Near-historical price increases in basic commodities such as food and gas have brought scrutiny to issues at the heart of the economy.
Egg prices rose nearly 50% last year. Meanwhile, milk and bread prices jumped by about 15% each. Gas prices remain 10% higher than they were a year ago, even after falling from their summer peaks.
While price gains have slowed in recent months, they remain near 40-year highs.
For some, higher wages softened the blow. Nearly half of US states will raise their minimum wage by early 2023. Meanwhile, some major companies recently increased starting salaries. For example, Target increased its base salary to $24 an hour last year.
As costs continue to rise and workers try to catch up, buzzwords like ‘poverty wage’, ‘minimum wage’ and ‘living wage’ reappear in the lexicon, asking what does adequate income mean? It’s shaping the conversation about who decides where to withdraw money from. line.
However, the definitions and meanings of these terms can be overlooked, confusing centuries-old issues affecting both workers and employees.
“Ultimately, this comes down to the philosophical question of what is essential,” Steve Allen, an economist at North Carolina State University’s Poole College of Management, told ABC News. rice field.
The difference between poverty wage, minimum wage and living wage is: Why it matters:
poverty wages
A poverty wage is the wage level below which a full-time worker falls below the US poverty line, an income threshold set annually by the federal government.
The government began measuring the threshold in the mid-1960s, shortly after then-President Lyndon Johnson declared a “war on poverty.” Social Security Administration employee Molly Oceanxey developed the scale by multiplying the cost of food by 3, because at the time many economists believed that food should account for one-third of a household’s budget. .
Amy Glasmeier, professor of economic geography at the Massachusetts Institute of Technology and creator of the Living Wage Calculator, told ABC News:
The method of calculating the poverty line remained the same over the decades that followed, although authorities updated the measure each year to adjust for inflation. Although a unified index, the federal government has developed separate indices in Hawaii and Alaska.
Many economists consider the poverty line to be outdated because it estimates the overall financial situation from a single cost category and remains constant regardless of differences in cost of living between regions.
“National data combines New York and Tupelo, Mississippi,” she said. “That’s the difference between Mars and America.”
The poverty line is used to determine eligibility for many federal benefit programs, including the Supplemental Nutrition Assistance Program (SNAP), commonly known as food stamps. Assistance with school meals.
Last year, the poverty line for a single household was $13,900. Spreading this over the number of hours a full-time employee works in her year, that’s about $6.80 per hour.
Health and Human Services, a federal agency, will release the 2023 poverty line later this month.

minimum wage
Minimum wage is the legal minimum wage that a company can offer to its employees. Importantly, minimum wages are set by elected officials within federal, state, or local governments, rather than being derived from calculations of living standards for a particular area or household size.
“When an employer says, ‘How much should I pay?'” says Glasmeier. “That’s minimum wage.”
The United States set the first federal minimum wage at $0.25 in 1938. In the midst of the recession, jobs were scarce and workers were losing influence.
The federal minimum wage last increased in 2009 is $7.25 an hour. Adjusting for inflation, the federal minimum wage last summer hit its lowest level since 1956, the left-leaning Economic Policy Institute has found.
Thirty states have raised minimum wages above federally guaranteed wage rates, including 23 states that imposed rate increases earlier this year. Washington state has the highest minimum wage, offering workers an hourly rate of $15.74.
Additionally, earlier this year, 27 cities and counties, from San Diego, California to Portland, Maine, increased their minimum wages. The city with the highest minimum wage, Sea-Tac, Washington, increased the base salary to $19.06.
Nationwide calls for a higher minimum wage intensified 10 years ago when fast food workers launched a campaign called “Fight on $15” to raise wages and unionize the fast food sector. .
living wage
A living wage is a wage rate that allows a particular worker or household to meet basic needs such as housing, food, medical care and transportation.
Unlike the poverty line, which estimates a country’s baseline self-sufficiency based on food costs, the living wage is typically derived from a more complex calculation that takes into account additional costs and differences in cost of living between regions. .
According to Allen, the living wage is usually higher than the poverty wage because it captures household expenses more broadly, including the need to save in case of an economic emergency.
“We’re factoring in a broader set of spending that they feel is a bare minimum,” he said. “It contains enough that households can stand to save something.”
There is no single reliable living wage measure. A popular example is the Massachusetts Institute of Technology Living Wage Calculator created by Grassmeier.
The calculator first asks the user to enter a location, such as a city or metropolitan area, and can incorporate specific regional costs into the metric. This metric also provides multiple numbers that correlate with the number of adults and children within a given household.
For example, in New York City, the living wage for a one-adult household with no children is approximately $22.70. In Montana, the living wage for the same household is about $16.30.
Glasmeier said the living wage index helps Americans understand how much money they need to buy basic necessities.
“As a nation, we are as good as the state of our people,” said Grassmeier. , because there will always be losers.”