North Carolina communities are undergoing rapid economic change at different rates in different parts of the state. Issues such as affordable housing, appropriate rate levels for public services, costs of commuting and wage growth (or stagnation) are now key for CED officials, whether your community is still struggling or dealing with the challenge of intense growth. How do we know what ‘affordable’ is in our own hometowns?
The debate over higher minimum wages, which played into the North Carolina Legislature adopting a new, higher minimum wage for many state employees as part of the recently passed state budget, or the argument for a ‘living wage,’ revolves around employees being able to afford to live in the communities in which they work. In fact, the whole idea of anything – housing, food, utilities – being affordable in a community depends not only on wages and income but how much those items cost in that location.
This question came to the SOG recently. Combined with recent CED blogs on affordability of public services and workforce housing, it led to the (re)discovery of a valuable national data source on cost of living at a local level buried within a project around living wages – the MIT Living Wage Calculator. The idea of this calculator was started in 2003 by a researcher at Penn State University as part of a Ford Foundation project on poverty policy. Its current form was established in 2004 at MIT and is maintained there.
Current measures of poverty rely only on resources flowing into a household, not on the costs of goods and services purchased with that income. The goal of the living wage calculator was to expand on the concept of poverty to what it would take to sustain a household at a minimal level in any community. An income of $50,000 has a different purchasing power in Charlotte than it does in Statesville or Clinton. In essence, the goal was to create a tool to calculate cost of living for different types of households. The calculator estimates costs of food, child care, medical care, housing, transportation, and other expenses (personal items, cleaning supplies, clothes). The creator emphasizes that costs represent a household minimum, and does not include vacation or leisure costs. From the total household costs, a living wage is relatively easy to calculate.
The weakness of the calculator is that like all such tools, it ultimately relies on government data, and as such, is lagged. The data in the current calculator are based on 2015 or 2016 reports. Therefore, when housing costs are rising, especially in metro areas, cost estimates can be significantly under-estimated. In addition, outside of the 15 metro areas included, within counties, especially geographically larger ones, there can still be significant variation in certain costs, such as child care.
The value, however, is that in one place, it combines costs across a range of goods and services, something that is not easily found elsewhere, and that it does so consistently across the entire state, so one can safely make geographic comparisons. To estimate cost of living in current terms, one can take estimates of growth for larger items, such as housing costs, and apply it to that portion of the total, making similar calculations for other items based on reasonable assumptions of price growth in the past two years.
The other attribute that is attractive is that data are available with a variety of household compositions, from a single individual to a single working adult with three children to two working adult households to part-time workers. And finally, the calculator presents the estimated average salaries for a series of common professions, so that you clearly see that even two years ago, most professions would allow you to live in Vance County because of lower costs, but, for traditionally low wage professions, not in Buncombe or Wake counties.