Recently, the Economic Policy Institute released a study that said that a family of four – two parents and two children – need a household income of $70,000 a year to maintain a “modest lifestyle.”
John Burbank, the executive director of the Economic Opportunity Institute which is a regional partner of the EPI, explained that how the calculations were made.
In their calculations for a modest lifestyle, they’re calculating rent at the 40th percentile, meaning that 60 percent of all rent is higher than that. They’re calculating food costs using the low-cost plan from the Department of Agriculture, which assumes that almost all food is bought at the grocer and then prepared at home. They are calculating the cost of operating a car for work, the cost of health care – including health insurance premiums and out-of-pocket expenditures – and also child care. If you take all those factors into consideration, that’s how you come up with their calculations for what I would consider a modest budget for a family of two parents and two children.
However, he also said that this calculation of modest actually represents a lifestyle below average, even though the number is about $25,000, or 33 to 40 percent, higher than the federal poverty level.
A lot of the problems with the poverty index is that it was developed in the early 1960s and really has not been updated since that time except for inflation, and obviously there have been a lot of changes in the economy and purchasing since that time.
The median household income in King County is about $65,000 a year according to Burbank. That number would technically represent the middle class level. The modest lifestyle number of $70,000 is above that. However, Burbank gave the example of how this can occur.
One of my colleagues has a modest home (960 square feet), his mortgage is $2,200 a month, he has one child and their childcare payments are $1,600 a month – that amounts right there to about $45,000 a year that is going just to housing and to childcare for a modest family. He has one car that is 12 years old, so he’s not living high off the hog with this income.
So while mathematically speaking, the modest lifestyle income is above the median income, that doesn’t necessarily show the whole picture. Burbank attributes this to wage stagnation.
Because of the undermining of the middle class and the stagnation of wages over the past five years – actually over the past 10 years – what was perhaps a slightly more comfortable middle class existence is now not as comfortable.
According to Burbank, $70,000 is enough to just be comfortable in Seattle – and it doesn’t include other costs like college tuition. He stated that the intent of EPI is to promote economic security and educational opportunity and cited how minimum wage could be an important factor in this goal.
We need to think about how we can actually increase the minimum wage and that will help push up other wage levels. The federal minimum wage was at its highest in 1968 and if it had kept up with productivity it would be at about $21.75 today. Unfortunately the gains in productivity have not gone to low-wage workers, rather they have gone to the very top echelon of corporate leaders and to corporate profits themselves.
Burbank is hopeful that changes could be made to raise minimum wage in Seattle, with the right political will and business allies.
Burbank spoke with Marcie Sillman on Weekday, July 9.