What is a Decent Living Wage in America: Unveiling the True Costs

What is a Decent Living Wage in America

Sharing is caring!

A decent living wage is a topic that has always been central to financial discussions in America. But what exactly constitutes a living wage that allows individuals and families to lead comfortable lives without struggling to make ends meet? The living wage goes beyond the minimum wage by considering the actual cost of living in various locations and ensuring that all full-time workers have sufficient income to stay above the federal poverty level 1.Nowadays, more people over 40 are questioning traditional financial advice and seeking alternative ways to achieve financial freedom. Evaluating the living wage concept is essential in this process, as it provides an understanding of the income required for a decent standard of living, enabling individuals to make informed decisions about their financial goals and investments. Location, family size, and personal goals are crucial in determining the ideal living wage that caters to one’s specific needs 2.So, how can we calculate a decent living wage in America? Various resources, such as the MIT Living Wage Calculator, estimate the minimum income necessary for an individual to cover their living expenses and stay above the poverty line in different states. By using these tools and considering your circumstances and financial goals, you can better understand the income you need to attain the financial freedom you desire.

Key Takeaways:

  • The term ‘living wage’ goes beyond the minimum wage and considers the cost of living in various locations, ensuring full-time workers have a sufficient income to stay above the federal poverty line.
  • The concept of a living wage is essential for individuals over 40 seeking financial freedom as it provides an understanding of the income required for a decent standard of living, factoring in location, family size, and personal goals.
  • Tools like the MIT Living Wage Calculator can help estimate the minimum income necessary for an individual to cover their living expenses and stay above the poverty line in different states, aiding in financial planning.
  • The living wage varies significantly between states and cities due to differences in the cost of living. Therefore, understanding these variations is vital for individuals seeking financial freedom, particularly those considering relocation.
  • The living wage is influenced by various economic conditions such as inflation, unemployment, and recession. These factors can significantly impact the adequacy of a living wage, making it essential for individuals to understand and plan for these economic challenges.

Understanding Living Wage

Living wage is critical for people looking to break free from traditional financial advice and achieve financial freedom in today’s economy. A living wage is an income that ensures a decent standard of living, enabling individuals to afford basic expenses such as housing, food, transportation, and healthcare. Unlike the minimum wage, a living wage is adjusted according to the cost of living in a specific location and inflation to help workers live above the federal poverty level.

The legal minimum wage in the United States currently stands at $7.25 per hour. However, this amount does not necessarily provide a living wage for most American families. According to the MIT Living Wage Calculator, in 2019, the living wage in the United States was $16.54 per hour or $68,808 per year, before taxes, for a family of four (two working adults, two children). So, is the minimum wage sufficient for a decent living, or is it keeping families on the edge?

When considering financial freedom, examining the average salary alongside living wage and minimum wage is essential. While the living wage ensures basic needs are covered, financial freedom usually entails having enough income to meet actual expenses and affording some extra for savings, investments, and leisure. Moving towards a higher salary can make all the difference in achieving financial freedom for those over 40 looking to shift away from traditional methods.

To better comprehend and measure your financial freedom in the current economic landscape, you should consider minimum wage and average salary, and the concept of a living wage. Knowing the differences between these monetary benchmarks can help guide you toward financial security and independence. In contrast, read further on the topic and at what income level you are in poverty.

Components of a Decent Living Wage


Owning or renting a comfortable home in a safe neighborhood is crucial for a decent living wage. The cost of housing often depends on the location and can vary significantly across America. An essential question to ask: Are individuals able to afford housing without sacrificing other vital necessities?


Reliable transportation is essential to maintaining employment and accessing necessary services. A decent living wage should cover public transport costs or a modest vehicle, including maintenance, fuel, and insurance. How does one’s income affect their ability to quickly get to work and other essential destinations?


Access to nutritious food is vital for maintaining health and well-being. A decent living wage should be sufficient to cover the costs of groceries for balanced meals. Can individuals afford healthy and nutritious food for themselves and their families on their current income?


Healthcare is a critical component of maintaining a good quality of life. A proper living wage should encompass preventative care, medication, and treatment expenses, including those not necessarily covered by insurance. Could medical expenses become a burden on one’s financial stability?


For those with children, access to quality childcare is essential. Childcare costs can be a significant strain on household finances. A living wage should factor in these expenses to create a supportive environment for children and their parents. Can families afford adequate childcare without compromising their financial well-being?

Basic Necessities

Beyond housing, transportation, food, and healthcare, necessities such as clothing, utilities, and technology also need consideration in a decent living wage calculation. Taking the cost of these items into account ensures a well-rounded financial outlook. Are the fees for these items accounted for within one’s budget?


Taxes play a significant role in shaping household finances. A decent living wage should account for federal, state, and local taxes individuals and families pay. Are taxes becoming a considerable constraint on one’s ability to afford a decent living?

Savings Insurance

A decent living wage should allow for some savings and insurance to protect against unexpected financial emergencies and future needs, such as retirement or caring for an aging parent. Can individuals afford to save and secure their future on their current income?

By examining these various components, individuals over 40 can better understand their financial needs and work towards a decent living wage. It is essential to be proactive and informed in the quest for financial freedom without relying on traditional financial advice and investment strategies.

Variations in Living Wages Across States

New York

Did you know that the cost of living in New York is higher than most other states? Due to its expensive housing and general living expenses, a higher living wage is necessary for financial stability.


Similarly, California is known for its high cost of living, particularly in major cities like San Francisco and Los Angeles. Would you have guessed that the Golden State requires a higher living wage for most residents?


Is it a paradise if living in Hawaii means dealing with a significantly higher cost of living? The Aloha State’s remoteness and increased demand for housing led to a higher living wage than most states.


In Virginia, the living wage varies significantly between urban and rural areas. Nevertheless, the Old Dominion generally boasts a lower cost of living than its northeastern neighbors.

South Dakota

Have you considered affordable living in South Dakota? Mount Rushmore State offers a lower living wage due to its low cost of living and inexpensive housing options.


Residents in Arizona experience a living wage just above the national average, with the cost of living being 6.7% above the national average1. However, healthcare costs in the state are lower than the average.


The Natural State, Arkansas, stands out for its low annual living wage requirement of $54,3592. How does that compare to other southern states?


Georgia, the Peach State, has a slightly higher living wage than its southern neighbors. This can partly be attributed to the cost of living in its central city, Atlanta.


With its low cost of living and affordable housing market, Kansas boasts a living wage that offers residents financial stability without needing high earnings.


Kentucky, known for its famous bourbon, also offers a reasonable cost of living and a moderate living wage for its residents.


The living wage in Maine is higher than in most areas in New England due to factors such as housing costs, with an average living salary of $17.883.


Being close to the nation’s capital, Maryland is known for its high cost of living. Consequently, the living wage is higher to compensate for these increased expenses.


The low cost of living in Mississippi results in a lower living wage requirement, making it a more affordable option for residents looking for financial freedom.

New Hampshire

New England’s cost of living varies significantly throughout the region, and New Hampshire is no exception. The living wage in Granite State depends on factors such as housing and transportation expenses.

New Jersey

With proximity to New York City, New Jersey experiences a higher cost of living and, therefore, a higher living wage requirement for its residents.

North Dakota

Like its southern counterpart, North Dakota enjoys a low cost of living, resulting in a comfortable living wage for its residents.


The Buckeye State’s lower cost of living means that Ohio residents enjoy a moderate living wage that offers them more financial freedom.


Oklahoma, the Sooner State, also boasts a lower living wage requirement due to its low cost of living, making it an attractive option for those seeking financial stability.

Calculating a Living Wage

Wondering how to calculate a decent living wage in America? You’re not alone. Many people over 40 are considering alternative financial advice to ensure they can live comfortably. One reliable tool for determining a living wage is the MIT Living Wage Calculator. So, what is it, and how does it work?

The MIT Living Wage Calculator is designed to estimate the cost of living in a specific community or region based on typical expenses. While traditional financial advice tends to focus solely on income, this calculator considers various factors such as housing, food, healthcare, and transportation, providing a more accurate depiction of what a person or family needs to maintain a decent standard of living.

Instead of using a one-size-fits-all approach, the MIT Living Wage Calculator focuses on regional differences in the cost of living. This is particularly important for people seeking financial freedom, as it offers a more accurate measure of what it takes to thrive in different parts of the country.

When you access the MIT Living Wage Calculator, you’ll find categories for each state and county, enabling you to analyze your specific circumstances quickly. The calculator then provides a breakdown of expenses, allowing you to determine if you are on track to maintaining a secure and comfortable lifestyle.

Using a data-driven and customizable tool like the MIT Living Wage Calculator, you can confidently assess your financial situation and make smarter decisions to reach financial freedom. Ultimately, clearly understanding your living wage is crucial in navigating your financial future and achieving the stability you desire.

Influence of Cities on Living Wage

New York City

New York City is known for its high cost of living. With skyrocketing rents and expensive day-to-day expenses, what does a decent living wage look like? In the Big Apple, earning enough to cover necessities is crucial. According to the Living Wage Calculator, a single New Yorker must make a minimum of $17.99 per hour for a sustainable lifestyle.


Boston, rich in history and culture, also has a high cost of living. Research shows that housing costs have increased above the inflation rate in this city. A living wage is approximately $18.80 per hour for a single person in Boston.

Los Angeles

The film industry’s glamorous capital, Los Angeles, has its challenges regarding living expenses. As a result, a single individual’s living wage in L.A. is currently estimated at $17.86 per hour. Are you financially prepared to navigate the City of Angels?

San Francisco

San Francisco, the tech industry’s hub, boasts some of the highest living costs in America. Shockingly, the Living Wage Calculator estimates that a single person needs to earn $20.82 per hour to maintain an acceptable standard of living.


Home to a thriving tech scene and delicious coffee, Seattle’s cost of living has steadily increased over the years. For a sustainable lifestyle in this beautiful city, earning a living wage of roughly $17.59 per hour is essential for a single individual.

District of Columbia

Finally, the District of Columbia, our nation’s capital, also has a high cost of living. So, what does it take to enjoy a decent living wage here? According to current estimates, a single person must make approximately $19.50 per hour to maintain an acceptable standard of living in this prestigious city.

As someone over 40 and seeking financial freedom, understanding these living wage requirements can help inform your decisions on where to live and work. Remember, knowledge is power.

Comparison to Federal Poverty Level

When understanding a decent living wage in America, it’s essential to compare it with the federal poverty level (FPL). Let’s dive in if you’re wondering how these two measurements relate.

The FPL, established by the government, considers a family’s annual income to determine whether they live in poverty. Financial circumstances differ significantly between families, and the FPL is a one-size-fits-all metric that might not always accurately capture their financial needs.

On the other hand, a living wage considers the specific costs of living in a particular area and is designed to allow people to cover their necessities comfortably. In contrast to the FPL, calculating a living wage is a more personalized approach, better reflecting the regional disparities in living expenses.

So, how does the national minimum wage fit into this picture? Currently, the federal minimum wage stands at $7.25 per hour. For many families, this rate needs to provide a decent living standard. To give you a clearer image, a single mother with two children earning the federal minimum wage must work 252 hours per week – equivalent to almost six full-time minimum-wage jobs – to make a living wage.

Does the federal poverty level adequately address these challenges? With an estimated poverty rate of around 11.2 percent in the United States, the existing FPL might not capture the actual economic struggles American families face daily.

Remember, achieving financial freedom means securing a stable income and supporting one’s needs. Comparing the living wage, federal poverty level, and minimum wage helps us understand the extent of the challenge and becomes an essential part of your financial journey toward a more stable future.

Living Wage Concerning Economic Conditions

In this section, we’ll explore how inflation, unemployment, and recession can impact the concept of a decent living wage in America, considering our audience’s desire for financial freedom.


Inflation, the continuous increase in the prices of goods and services, is essential when defining a living wage. As inflation progresses, the purchasing power of money decreases, affecting the ability to meet basic needs. For those over 40 and seeking financial freedom, it’s crucial to understand how inflation can influence the adequacy of a living wage.

A living wage needs to be periodically adjusted to keep up with the rising cost of living. But how often should these adjustments take place? And what are the best methods to implement them?


Unemployment has a direct impact on wages and living conditions. Higher unemployment rates often lead to stagnant or declining wages as the labor force becomes more competitive. This can make it challenging for those over 40 looking to shift careers or enter new industries, affecting their potential to earn a decent living wage.

Moreover, the pressure to accept jobs with lower wages may intensify during high unemployment. Is it still possible to achieve financial freedom in such circumstances? What strategies can secure fair compensation in a competitive job market?


The effect of a recession on living wages cannot be understated. For instance, the Great Recession of 2008 led to a substantial decline in wages, increasing the income disparity and making it even more difficult for some to achieve a decent standard of living. For people over 40, this can serve as a harsh reminder of the importance of being financially resilient during times of economic downturn.

In the face of a recession, are there any viable approaches to ensure a living wage remains intact? How can individuals and policymakers work together to promote a sustainable living wage, even in challenging economic times?

Policy and Legislation

U.S. Congress

In recent years, the U.S. Congress has tackled the issue of decent living wages through various proposals and legislation. One of these is the Original Living Wage Act (H.R.122), which aims to increase the federal minimum wage to a level that enables a four-person household with two children to live above the poverty line. But what about the varying costs of living in different states?

To address this, there have been other proposed bills, such as the Living Wage Now Act (H.R. 325), which focuses on different aspects of the issue. As a responsible adult, you care about the well-being of your family and yourself, which brings us to another interesting concept – Universal Basic Income (UBI).

Universal Basic Income

Universal Basic Income (UBI) is an idea to provide a guaranteed, no-strings-attached, regular income to every citizen, regardless of their employment status. UBI has potential advantages like reducing income disparity, encouraging entrepreneurship, and guarding against job loss due to automation. On the surface, it may seem like an attractive solution to financial security, but what are the potential drawbacks?

Possible drawbacks include funding concerns, fears of reduced incentives to work, and likely inflationary pressures. Only some people agree on the net benefits of UBI, and further research and experimentation are needed to understand its full implications. Nevertheless, the concept of UBI remains debated and discussed in policy circles.

By examining congressional efforts and alternative ideas like UBI, you can stay informed and proactive in understanding the complexities of achieving a decent living wage for all in the United States.

Budgeting for a Decent Living Wage

A decent living wage is fundamental to financial freedom. How can you budget effectively to ensure you’re meeting your needs and working towards a comfortable future? One popular method is the 50/30/20 budgeting rule.

This rule implies that 50% of your income should cover necessities like housing, groceries, utilities, and healthcare. Around 30% should be allocated for discretionary spending like entertainment and hobbies. In comparison, the remaining 20% should be saved or invested for the future. This guideline offers a practical, straightforward approach to managing your finances.

But how does this relate to the living wage across America? According to GoBankingRates, the living wage varies significantly from state to state. To better understand your situation, knowing the cost of living in your area is crucial.

A decent living wage in one state might not be enough in another. So, how can you budget effectively to maintain a decent living wage wherever you are in America? The key is to adjust your 50/30/20 budget based on your unique circumstances.

Remember, staying disciplined and monitoring your expenses regularly is essential to keep on track. Are you spending too much on unnecessary items? Can you reduce certain costs to meet the 50/30/20 rule more effectively? Being confident, knowledgeable, and proactive in managing your finances will help you achieve financial freedom and maintain a decent living wage in any area of the country.

Financial Freedom: Beyond the Living Wage for the 40+ Generation

The Myth of Traditional Financial Advice

In the kaleidoscope of financial landscapes, the age-old adages of “save for a rainy day” or “put your money in a safe, interest-bearing account” seem almost quaint. For the 40+ generation, these tidbits, once considered golden, now shimmer with a tarnished hue. The financial horizon has shifted, with retirement paradigms evolving and pensions becoming as elusive as a mirage. The old rules? They’re in the rearview, and it’s high time we recalibrate our compasses.

The Power of Passive Income Streams

Imagine a river, its waters flowing endlessly, nourishing everything in its path. That’s the magic of passive income. It’s not just about the money trickling in; it’s about creating ecosystems of wealth. Real estate, with its promise of rental returns; dividends that sing the song of stocks; and the vast digital realm, where online ventures beckon with the allure of untapped potential. For those over 40, this isn’t just a dream—it’s a tangible reality, a safety net woven with threads more vital than the confines of a 9-to-5.

As for ourselves, we now focus on generating passive income streams rather than climb the corporate ladder.  Primarily we do this through real estate investing (particularly in Single Family Rentals), but also through side-hustles as well.

Redefining Success and Financial Security

Success. A word laden with societal expectations, often equated with hefty bank balances and luxury cars. But what if success was the peace that comes from financial literacy? The empowerment of understanding investments, risks, and rewards? For the 40+ brigade, it’s not just about accumulating wealth—it’s about wielding it wisely. It’s about embracing a mindset where financial freedom isn’t a distant dream but a reality.

Actionable Steps to Achieve Financial Freedom

The journey to financial freedom isn’t a sprint; it’s a marathon punctuated with milestones that deserve celebration. Start by assessing your financial health, peeling back the layers to understand assets and liabilities. Set goals, not just in numbers, but in dreams—perhaps a vacation home or a world tour. Chart out a roadmap, but remember, taking detours is okay. Seek mentors, those who’ve trodden these paths, their wisdom illuminating the way. And never stop learning, for knowledge isn’t just power—it’s freedom in finance.

Frequently Asked Questions:

Q: What is a decent living wage in America, and why is it essential for financial planning?

A: A decent living wage is the income that ensures a comfortable standard of living, covering essential expenses such as housing, food, transportation, and healthcare. It’s crucial for financial planning as it provides an understanding of the income required for a decent standard of living, enabling individuals to make informed decisions about their financial goals and investments. 

Q: How can one calculate a living wage in America?

A: Individuals can use resources like the MIT Living Wage Calculator to calculate a decent living wage. This tool estimates the minimum income necessary for an individual to cover their living expenses and stay above the poverty line in different states. By considering personal circumstances and financial goals, the tool accurately depicts the required income for financial freedom.

Q: How does the living wage vary across states and cities in the U.S.?

A: The cost of living, and thereby the living wage, varies significantly across different states and cities in the U.S. For example, states like New York and California are known for their high living costs, requiring a higher living wage. On the other hand, states like South Dakota and Arkansas have a lower cost of living and, consequently, a lower living wage. Similarly, major cities like New York City, Boston, and San Francisco require a higher living wage due to their high living costs.


  1. Living Wage and How It Compares to the Minimum Wage  ↩2 ↩3
  2. What a ‘Living Wage’ Actually Means – The New York Times  ↩2 ↩3