What Is the Difference between Minimum Wage and Living Wage?

Malcolm Tatum

The terms "minimum wage" and "living wage" are both used to describe certain aspects of wages and salaries as they relate to the benefits extended to employees. Some confusion about what is meant by each term occurs, making it necessary to define the differences between each type of wage. Essentially, a minimum wage is a set amount per hour that employers are required to pay employees within certain classes of employment, as long as those employees meet the qualifications put in place by the wage laws that apply in a given jurisdiction. By contrast, a living wage is the amount that an employee must earn in order to enjoy an equitable standard of living within a specified area or region.

Individuals who are only paid minimum wage may not be able to support their families.
Individuals who are only paid minimum wage may not be able to support their families.

One of the chief differences between a minimum wage and living wage is that the former is often fixed while the other is variable. For example, a national government may set the minimum wage that applies to all employees covered by the applicable wage laws, and employers in all parts of the nation must comply by paying qualified employees at least that minimum wage. With a living wage, the amount required to enjoy a decent standard of living may be higher in some areas, such as metropolitan areas, while a lower wage would allow that same level or standard of living in a different area like a rural location.

Workers who only earn minimum or living wages may find it difficult to pay for all of their basic needs without assistance.
Workers who only earn minimum or living wages may find it difficult to pay for all of their basic needs without assistance.

Another difference between minimum wage and living wage is that the minimum wage is a matter of public policy, with the amount set based on financial analysis conducted under the auspices of a government entity. The living wage is more subjective and is based on what households must pay in order to meet basic needs while living in a particular locale. Governments do not set living wages, although it is not unusual for data regarding the average cost of living in different areas to have some impact on how a minimum wage for an entire country is determined.

Want to automatically save time and money month? Take a 2-minute quiz to find out how you can start saving up to $257/month.

There are situations in which a minimum wage and living wage may be very close in terms of the actual amount. This is true in areas where the cost of living is relatively low. More often, the average living wage is noticeably more than the current minimum wage required by law, prompting consumers who must work for minimum wage to make housing arrangements that include sharing living space and expenses with friends or relatives. When the gap between the minimum wage and living wage increases too rapidly, many governments will intervene in the function of the economy, often working to promote decreases in costs that slow the forward movement of the living wage and preventing greater disparity in the overall economy.

Because servers make tips, they are generally exempt from minimum wage laws in the U.S.
Because servers make tips, they are generally exempt from minimum wage laws in the U.S.

You might also Like

Discussion Comments


Inexperience for a job is the benchmark for the minimum wage. It is a 'starting point' for those people -- students or people getting their 'first' job with no work experience.

Usually with increased experience and responsibility, comes increased wages, usually after 3 to 6 months and yearly. Eventually meeting up with a living wage standard, this standard is met either with a wage increase or by changing jobs for increased wages either in offering or by negotiation. It's also called 'striving' for a better life.

A employment contract between an employee and employer is that. If you negotiate a wage of $20.00/hour, then that is what your employer will pay you. Next time, take a look at your pay stub from your employer. Look and you will see who is 'really' confiscating your hard earned dollars. Here is a hint: it isn't your employer.

You want to make an argument, then argue how your are forced by your government to lower your standard of living in order to raise someone else's and stop blaming the employer!

People who argue the point that a company earns profits. How dare they! But these same people, they willfully neglect to take into account how a lot of these 'uncalled for' 'Profits' by these 'greedy' companies are actually used;

Profits are very often used to "reinvest in the company" whether it is Machinery, Technology, Increased safety or employee related e.g.: offering employees merits, perks, wage increases and/or bonuses, or perhaps a better work environment, a increased work force, or to comply with the ever changing regulations imposed on them by a benevolent government.

There are many ways a company will use those ill-gotten profits to improve their businesses. Sadly, and to the anger of the whiners, a lot of these things actually cost money too.


You know minimum wage is below the living wage when even the employers tell employees how to apply for food stamps and other social programs. I don't see why companies that earn millions or even billions of dollars in profits can't afford to pay their workers a decent living wage. I could see it if a company would literally go bankrupt if employees earned $15 an hour, but most of the corporations that hire minimum wage workers are not in any danger of going broke next year.


I don't know if the minimum wage has ever matched a living wage. When I first started supporting myself through minimum wage jobs, I found a lot of ways to economize. I had no other choice. I ate meals at work because of employee discounts, and I shopped at local grocery stores that offered generous specials at closing time. I washed my clothes in a sink, and I rented rooms instead of apartments. I could survive on a minimum wage income, but there was no way I could afford a car, pay for health care or support anyone else.

If I had applied for all of the governmental benefits I was entitled to, however, I could have reached the level of a living wage. I could have applied for subsidized housing, food stamps and supplemental income. I didn't know I could qualify for those programs, but they were available if I wanted to go through the process.

Post your comments
Forgot password?