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By Adam Uzialko, Updated Sep 20, 2022

Employees who earn enough to get by improve performance and overall business.

Paying a “living wage” requires more than just meeting state and federal minimum wage requirements. Living in certain communities is more expensive and requires people to earn more to sustain basic life necessities. As an employer, paying a living wage can feel like a burden to the bottom line, but it can be a powerful investment in your people that positively affects revenues.

A living wage is an hourly employee pay rate that each working adult in a household requires to meet typical expenses for essential goods, like food, medical care, housing and transportation. Living wage values vary depending on the household’s size, the composition of adults and children, and location. ...

“When you’re setting something like the federal minimum wage, you want to consider the averages,” said Holly Sklar, CEO of Business for a Fair Minimum Wage, an advocacy group that supports gradually raising the floor. “When talking federally, it’s a floor that’s adequate for the country as a whole. When you’re talking about an individual, or city, or a state, you look closer to home to determine what is living wage.”

If a business owner wants to offer a living wage to their employees, they have a handy tool to determine the right number. The Massachusetts Institute of Technology (MIT) developed a living wage calculator that covers every county in every U.S. state. The calculator shows the living wage for households of varying sizes as well as the local poverty and minimum wages. ...

Sklar and her organization believe offering a living wage (and indeed raising the mandated minimum wage) will yield the most positive outcomes for individual businesses and the economy at large. 

Sklar points to the long-term benefits of paying employees more, which ... would be more effective in retaining employees, boosting morale and increasing long-term productivity.

“One of the things our business members stress is looking at the whole picture,” Sklar said. “Low pay often means high turnover, and with a reduced turnover [due to higher pay], businesses often see substantial savings in recruiting and training costs. There are also savings from managers able to spend time on more productive tasks, as well as less product waste through lower error and accident rates.”

Sklar added that customer service tends to be significantly better when wages are higher, resulting in a happier, more loyal customer base.

“We know that frontline employees often make the difference between repeat customers and lost business,” she said. ...

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