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Calculating A Living Wage

Calculating A Living Wage

On this page we provide…

  • the definition of a living wage;
  • links to living wage calculators and related resources;
  • guidance on using those calculators and/or local data to determine an accurate living wage for your business and locale; and
  • AJP’s own spreadsheet calculator (Google Sheets) to help you customize data from other living wage calculators to account for your workplace’s compensation package and other local cost of living data, arriving at a more accurate living wage for your business.
To get started quickly, jump to our instructions on using the AJP’s spreadsheet, but note that the rest of this page provides important information to make sure your calculated living wage is accurate.

About living wages #

A living wage provides for life’s necessities and a dignified life. Living wages are calculated based on local cost of living and the number of dependents that a wage earner must support. For Food Justice Certification purposes living wage rates are determined based on the needs of one individual. FJC defines a living wage (Standard 3.3.1.) as covering a worker’s needs for

  • adequate nutrition;
  • clothing and sanitary needs;
  • health care;
  • transportation;
  • housing and utilities; and
  • savings (at least 10 percent of income).

A living wage can be adjusted for in-kind or non-monetary compensation: for example, if an employee’s benefits include food or housing, those are expenses that the employee would not have to pay independently from their earnings. For FJC purposes, a living wage rate will be calculated based on the actual value of any benefits and the actual typical expenses of each of the categories outlined above, relying on local cost of living data.

Living wage calculators look at average monthly or annual household costs and then divide that figure to arrive at an hourly wage, assuming 40-hour working weeks without overtime. For FJC purposes, living wage calculations must not include weekly hours worked beyond 40 (or 48, depending on job classification), which are considered overtime and strictly voluntary under the FJC standards. Note also that calculators may account for some public subsidies (such as in the calculation of average health care costs) but not others (such as whether a worker qualifies for, or is able to secure, food stamps or subsidized housing).

AJP standards require that employers must either 1) pay employees living wages, calculated for the local conditions; or 2) meet several conditions:

  • show the farm’s accounting to employees in order to explain why they can’t afford to pay livings wages yet;
  • negotiate wages with employees;
  • work with employees to develop a plan to raise revenues and lower costs, in order to achieve living wages;
  • raise wages when profits increase;
  • pay the highest paid employee not more than 8x the lowest paid employee.

The same requirement applies to wholesale buyers, who must either 1) pay suppliers a price that covers the actual cost of production, including living wages for all employees and owners; or 2) buyers must document their inability to pay a fair price by sharing their financial records and negotiate a price in good faith.

Determining a living wage for your operation #

The most accurate way to determine a living wage is through direct dialogue with employees (in the case of an employer) or suppliers (in the case of a wholesale buyer). Using regional benchmarks or a living wage calculator simplifies the process, but these institutional datasets have difficulty accounting for local variation, special circumstances, or fast-paced change. Employers and employees, and suppliers and buyers, need to talk to each other: this is the basis for good faith negotiation, even when living wages are not immediately achievable in a given business.

Note that the living wage calculation serves two distinct purposes:

  1. Setting a benchmark: Businesses should know how their current compensation measures up against people’s needs. This applies as much to employees as to supervisors and business owners. Any discrepancy between compensation and needs must inform a business’s future financial goals, even if it feels hard or impossible to afford living wages. This information is important for communicating a business’s needs to the community and to buyers: knowing the cost of providing living wages is a key part of negotiating fair prices.

  2. Certification: Food Justice Certification requires employers to either pay each worker at least a living wage calculated for a single adult with no dependents or meet a number of other criteria (outlined here). Calculating the living wage specifically for a single adult with no dependents thus determines which criteria your business must satisfy to qualify for FJC. Depending on their household situation, this amount may unfortunately be different from the wages that your workers need to cover their costs and achieve financial stability. This is why the FJC standards include requirements for constant improvement and for good faith negotiation over working conditions with workers.

To calculate a living wage for your business: #

1. Start with the Definition  #

For Food Justice Certification purposes, work towards estimating costs for each of these categories:

CategoryMonthly Cost ($)
Food & nutrition
Clothing & sanitary needs 
Health care 
Housing & utilities 
Savings (10% of income) 

Note that MIT and other calculators also account for average costs associated with phone and internet access and basic entertainment. These items are not specifically codified into the AJP’s minimum definition of a living wage but may be in the future. MIT & other calculators also provide estimates of taxes, which, while not specifically mentioned in the AJP standards, must be included in any living wage calculation.

Here we include guidance for calculating costs in each of these categories.

Nutrition #

Many living wage calculators use the USDA’s “low-cost food plan” as a benchmark. The Food Plans are updated monthly by USDA based on national information and broken into categories by age and family size. Many calculators use the Male age 19-50 as their estimate for an individual. In addition, there are different levels of the food plan. The “Low Cost” level is supposed to be modest without being unhealthy, meaning that lower cost foods are selected for all meals including snacks and that all meals are assumed to be cooked at home.

These estimates may not be an accurate fit for every employee. Some farm employees may receive healthy fresh food from the farm, reducing their food costs. Others may have particular dietary needs that make it impossible to conform to the low cost food plan. Some workers may not have time or suitable kitchens for cooking their meals at home. AJP recommends looking at the food plan levels and considering if they are appropriate for employees’ situations. In addition, the food plans give estimates for families. In the event that an employee is the breadwinner for a family, employers and farmers can use this as an estimate to adjust the living wage appropriately.  

Healthcare #

It is difficult to account for every individual’s medical needs, but a living wage should include an estimate of average basic health needs, including health insurance and out of pocket expenses.

The MIT calculator’s estimates of health care costs assume an employer is sponsoring the employee’s health plan. This is not the case on many farms. Indeed, with premiums steadily rising and significantly outpacing inflation, many small businesses that do offer health insurance to their employees are dissatisfied with the level of insurance they can afford to offer. And under the Affordable Care Act, if an employer offers a group health plan, employees are not eligible for any potentially free or low-cost plans available through Medicaid or a state or federal Healthcare Marketplace. Some small businesses choose to accept the tax penalties for not providing a group plan to employees so that employees can get subsidized plans, typically with lower deductibles. This situation is challenging and distressing to all parties, and with the Biden administration having completely abandoned the idea of single-payer health insurance, there is no legislative proposal in sight that seeks to resolve this quagmire.

This situation makes it all the more important for employers to consult their staff about what their health care costs are and work together to find the most affordable way to get the best quality care.

Estimating health costs: In addition to asking your staff what their health expenditures are, consult these resources for average costs:

  • EPI’s Family Budget Calculator estimates the cost of healthcare through an ACA marketplace, plus average out-of-pocket expenses. You can also look up Average Health Care Marketplace Premiums (KFF) to see what plans are likely to cost in your state.

  • MIT’s calculator provides a breakdown of their calculations, including their estimate of healthcare costs. Look up a living wage for your area and scroll down the page to see the breakdown. Their estimate is the cost of an average employer-sponsored plan plus average out-of-pocket costs.

Child Care #

For employees who have children, childcare is an essential expense that must be included in a living wage. In the past, AJP has required that child care be part of a living wage for employees with children, but the most recent (2019) revisions of the standards removed this requirement, establishing the baseline living wage requirement as a living wage for a single adult with no dependents. While child care costs are not required to be covered for purposes of Food Justice Certification, an accurate calculation of a living wage must account for all basic household needs, including child care. It is still worthwhile to consider what a comprehensive living wage would be for workers and owners because this wage should be written into a business’s financial goals and negotiations with customers.

The organization Child Care Aware of America has put together an extensive study of child care types and costs in all 50 states. In humbling statistics, they note that for a couple, child care costs represent between 7% and 15% of their total income. For a single mother, this is from 24% to as much as 63%. For this reason it is critical to consider child care costs carefully in developing a living wage. MIT and EPI each use slightly different methods and datasets for calculating child care costs.

Transportation #

Transportation is a major expense and varies according to regional access to public transport, the length of commute, what kind of vehicle they can afford, etc. Tailor your calculation of transportation costs to the circumstances of your area. MIT’s living wage calculator relies on the Bureau of Labor Statistics data on average expenditures on transportation. EPI uses estimates from the Center for Neighborhood Technology based on BLS data and other sources and adjusted for family size.

For additional consideration: Some farms and employers may provide subsidized transportation to and from work. While this would not be sufficient to represent the entire transportation budget of an employee, it can be taken into account in calculating the living wage needs.

Housing #

Estimates of housing expenses are based on what is known as “fair market rents” for a given area, based on survey responses from people who have recently moved. This figure includes rent and utilities (water, sewer, electric, gas/oil) and excludes internet, cable/satellite, or phone service. The Department of Housing and Urban Development develops annual county-specific data on fair market rents.

Clothing, sanitation, other necessities #

While these are undeniably necessities, quantifying an average that individuals need to spend on these last items is difficult. The MIT calculator draws their estimate from the Bureau of Labor Statistics data on consumer expenditures on apparel and services; housekeeping supplies; personal care products and services; reading; and miscellaneous.

While certain expenses such as internet access, a cell phone plan, or basic entertainment are not specifically required to be covered for purposes of Food Justice Certification, an accurate calculation of a living wage must account for all basic household needs, including expenses such as these. As noted above regarding child care, it is still worthwhile to consider what a comprehensive living wage would be for workers and owners because this wage should be written into a business’s financial goals and negotiations with customers. MIT and EPI account for some of these expenses, including taxes.

2. Compare different definitions & calculators #

There are different living wage calculators that can help to quickly provide a snapshot for what a living wage may look like in your region. However, not all calculators are constructed equally, and not all calculators include the AJP categories that are covered in the living wage definition.  

Here is how the AJP categories compare to those covered in two popular calculators: 

CategoryAJP Living Wage DefinitionMIT Living Wage CalculatorEPI Family Budget Calculator
Housing & UtilitiesYesYesYes
SavingsYes (10%)NoNo
Other NecessitiesYesYesYes
(Broadband & Cell Phone)
(Phone service in Other)
(Civic engagement)

3. AJP Spreadsheet Calculator + MIT or EPI Calculator #

The simplest way to calculate an accurate living wage for your workplace is to 1) start with a living wage calculator (MIT or EPI or both), 2) check those numbers for accuracy (including by talking to workers), and 3) make adjustments based on your compensation package and local circumstances. AJP provides a spreadsheet calculator to help with this process.

How to use the AJP spreadsheet calculator #

  1. Enter your state, city, or county information into the MIT Living Wage Calculator or EPI Family Budget Calculator. MIT generates a chart of an hourly living wage according to household size and estimates for annual “typical expenses” in a table further down the page. EPI generates a list of typical monthly expenses. Whether you use data from MIT or EPI, you will enter the typical expenses (not the hourly wage) into AJP’s spreadsheet calculator.
MIT annual expenses tableEPI monthly expenses table
Screenshot of MIT typical annual expenses tableScreenshot of EPI typical monthly expenses table
  1. Use the AJP Spreadsheet Calculator (Google Sheets) to come up with a living wage for your workplace. Make a copy (File > Make a copy) of the Google spreadsheet for your own use.

  2. In the corresponding fields enter the estimated annual expenses (MIT) or monthly expenses (EPI). See tabs at the bottom of the browser window to choose between annual and monthly worksheets. Screenshot below.

Screenshot of monthly vs. annual expenses worksheets

  1. Add any modifications, adjustments, or additions in the next column, based on the employer’s contributions or local conditions. The spreadsheet formula will automatically add in 10% savings and divide the annual amounts to estimate an hourly living wage for someone working full-time.

The spreadsheet calculates a living wage based on either a 40-hour week or a 48-hour week. The AJP standards allow a regular farm work week to be up to 48 hours; AJP standards require that any hours beyond 48 are overtime, meaning (for FJC purposes) that such hours are strictly voluntary and not to be used for calculating a baseline living wage. Depending on the nature of the work, and depending on your state’s laws and regulations, workers may be legally entitled to time-and-a-half on any hours worked beyond 40, regardless of the AJP standards’ definition of “overtime.” Consult a local farm organization for help complying with wage and hour laws.

Part-time work: Note that, according to the AJP standards, part-time workers must be paid at an hourly rate that would equal a living wage for one individual if multiplied by full-time hours. In other words, part-time workers should be paid at least the same hourly rate as full-time workers who earn a living wage.

All calculators & linked resources #

These calculators can help you figure out a living wage for your workplace.

See also: