Living Wage

What Is a Living Wage?

A living wage is an hourly rate calculated to provide workers with enough income to afford basic necessities—housing, food, healthcare, transportation, and other essential expenses—in a specific geographic area. Unlike minimum wage, which is a legal floor set by government, living wage is an economic concept that reflects the actual cost of living.

In California, the gap between minimum wage and living wage can be significant, particularly in high-cost metropolitan areas like San Francisco, Los Angeles, and San Jose. Understanding this distinction helps employers make informed decisions about compensation strategies.

Living Wage vs. Minimum Wage

Aspect	Minimum Wage	Living Wage
Definition	Legal minimum employers must pay	Estimated wage to cover basic needs
Set by	Government (federal, state, local)	Economic calculations
Legal requirement	Yes, mandatory	Generally voluntary
Variation	By jurisdiction	By location and family size
Updates	Through legislation	Annually based on cost data

Living Wage in California

According to MIT's Living Wage Calculator, living wage estimates for California workers vary significantly by location and household composition:

Single Adult, No Children (2024 Estimates)

Location	Living Wage	State Minimum
San Francisco County	~$28.00/hour	$16.00
Los Angeles County	~$24.00/hour	$16.00
Sacramento County	~$21.00/hour	$16.00
Fresno County	~$18.50/hour	$16.00

Adult with One Child

Living wage requirements increase substantially:

• San Francisco: ~$58.00/hour
• Los Angeles: ~$52.00/hour
• Inland areas: ~$42.00/hour

These figures illustrate why many California workers struggle despite earning above minimum wage.

Living Wage Ordinances

Some California cities have enacted living wage ordinances requiring certain employers—typically those with government contracts or receiving public subsidies—to pay above minimum wage:

San Francisco Living Wage

• Applies to employers with city contracts over $25,000
• Also covers nonprofit grantees receiving significant city funding
• Includes health benefits requirements

Los Angeles Living Wage

• Covers employers with city service contracts
• Includes hotel workers at large hotels near LAX
• Requires paid days off provisions

Other Jurisdictions

Several California cities have living wage requirements:

• Oakland
• San Jose
• Berkeley
• Santa Monica

Business Implications

Recruitment and Retention

Employers paying living wages often experience:

• Lower turnover rates
• Reduced hiring and training costs
• Larger applicant pools
• Higher employee engagement

Public Perception

Companies known for living wage practices may benefit from:

• Positive brand reputation
• Customer loyalty from socially conscious consumers
• Easier community relations

Cost Considerations

Paying living wages requires balancing:

• Higher direct labor costs
• Reduced turnover-related expenses
• Potential productivity gains
• Market competitiveness

Living Wage Movement

The living wage concept has gained momentum through:

Worker Advocacy

• Fight for $15 campaigns
• Union organizing efforts
• Community organizing groups

Corporate Commitments

Many major employers have committed to company-wide minimum wages:

• Amazon: $15+ minimum
• Target: $15+ minimum
• Costco: $17+ minimum
• Bank of America: $22+ minimum

Certification Programs

Organizations like Living Wage for US and local living wage coalitions certify employers meeting living wage standards.

Calculating Living Wage

Living wage calculations typically include:

Basic Expenses

• Housing (fair market rent for the area)
• Food (USDA low-cost food plan)
• Transportation (public transit or vehicle costs)
• Healthcare (individual market premiums)
• Childcare (if applicable)
• Taxes

Methodology

Most living wage calculators:

1. Sum annual costs for basic necessities
2. Add estimated tax burden
3. Divide by working hours (typically 2,080 per year)
4. Result is the hourly living wage

Limitations

Living wage estimates may not account for:

• Debt repayment
• Savings for emergencies
• Education costs
• Entertainment and quality of life
• Variable family situations

Employer Strategies

Phased Implementation

• Gradually increase wages toward living wage targets
• Prioritize lowest-paid positions first
• Build cost increases into long-term planning

Total Compensation Approach

Consider the full value provided to employees:

• Healthcare benefits
• Retirement contributions
• Paid time off
• Scheduling flexibility
• Professional development

Transparency

• Communicate compensation philosophy
• Explain how wages are determined
• Share progress toward living wage goals

Industry Considerations

Different industries face unique challenges:

Retail and Hospitality

• Thin profit margins
• High turnover historically
• Competitive labor markets

Healthcare

• Regulatory constraints on pricing
• Varied funding sources
• Already facing staffing shortages

Technology

• Competitive for talent
• Often already pay above living wage
• Contrast with contracted workers

Looking Forward

As California's cost of living continues to rise, the conversation around living wages intensifies:

• More local minimum wage ordinances targeting living wage levels
• Industry-specific minimum wages (fast food, healthcare)
• Ongoing debate about economic impacts
• Growing employee expectations for fair compensation

Whether legally required or voluntarily adopted, understanding living wage concepts helps California employers develop competitive and ethical compensation strategies.