PAI: Wages fall short of workers’ basic needs

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PAI: Wages fall short of workers’ basic needs

Tue, 02/23/2021 - 5:40pm -- tim

by Julie Lowell, Public Assets Institute How much income does a person need to live? The Joint Fiscal Office’s January release of its biennial Vermont Basic Needs Budgets and Livable Wage report answers this question. Unfortunately, it reminds us that not all Vermonters are able to meet their basic needs.

In 2020 livable income levels for full-time workers ranged from nearly $13 an hour for people without children in rural Vermont to nearly $42 an hour for a single parent with two children in the Burlington area – about $27,000 and $87,000 a year respectively. The report details the cost of basic needs for seven Vermont household configurations, adjusting expenses based on household size and type: one or two parents, children, urban or rural. Needs include food, housing, transportation, childcare, health care and other costs.

Vermont has two main policy levers to help ensure that working Vermonters can make ends meet: minimum wage and earned income tax credit (EITC). The minimum wage provides a wage floor. The EITC, recognizing that wages often cannot cover the cost of all household expenses, supplements low wages through a tax credit for households with low and moderate incomes.

But Vermont’s 2020 minimum wage was just $10.96 an hour, nearly two dollars lower than what people without children in rural Vermont needed to get by, and far below what a single parent with children needed. Even Vermont’s scheduled minimum wage increase to $12.55 by 2022 will not meet any of these household’s basic needs. The EITC supplemented incomes for parents earning the minimum wage, but left an income gap of over $27 an hour for some families. And individuals without children earning minimum wage do not currently qualify for the EITC.

National or state action to ensure a $15 minimum wage would boost the incomes of tens of thousands of Vermonters, allowing many to meet their basic needs. State expansion of the EITC would better help fill in the gap between earned wages and needed income for additional full- and part-time workers. These steps would especially impact people of color and women, who are disproportionately employed in low-wage work, guaranteeing that these Vermonters have enough food to eat, safe housing, and the resources they need to live a healthy life.

While the JFO report reminds us that many working Vermonters are not making enough to live on, the good news is that we already have mechanisms in place to address this problem. Making adjustments to these mechanisms—increasing the minimum wage and expanding the EITC—would provide an economic boost to thousands of people in the state.

Public Assets Institute. Montpelier 2.23.2021