movies, or vacation. There are only trips to the doctor, to school, to work.
On food, for example, we plan where families are buying at the grocery store, but they’re not eating out. They’re buying fresh fruit, not just rice and beans. But there’s no extra “fun food.”
Q: What can families do to help get themselves to "adequate"? Beyond? How can it be used as a road map?
Wething: The best thing we can do to help people get to the family budget level is to boost wages at the bottom by raising the minimum wage. No family budget is at minimum wage. In New Jersey, where the minimum wage is at $7.25 an hour, two parents working full time would bring in about $30,000. This doesn’t reach any family budget level.
How we make family budgets more affordable is trickier. A component would be with figuring out how to subsidize the cost of living for these families. One of these would be child care — which can be the most expensive piece of the family budget.
The Earned Income Tax Credit, food stamps, subsidies for housing and transportation would also help.
The more we can provide more support for families who are working and trying to get into the middle class, the more of these families can reach their family budget level.