How much does it really cost to afford life in NJ? Living Wage Calculator can tell you
Inflation remains an issue and rent is soaring each year. The cost of living in North Jersey is anything but cheap. Which raises the question, how much is a livable wage in our area?
MIT Professor Dr. Amy K. Glasmeier created a tool called the Living Wage Calculator along with researcher and geographer Tracey Farrigan that was first published under the university's name in 2003, and now operates under the Living Wage Institute.
This device was created as an "alternative measure of basic needs" compared to the federal poverty line that policymakers often use as a threshold to determine an individual's standard of living. The creators of the Living Wage Calculator argue that the poverty line "no longer reflects the true cost of living in a modern economy."
This tool, constantly updated to reflect the present economy, is used as an estimate of what employment earnings one full-time worker requires to cover or support the costs of their family's or their own basic needs while being self-sufficient.
It uses a thorough and dense methodology that takes many factors into consideration such as different family types, geography and cost components. From there to calculate the living wage of a certain area the basic needs budget must be added together, plus all relevant taxes.
The Living Wage Benchmark is primarily meant to be used at the county level according to their technical documentation, but estimates are provided for states and other geographies from the U.S. Census Bureau’s to "aggregate a weighted mean."
Their website offers a detailed and updated outline along with the data used and collected for the calculations.
What is the Living Wage in North Jersey?
According to the Living Wage Calculator, the living hourly wage for someone living in Bergen County with no children is $24.87 per hour.
Two working adults with one child should both be making $25.18 an hour for a living wage, according to the calculator. Here are some other family scenarios and their living wages for Bergen County.
One adult with one child: $45.82 per hour
One adult with two children: $59.50 per hour
Two working adults with zero children: $17.29 per hour
Two working adults with two children: $32.25 per hour
Two working adults with three children: $39.83 per hour
For Passaic County, the Living Wage Calculator says the hourly living wage for a resident with no children is $23.03 an hour. If that person wanted to start a family with a working partner and had one child, the hourly living wage for those two Passaic county residents would be $22.10. Some other Passaic County living wages for different family types:
One adult with one child: $39.49 per hour
One adult with two children: $48.23 per hour
Two working adults with zero children: $16.17 per hour
Two working adults with two children: $26.82 per hour
Two working adults with three children: $31.05 per hour
All New Jersey counties have a designated living wage assigned to them with all multiple family combinations listed. For individuals with no children the living wage for Essex County is $23, for Morris County it is $26.58 and $24.72 for Sussex County. Even though the tool is meant to be used for a more regional county level, through estimations the Living Wage Calculator believes the living wage for the state of New Jersey should be $24.76 for one individual with no children.
Expert analysis
Professor Parul Jain, a finance and economics professor at Rutgers Business School, says she is familiar with the Living Wage Calculator model.
Jain said all the data taken into consideration is comprehensive. "I think the methodology is pretty sound, the data collection and compilation of the different counties, there was a massive amount of work that is seen here, and so for the most part I would trust these numbers." She called the estimates given to the different family types for Bergen and Passaic counties fairly plausible.
She observes how there is a disconnect between what the model says is a living wage and what the state has made the minimum wage, which stands at $15 an hour.
Some disconnects are more extreme than others. For one working adult with no children in Bergen County the living wage is set at $24.87. The separation between a living wage and the state minimum wage grows further apart looking at larger size households as two parents with three children would both need a living wage of $39.83, but a household with two working adults and no children requires a $16.90 living wage for each adult.
With all the updated data, Jain called the estimates for the state as whole fair, but thinks estimates of larger households may be a little exaggerated, as she says "there may be a little extra sitting there at the upper end." Jain applauds the extensive research that went into the components. She would only consider potentially adding other categories like the age of the working adults.
The methodology
The methodology for the Living Wage Calculator can seem complex but essentially credible data is used to calculate the costs of eight basic needs plus income and payroll taxes at the county and metro levels.
This series included wage estimates across 3,143 counties and county equivalents across the United States. Across different geographies, 12 different family types are accounted for in the model. The eight basic needs in the cost components are child care, civic engagement (education, fees and administration, entertainment, etc.), food, health care, housing, internet and mobile, transportation and other necessities (example: personal care products).
The five core components on the 2024 benchmark documentation are geography, families, costs, calculation and aggregation.
The hourly living wage is calculated through the cost components (basic needs budget) plus taxes on the federal, state and local level divided by working adults and the number of working hours.
The equation used is as follows, Hourly living wage = [[Basic needs budget (after tax) +[Basic needs budget (after tax)(federal income tax rate) + Basic needs budget (after tax)(state income tax rate) +Basic needs budget (after tax)(0.5FICA tax rate)]] / number of working adults] / 2,080 hours.
The creators of The Living Wage Calculator take note that this model is only a small "step up" when attempting to measure someone's standard of living. The tool only considers the basic needs an individual or family, and does not take into account other specific expenses.
Their user's guide says, "It does not budget funds for pre-prepared meals or those eaten in restaurants. It does not include money for unpaid vacations or holidays. Nor does it provide money income to cover unexpected expenses such as a sudden illness, a major car repair, or the purchase of a household appliance such as a refrigerator."
The creators said this model can separate the "financial independence of the working poor" and those who "need to seek out public assistance or suffer consistent and severe housing and food insecurity." They would define this living wage as a better defined minimum subsistence wage for those in the United States.
Sources
The data sources for the model vary from government statistics to other bureau reports.
U.S. Department of Housing and Urban Development’s 2024 Fair Market Rents, Housing & Transportation Index (H&T Index) and American Census data are all credited by the Living Wage Calculator, among other sources.
The data will continued to be updated in the future as the last update for the model was in February of the year. The website also offers a contact page for those interested in questions.
This article originally appeared on NorthJersey.com: How much does it cost to afford life in NJ? Tool can calculate it
