New Estimates of Livable Wages for Maine

(Augusta, ME)  The Maine Center for Economic Policy released today Getting By: Maine Livable Wages in 2004. The report calculates basic needs budgets by adding estimated costs of food, housing, telephone, health care, transportation, child care, clothing, personal care and household goods, and taxes for five family sizes in the sixteen counties and four “urban” areas of Maine. A “livable wage” is calculated for each family size in each area by estimating the annual gross income required to yield after-tax income required to meet the basic needs budget.

“Statewide, on average, an earner with one child in Maine needs to earn an hourly wage of $14.84 full-time, or $30,865 annually, to meet a basic needs budget,” reported Christopher St.John, Director of the Maine Center for Economic Policy. “This is a concern for families, considering that Maine’s median wage in 2004 was $12.73. This means that over half the earners in the state were not making enough money to meet the needs of one person and one child.” Estimates show the same held true for single parents with two children ($18.15) and two parents, with one earner, raising two children ($14.69). Economically, life appeared to be easier for families with two earners and two children where each earner needed an hourly wage of $11.51 to meet their basic needs. 

Disparities in the livable wage estimates emerge across the state. An earner with one child needed an hourly wage of $11.87 in Washington County and $10.37 in Somerset County as compared to $15.13 in Sagadahoc County and $15.21 in the non-metropolitan areas of York County. Even greater differences appeared in Maine’s metropolitan areas where the same earner with one child needed, $17.37 in the Kittery-Portsmouth area and $17.32 in the Portland metropolitan area.

The 2004 budgets also reveal striking “cliff effects.” The cliff effect occurs when a family receives some government benefit at one level of income and then becomes ineligible for that assistance when their income increases. Such benefits can include publicly subsidized health care, earned-income tax credits, or renter’s property tax rebates. In Washington County a family of two required an estimated annual income of $24,683. In York County (excluding the metropolitan areas around Portland and Kittery) the same family needed $31,628, a difference of $6,945 per year. Approximately half of this difference is due to the cost differences of housing and health care in the two regions and the resulting tax effect. The York County family ends up in a higher state income tax bracket, due to the higher cost of living in southern Maine (e.g. rent). This results in the loss of the federal Earned Income Tax Credit. The family in Washington County owes only $1,247 in net taxes while the York County owes $4,172. The higher income (> 200% poverty level) also disqualifies the York County family from receiving health care assistance (MaineCare) for their children. Other than Washington County; only five other counties (Aroostook, Kennebec, Oxford, Penobscot, and Somerset) have living expenses low enough where families earning a livable wage are eligible for a considerable tax break and assistance with health care expenses. 

The report also highlights the disadvantages faced by single-parents. In York County more money is required by one parent raising one child than by two parents (one earner) raising two children. The single parent with one child has basic needs expenses of $27,456 but has to earn a gross income of $31,628 due to a combined state and federal tax bill of $4,172. In contrast, a family of four in York County has basic needs expenses of $29,676 but only needs a gross income of $31,090, because their net tax bill is only $1,414. Additionally, having one parent at home, the family of four does not pay money for child care. The single parent, without help, must pay $5,724 per year. The same pattern is seen in the other counties and metropolitan areas.

Lisa Pohlmann, Associate Director of the Center notes, “The basic needs calculations show how inadequate the federal poverty level is in determining whether families can meet basic needs without assistance. The statewide average ‘livable wage’ of $14.84 for a family of two is 241% of the federal poverty level. The costs of housing, child care, and health care continue to grow faster than the cost of living, while the poverty level has increased only at the rate of the consumer price index.”

The report recommends several state policy changes that could assist the growing number of “working poor”. These include providing health care and other subsidies to households at higher income levels; raising the state minimum wage; making the state Earned Income Tax Credit refundable and a larger percentage of the federal earned income tax credit; increasing the property tax “circuit breaker”; and setting higher wage standards for publicly contracted jobs and benefits to private businesses. 

Recognizing that thousands of workers in the Maine economy earn less than livable wages, including many workers in publicly supported occupations such as health care, child care, and state and local government. The legislature formed a livable wage commission, which met for the first time October 5, 2005. Chaired by Senator Phil Bartlett (Cumberland) and Rep. Arthur Lerman (Augusta), the Commission includes Senator Dana Dow (Lincoln), Reps. Brian Duprey (Hampden) and Deborah Hutton (Bowdoinham), Peter Gore of the Maine Chamber of Commerce, Sarah Standiford of the Maine Women’s Lobby, Mike Roland of the Maine AFL-CIO, and representatives of the Departments of Labor, Health and Human Services, and Economic and Community Development.

The commission is charged with the duty of defining a “livable wage”; determining how many people are earning below that wage; evaluating the effectiveness of current programs in helping families meet their basic needs; developing new initiatives to ensure those basic needs are met; and estimating the impact on the Maine economy. The commission will use the MECEP report and other national work on livable wages as a resource for their efforts and will work toward introducing legislation in December that strengthens families’ ability to meet basic needs.