A Living Wage in Humboldt County:
A comparative study of three models Deborah Keeth Assistant Director Humboldt Economic Index September 1999
The ability to earn a wage that can support a household at a decent standard of living is a goal that most of us in Humboldt County can agree on and hope to achieve. Determining what a "decent standard of living" means, however, and how much income one needs in order to achieve that "standard," is more complex. Each household in the County is unique in composition, goals, economic status, needs, and desires. Trying to set a rigid definition for what a household is and what it needs to live comfortably would prove an impossible task, and that is not the goal of this paper. Instead the approach taken here is to develop a variety of different standards of living and then determine how our diverse County households fit into that range. For this discussion, three standards will be used: a minimum wage standard, a subsistence wage standard, and a hypothetical living wage standard. I will begin with a brief discussion of the history of the living wage movement. This discussion will be followed by the definitions and the reasoning underlying each of the three standards. The report will conclude with a look at how county households fit into the range of standards, and will briefly discuss some of the economic development tools that are available to help Humboldt County households achieve an acceptable standard of living.
A technical Appendix provided by the author describes in detail the methods and calculations used throughout this report.
The living wage movement began with British labor struggles in the 1870’s. The first appearance of the movement in the United States began with the national railroad strike in 1877. In the early 1900’s, a "social gospel" was heralded by religious leaders and upper-class women. Their intent was to help alleviate some of the social problems in the burgeoning urban centers. This social movement included fighting for worker rights, and specifically a minimum wage. The Depression gave rise to the New Deal programs, which supported raising worker purchasing power and stimulating demand by creating jobs and increasing wages. The minimum wage was set federally with the passage of the Fair Labor Standards Act in 1938.i It was effective in putting money back into working people’s pockets.
Designed over 60 years ago with no provision for regular updates, the minimum wage has not kept pace with inflation. Robert Pollin and Stephanie Luce, in their book The Living Wage: Building a Fair Economy, determined that "if the minimum wage had been rising at just the rate of productivity growth from 1968 until today – with low wage workers’ incomes buying a constant share of the economy’s increasing production of goods and services, but no more – then the minimum wage in 1997 would be $11.20. ii" The discrepancy between the current minimum wage ($5.15 per hour) and the pace of growth and inflation in this country, as well as the high number of working households living in poverty, has led many to call for a new standard – a living wage.
Wages and Standard of Living
Three income thresholds--minimum wage, subsistence wage, and a proposed living wage, are used to illustrate a variety of different living standards, and to show where Humboldt County households stand in relation to these standards. Many households living at or below the minimum wage or subsistence wage thresholds may qualify for government assistance programs. It is the attempt of this report to provide guidelines for gauging County living standards – not to compute all possible non-cash benefits available to households. Therefore, the dollar value for government subsidies that a household may qualify for is not included in determining any of the wage thresholds in this report. It is understood that both the minimum wage and the subsistence wage thresholds may be overestimated because they do not account for possible government assistance program benefits.
Minimum Wage Standard
As discussed above, a federal minimum wage was enacted in 1938. Congress has periodically enacted legislation to raise the minimum wage – specifically in 1955, 1961, 1966, 1974, 1978, 1989, and, most recently, in 1996. The graph below depicts changes in both nominal and inflation-adjusted federal minimum wage since 1954. iii
As can be seen in the graph, the real dollar minimum wage has been following a downward trend since a peak in 1968. This trend in the inflation-adjusted minimum wage indicates that the nominal growth in minimum wage has been less than inflation rate. Therefore, even though the nominal minimum wage has been rising, the purchasing power of minimum wage workers has been declining since 1968.
Since 1997 the federal minimum wage in the United States has been $5.15 per hour. A full-time worker (2000 hours each year) earning the minimum wage of $5.15 per hour would earn $10,300 each year, before taxes and transfers. As we shall see below, this income in only about 60% of what is required for a family of four to reach the federal poverty threshold.
Subsistence Wage Standard
The term "living wage" is one that is being used more frequently across the country as communities such as those in Humboldt County try to assess the standard of living of their residents. For each definition of what makes up a decent standard of living, there is a formula for determining what a living wage should be. Some definitions of a living wage found in the literature include the prevailing wage paid to a majority of workers in an area, the modal (most frequently earned) wage paid to workers in an area, or simply, economic justice. iv The most common formula used by groups developing living wage proposals is the amount needed for a family of four with one wage earner, one homemaker, and two children under 18 to live at the poverty line. v, vi
While I accept this definition as a useful gauge of household living standards, I believe it is better described as a subsistence wage. At this level, working households may still qualify for government assistance such as CALWorks, Temporary Assistance for Needy Families (TANF, formerly AFDC), food stamps, Medicaid, federal earned income tax credits, and general relief assistance. In addition, simply remaining at the poverty level and existing from "paycheck to paycheck" does not allow for expenses that many households would consider basic, such as home ownership. Consequently this definition will be referred to as the subsistence wage standard.
In order to understand the subsistence wage standard, it is necessary to understand how poverty is defined and determined. According to the Census Bureau, poverty is determined by "using a set of dollar income thresholds that vary by family size and composition to determine who is poor. If a family’s total income is less than the threshold, then that family, and every individual in it, is considered poor. The poverty thresholds do not vary geographically, but they are updated annually for inflation with the Consumer Price Index (CPI). The official poverty definition counts dollar income before taxes and excludes capital gains and non-cash benefits such as public housing, Medicaid, and food stamps. vii "
The dollar income thresholds for determining poverty were developed in 1963-1964 by Mollie Orshansky of the Social Security Administration. viii The thresholds were based on four food plans developed by the Department of Agriculture to determine a "nutritionally adequate diet." The cheapest food plan, the "economy plan" designed for "temporary or emergency use when funds are low," was chosen as the basis for the poverty threshold. ix The department of Agriculture determined that most families in 1955 spent about one third of their after-tax income on food. For a family of three or more people, Orshansky calculated the poverty threshold by multiplying the dollar value for food in the economy plan by a factor of three. It is important to note that Orshansky "presented the poverty thresholds as a measure of income inadequacy, not of income adequacy. x " She believed "if it is not possible to state unequivocally ‘how much is enough,’ it should be possible to assert with confidence how much, on average, is too little." Nevertheless the thresholds were adopted as the federal government’s official statistical definition of poverty. Several government agencies and task forces since 1965 have studied the poverty threshold and its relevance. While many recommendations have been made for revising and improving the threshold, only minor changes have been implemented.
The question remains, is the federal poverty threshold consistent with the cost of living in Humboldt County? It is commonly accepted that the cost of living in the state of California is higher than most other US states. Since the poverty threshold values do not vary across geographic regions, a relatively high cost of living in an area would require more than the official poverty threshold to achieve the subsistence standard of living. For example, average rent on an apartment in San Francisco is much higher than in a small mid-western town. Yet the federal poverty threshold is based on the assumption that households in both San Francisco and the small town can live on the same dollar amount. A national cost of living index sponsored by the Prudential Insurance Corporation and produced by Homefair.com rates Eureka’s cost of living as only about 5% higher than the national average. xi Therefore, it would seem that the "Redwood Curtain" protects Humboldt County households from the high cost of living in most of California, and that the national poverty standard roughly reflects local economic conditions.
The preliminary poverty threshold in 1999 for a family of four (two adults and two children under the age of 18) is approximately $17,098 per year, or $8.55 per hour for one worker at 2000 hours per year.
It is useful to estimate what a budget for a Humboldt County household at this income level might look like. Note that the monthly subsistence wage income for a family of four is $17,098 divided by 12, or $1,425.
It is important to note that while subsistence is proposed for this income threshold, $213 may not be sufficient for all the miscellaneous expenses a household may incur. See the Appendix for a more detailed discussion of how the cost and numbers were calculated.
Living Wage Standard
As discussed above, what determines a materially satisfactory standard of living, and in turn a living wage, varies from household to household. It is asserted here that home ownership is a universal household goal, and consequently a living wage standard can be constructed based on the capacity to purchase a home. The living wage standard adopted in this analysis is based on the income a household would need in order to qualify for a loan on a median-priced home in Humboldt County. Certainly there is a range of home quality and home prices in Humboldt County. The median-priced home is exactly in the middle, with half the homes more expensive and half the homes less expensive. Again, not every household will fit into this mold, but these figures can be considered a benchmark for what many would consider a materially satisfactory standard of living.
Ownership of the median priced home is an expense that is not included, or possible, at the subsistence wage in Humboldt County. In fact, studies have found that in 1997 "a median-income household ($28,930) in Humboldt county can not afford the median-priced home ($118,550). xviii " Median household income was found to be only about 85% of the income needed for a median-priced home in Humboldt County. For the state of California, the statistics are even more bleak. The same study found that median income was only about 61% of income needed for a median-priced home in the state. This disparity between income and home prices is not a nation-wide problem, however. For the United States as a whole, income in 1997 was about 107% of that needed for the median-priced home. This indicates that US households in general had more than enough income to afford the median-priced home.
There are two factors that explain why many California households cannot afford homes: income is too low and/or home prices are too high. According to 1990 Census data, California’s median household income was 19% higher than the national median income. California’s median home value, however, was nearly 150% higher than the national median home value. In Humboldt County, a similar gap exists. Median income in Humboldt County was 21% less than the national average, while the median home value in the County was 13% higher than the national average. The data indicate that in California, the most important factor limiting the ability of households to purchase homes is over-inflated home value. For Humboldt County, the limiting factor is a combination of lower-than-average income and higher-than-average home value. Detailing what income is necessary to afford the median-priced home in Humboldt County will put this disparity into perspective.
According to Humboldt Bank real estate underwriter Rodney Brunlinger, a household with good credit that put 5% down on the median-priced home in Humboldt County would need to pay about $1,002 per month on the mortgage. xix Generally, a house payment cannot exceed 33% of a household’s gross monthly income. This percentage is based on industry-wide repayment experience and a realistic estimate of other household expenses. With 5% down, a household would need to make at least $3,006 per month to qualify for a home loan on the median-priced home in Humboldt County. Consequently, in order to meet bank qualification requirements, the living wage would need to be at least $18.04 per hour, which translates into an annual income of $36,072.
It is important to note that adding the expense of a mortgage more than doubles the amount a household would need to earn annually over the subsistence wage. The issue is housing quality. In order to increase housing quality by moving from renting a two-bedroom apartment to owning a median-priced home, a Humboldt County household would need to more than double its income.
Applying the Income Standards to Humboldt County Households
The tables below show the number and percent of Humboldt County households at or below the income threshold for the minimum wage standard, subsistence wage standard, and the living wage standard. This information is also provided for Eureka, Arcata, Fortuna, and McKinleyville. All households certainly do not fit the "traditional" family made up of one wage earner, one homemaker, and two children under 18. In fact, most Humboldt County households have between one and three members. Thus the comparisons made in the tables below are simply illustrative and do not reflect actual household composition. The comparison is useful, however, in that one can determine how many Humboldt County households could support the traditional family, and at what level.
The Appendix describes in detail the methods and calculations used throughout this report.
Minimum Wage Standard:
Subsistence Wage Standard:
Living Wage Standard:
More than half of the households in Humboldt County are living at or below the living wage threshold. The same is true for each of the detailed areas, with the exception of Arcata where nearly 80% of the households in the city are living at or below the living wage threshold. Arcata figures reflect the large number of college student residents and more expensive housing. The result that more than half of Humboldt County households can not afford the median-priced home is the expected result. The living wage is based on income needed to purchase a median-priced home in the County. As discussed in the living wage section of the report, median income in the County is only 85% of the income needed to purchase the median-priced home. The data above indicates that less than half of County households can afford to purchase a median-priced home.
The graph below depicts the entire distribution of income for the County based on 1990 Census data, adjusted for inflation to current dollars.
How Do We Help More Humboldt County Households Reach a Living Wage?
Living wage campaigns have been sprouting up across the country in the last few years in response to concerns over the growing inequity in standard of living. As evidenced in this report, a close look needs to be taken at the standard of living of Humboldt County residents and what can be done to improve that standard. Would a living wage law be an effective tool in this area? In considering this, it is important to look at the characteristics of current living wage campaigns and compare them to Humboldt County. Two important characteristics to consider are where living wage campaigns are emerging, and who they propose to benefit.
Living wage campaigns across the country have concentrated most of their energy in urban centers such as Baltimore, Chicago, New York City, Los Angeles, Boston, Milwaukee, and Portland. Organizers believe that poverty and low-wage employment are more severe in urban areas due to escalating housing costs, and that municipal governments are actively pursuing strategies to reduce poverty in their cities, making them more receptive to living wage campaigns. xxi In addition to being focused on urban municipal governments, living wage campaigns are generally not aimed at across-the-board increases to all low-wage workers. The majority of campaigns are proposing "local ordinances requiring private businesses that benefit from public money to pay their workers a living wage. [The] ordinances cover employers who hold large city or county service contracts or receive substantial financial assistance from the city in the form of grants, loans, bond financing, tax abatements, or other economic development subsidies." xxii
Humboldt County does not have a major urban center. In addition, municipal governments in the County do not hold many major contracts with service providers that employ substantial numbers of area residents. In short, the County does not fit the profile for supporting a living wage campaign. The advantages of living wage legislation – increased wages and benefits – are still needed in this area, however. Humboldt County needs to look to other available economic development tools in order to achieve the same results that a living wage campaign would attempt to provide.
There are several economic development strategies that may be useful in this area. Three strategies that will be briefly discussed include increasing and nurturing small-scale manufacturing jobs, using the area’s natural beauty to make Humboldt County more attractive to higher-income retirees and "cyber-commuting" professionals, and promoting life-long learning opportunities throughout the County.
Replacing high-wage manufacturing jobs lost over the last 30 years is an important goal of any economic development program in Humboldt County. Currently about 25% of personal income in the County is generated by the service industry, with employment in the services area projected to increase between 9 and 27 percent by 2002. xxiii Unfortunately, average earnings in the service industry are generally lower than in manufacturing. There is a niche in the manufacturing industry, however, that Humboldt County may be able to secure. It is believed that, "while our remote location makes it difficult to develop much of a large-scale manufacturing base, there is likely to continue to be growth in smaller-scale non-lumber manufacturing such as recreational equipment, crafted furniture, and food." xxiv The Arcata Economic Development Corporation (AEDC), for example, focuses energy on the development and expansion of existing "business and industrial sectors [that] have been identified as having excellent growth and expansion potential that can provide future countywide employment opportunities." xxv Development projects, such as the Foodworks Culinary Center, the Humboldt Woodworker’s Guild, and the Northcoast Textile Design Center, receive nurturing, advice, and support from organizations such as the AEDC. This support is a critical element in developing the non-lumber manufacturing sector as a viable County employer.
The second area of opportunity for the County includes protecting and restoring the natural resources and beauty of Humboldt County in order to attract high-income retirees, high-end tourists, and professional "cyber-commuters" to the area. The area’s natural beauty, mild-climate, and relatively low housing costs are attractive to retirees and elderly from outside the County. A Business Week report identifies retirees as "permanent tourists" demanding goods and services that the County can provide. xxvi The same report also discusses the phenomenon of "cyber-commuting", or telecommuting. "The romance and solitude [of rural areas] are still there, but they’ve been joined by technology and commerce that allow professionals and entrepreneurs of all stripes to ply their trades from the prairies, the mountains, and the forests. They’re reversing decades of migration, boosting rural wealth, and bringing new spending power, development, and opportunities to the American hinterlands." A Harvard Business Review report estimates that in 1998 between 30 and 40 million people were either telecommuters or home-based workers. xxvii This trend does not seem to be slowing, as relatively cheap and plentiful technology such as fax modems, personal computers, and cellular phones gives an increasing number of professionals the flexibility to work where they chose. Humboldt County can attract both high-income retirees and telecommuting professionals by protecting the natural resources in the area and promoting the County as a beautiful place to live and work. These economic base sectors in turn create multiplier-based benefits for other sectors of the County economy.
Finally, promoting life-long learning opportunities for Humboldt County residents is an important economic development tool. As described in the Humboldt County Economic Development Forum’s Draft Principle Statements, "because human resources are so valuable in the information age, communities should provide life-long skills and learning opportunities by investing in excellent schools, post-secondary institutions, and opportunities for continuous education and training." Resources such as College of the Redwoods should be promoted as places to develop the job skills County residents need in order to be competitive in the marketplace.
In summary, with over one-fourth of Humboldt County households living at or a below a subsistence wage threshold, there is a need to examine and improve the standard of living of County households. A living wage campaign does not seem appropriate for Humboldt County because it does not fit the usual prototype of a major urban center with many municipal contracts affecting a large number of low-wage workers. Three economic development tools that may be appropriate for this area, however, are nurturing small-scale manufacturing, protecting the County’s beauty to attract retirees and telecommuting professionals to the area, and promoting life-long learning opportunities throughout the County. Utilizing a combination of economic development tools such as those mentioned above may help more Humboldt County households meet and exceed the "living wage" threshold.
I Pfeiffer, Fred. "Minimum Wage Campaign Analysis." New Party. <http://www.newparty.org/livwag> (September 7, 1999).
ii Pollin, Robert, & Luce, Stephanie. (1998). The Living Wage: Building a Fair Economy. The New Press.
iii "Value of the Federal Minimum Wage." Department of Labor. <http:// www.dol.gov> (August 30, 1999).
iv Ibid.v A "family" is defined by the Census Bureau as all the people living in a dwelling that are "related by birth, marriage, or adoption." A household is defined as "consisting of all the people who occupy a housing unit. (The household) includes the related family members and all the unrelated people who share the housing unit." The household definition seems more inclusive and to be more representative of Humboldt County demographics. All references and comparisons henceforth will apply to a "household."vi Pollin & Luce.vii "1990 Census." United States Census Bureau. <http://www.census.gov> (August 31, 1999).
viii All poverty threshold determination information from: Fisher, Gordon M. "The Development and History of the US Poverty Threshold – A Brief Overview." Department of Health and Human Services. <http://aspe.hhs.gov/poverty/papers/HPTGSSIV.htm> (September 16, 1999).
ix Orshansky, Mollie from Fisher, Gordon M.x Fisher, Gordon M.xi "Free City Reports." Homefair.com. <http://www.homefair.com>
xii "1990 Census." United States Census Bureau. <http://www.census.gov> (August 31, 1999).
xiii The food budget was determined by dividing the monthly income by three. This formula was developed by the Social Security Administration, and is used to determine the national poverty threshold. See the Appendix for more detailed information on all calculations used in this report.xiv Rent data for a 2-bedroom unit in Humboldt County from Humboldt State University’s "Student Off Campus Rental Listing." See Appendix for calculation details.xv A proposed living wage ordinance in the city of Los Angeles included not only the subsistence wage based on what was needed for a household to live at the poverty level, but an additional $1.25 per hour to cover private health insurance costs. See Robert Pollin’s "A Living Wage: Building a Fair Economy" for more information.xvi Low-income families qualify for reduced utility rates. PG&E’s CARE program offers 15% off energy bills for four-person households with gross yearly incomes of $25,100 or less. For more information contact PG&E <http://www.pgees.com>. Pacific Bell offers "Universal Lifeline Telephone Service" with rates "at least 50% less than basic residence service." To qualify, household income for four people must be less than $25,090, there must be only one telephone line in the house, and the head of household must not be listed as a dependent on anyone’s tax return. For more information contact Pacific Bell <http://www.pacbell.com>. xvii This figure is the remainder of the monthly income after all previous expenses are subtracted. It would be extremely complex to determine on a general basis if this is sufficient income to cover the rest of the household expenses.xviii Humboldt County Board of Realtors Multiple Listing Service, California Association of Realtors, and National Association of Realtors from "1999 Humboldt County Economic and Demographic Almanac." North Coast Almanacs. 1999. Split Rock Ventures. The income and home price data that follows this information is from the same source.xix Brunlinger,Rodney. Telephone interview. September 9, 1999. The interest rate at the time of the interview was 8.0%.
xx "1990 Census." United States Census Bureau. <http://www.census.gov> (August 31, 1999).
xxi Pollin, Robert. (November 1998). Living Wage, Live Action. The Nation.
xxii "Introduction to ACORN’s Living Wage Web Site." Living Wage Campaigns. <http://www.livingwagecampaign.org/introduction.html> (September 16, 1999).
xxiii "Humboldt County Industry Employment Projections Table, 1995-2002." California Employment Development Department. <http://www.calmis.cahwnet.gov> (September 15, 1999).
xxiv Hackett, Steven. "The Humboldt County Economy: Where Have We Been and Where Are We Going?" Economics Program at Humboldt State University. <http://www.humboldt.edu/~economic/humcoecon.html> (September 16, 1999).xxv Annual report. Arcata Economic Development Corporation. 1997-1998.xxvi Greising, David, & Murphy, Kate. (October 9, 1995). The Boonies are Booming: Young and Old are Moving Back to Smalltown, USA, and Suddenly the Sticks are a Marketer’s Dream. Business Week, 104-6.xxvii Apgar, Mahlon. (May/June 1998). The Alternative Workplace: Changing Where and How People Work. Harvard Business Review, 121-36.
The most current Humboldt County income data available is from the 1990 US Census. In order to discuss the three wage standards in a current context, I either inflated 1990 poverty and income values to 1999 dollars, or deflated 1999 data to 1990 dollars, as needed. In determining the amount of inflation or deflation I used the seasonally adjusted "Consumer Price Index for all Urban Consumers: All Items." This data can be obtained from the US Department of Labor, Bureau of Labor Statistics.
I compiled data for all of Humboldt County, as well as for specific areas of the county: Eureka, Arcata, Fortuna, and McKinleyville.
I. To determine percent change in CPI from 1990 to 1999:
January 1990 CPI (127.6) - January 1999 CPI (164.6) = change in CPI (37.0)
Change in CPI (37.0) / January 1990 CPI (127.6) = percent change in CPI (0.29)
II. To estimate the number of households living at or below the minimum wage threshold for Humboldt County:
Determine 1999 yearly minimum wage amount:
Hourly minimum wage ($5.15) * full-time hours worked (2000 hours) = $10,3000 per year.
Deflate 1999 minimum wage value to 1990 dollars:
Yearly minimum wage value ($10,300/year) / percent change in CPI (1.29) = $7,984 per year in 1990 dollars.
Use 1990 Census income data to estimate the number and percent of households in the County that make less than or equal to $7,984:
Income data is given in a bracket from $5,000 to $9,999 per year. A linear extrapolation will determine where $7,984 falls in that bracket.
Difference in income range: $9,999 - $5,000 = 0.767 (slope)
Number of households in the range: 9,094 – 2,578
$7,984 - $5,000 = 3,890 households fall between $7,984 and $5,000
Number of households in the $0 - $5,000 yearly income bracket (2,578) + number of households in the $5,000 - $7,984 bracket (3,890) = number of County households that make less than or equal to the yearly minimum wage threshold (6,468).
Number of county households in minimum wage category (6,468) / total households in the 1990 Census for Humboldt County (46,617) = percent of county households in the category (13.9%).
Estimate number and percent of households at or below the minimum wage threshold in each of the specific areas:
I used a linear extrapolation again to estimate the number and percent of households at or below each income threshold in each of the specific areas (Eureka, Arcata, Fortuna, and McKinleyville).
Number of households in $5,000 - $7,984 bracket (3,890) / total number of households in $5,000 - $9,999 bracket (6,516) = percent of households from $5,000 - $9,999 bracket in the $5,000 - $7,984 bracket (0.597%).
The following procedure is applied to each specific area. I use Eureka as an example:
Number of Eureka households in the $5,000 - $9,999 bracket (2,057) * percent of total households in the $5,000 - $7,984 bracket (0.597%) = number of Eureka households in the $5,000 - $7,984 bracket (1,228).
Number of Eureka household in the $0 - $5,000 bracket (696) + number of Eureka household in the $5,000 - $7,984 bracket (1,228) = total number of Eureka households making less than or equal to minimum wage threshold (1,924).
Total number of Eureka households making less than or equal to minimum wage threshold (1,924) / total households in the county (46,617) = Eureka households making less than or equal to minimum wage threshold as percent of total households in the county (4.1%).
III. To estimate the number and percent of households living at or below the subsistence wage threshold for Humboldt County:
The 1990 poverty threshold for a family of four with two children ($13,254) * percent change in the CPI between 1990 and 1999 (1.29) = the estimated 1999 poverty threshold for a family of four ($17,098).
The procedure used to estimate this is essentially the same as the procedure used in section II part C and D. The following substitutions should be made:
IV. To determine the subsistence threshold basic household monthly budget:
Yearly subsistence threshold ($17,098) / months in year (12) = monthly subsistence threshold ($1,425).
The Social Security Administration in 1963-1964 multiplied the economy food plan by three to determine a poverty threshold for families of three or more. Using this concept, divide the monthly subsistence threshold ($1,425) / mulitplier (3) = monthly food budget ($475).
A 2 bedroom unit would seem to be the minimum housing requirement for a family of four. Humboldt State University’s "Student Off-Campus Rental Listing" was used to estimate average rent on a 2 bedroom unit in the County. All the 2 bedroom listings for any type of unit (apartment, townhouse, house, mobile home, etc.) from any city in the County over several months were averaged together. The estimated average is $537 per month for a 2 bedroom unit.
A proposed living wage ordinance in the city of Los Angeles included not only the subsistence wage based on what was needed for a household of four to live at the poverty level, but an additional $1.25 per hour to cover private health insurance costs. It was assumed that this is a sufficient amount of money to cover health insurance expenses. Private health insurance ($1.25) * number of hours worked (160) = monthly health insurance cost ($200).
All other household expenses fall into this category – utilities, transportation, clothing, etc. The dollar figure for this category is the remainder of what is left in the monthly subsistence threshold budget after food, rent, and health insurance are taken out. It is not clear whether or not this is a sufficient amount to cover miscellaneous expenses, but at the subsistence threshold that is all that is available. Monthly subsistence threshold ($1,425) – food ($475) – rent ($537) – health insurance ($200) = monthly miscellaneous expense budget ($213).
V. Comparing median income and median home values:
Data source: 1990 Census, US Census Bureau.
California median income ($35,798) / US median income ($30,056) = percent difference between California and the US (1.19)
Humboldt County median income ($23,586) / US median income ($30,056) = percent difference between Humboldt County and the US (0.785)
California median home value ($194,300) / US median home value ($78,500) = percent difference between California and the US (2.48)
Humboldt County median home value ($88,500) / US median home value ($78,500) = percent difference between Humboldt County and the US (1.13)
VI. Estimate of the number and percent of households living at or below the living wage threshold for Humboldt County:
A. Determine 1999 yearly living wage threshold:
This threshold is based on the mortgage payment amount for a loan on the median-priced home in Humboldt County.
Median-priced home amount ($118,000) – 5 percent down-payment ($5,900) = amount of home loan ($112,100)
Taking into account principle, interest, taxes, and required insurance the monthly mortgage payment to the bank would be $1,002.
The bank requires that the household mortgage payment be no more than 33% of gross monthly income. Monthly mortgage payment amount ($1,002) * multiplier (3) = Monthly income needed to qualify for loan ($3,006).
B. Deflate 1999 living wage threshold to 1990 dollars:
1999 living wage threshold ($36,072/year) / percent change in CPI (1.29) = 1990 living wage threshold ($27,963/year).
The procedure used to determine this is essentially the same as the procedure used in section II part C and D. The following substitutions should be made:
VII. Distribution of income in Humboldt County:
Source: 1990 Census, US Census Bureau
Multiply each income bracket in the 1990 Census by the difference in CPI (1.29) to determine the 1999 income bracket dollars.