Minimum wage is a fixed amount per hour that employers must pay employees within certain employment classes, while a living wage is the amount an employee must earn to enjoy an equitable standard of living within a specific area or region. The minimum wage is a matter of public policy, while the living wage is more subjective and based on what households must pay to meet basic needs while living in a particular location. The average living wage is significantly higher than the current minimum wage required by law, leading to living arrangements that include sharing living space and expenses with friends or relatives.
The terms “minimum wage” and “living wage” are used to describe certain aspects of wages and salaries related to employee benefits. There is some confusion about what is meant by each term, so it is necessary to define the differences between each type of salary. Essentially, a minimum wage is a fixed amount per hour that employers must pay employees within certain employment classes, provided those employees meet the requirements set forth by the wage laws that apply in a given jurisdiction. By contrast, a living wage is the amount an employee must earn to enjoy an equitable standard of living within a specific area or region.
One of the main differences between a minimum wage and a living wage is that the former is often fixed while the latter is variable. For example, a national government may set the minimum wage that applies to all employees covered by applicable wage laws, and employers in all parts of the nation must comply by paying qualified employees at least that minimum wage. At a living wage, the amount required to enjoy a decent standard of living may be higher in some areas, such as metropolitan areas, while a lower wage would allow for that same level or standard of living in a different area such as a rural location. .
Another difference between the minimum wage and the living wage is that the minimum wage is a matter of public policy, and the amount set is based on financial analysis conducted under the auspices of a government entity. The living wage is more subjective and is based on what households must pay to meet basic needs while living in a particular location. Governments do not set living wages, although it is not unusual for data on the average cost of living in different areas to have some impact on how a minimum wage is determined for an entire country.
There are situations where a minimum wage and a living wage can be very close in terms of the actual amount. This is true in areas where the cost of living is relatively low. More often than not, the average living wage is significantly higher than the current minimum wage required by law, leading consumers who must work for minimum wage to make living arrangements that include sharing living space and expenses with friends or relatives. When the gap between the minimum wage and the living wage grows too quickly, many governments will intervene in the function of the economy, often working to promote cost decreases that slow the progress of the living wage and prevent further disparity in the broader economy. .
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