A Living Wage

  in Blog

What is a living wage?

Educational and research organizations can’t agree on a definition for the term, let alone people in different communities throughout the country.

According to MIT, the living wage model is an alternative measure of basic needs. It is a market-based approach that draws upon geographically-specific expenditure data related to a family’s likely minimum food, childcare, health insurance, housing, transportation, and other basic necessities (e.g. clothing, personal care items, etc.) costs. The living wage draws on these costs elements and the rough effects of income and payroll taxes to determine the minimum employment earnings necessary to meet a family’s basic needs while also maintaining self-sufficiency.

According to United Way’s 2019 ALICE (Asset Limited, Income Constrained, Employed) report, their threshold is the average income that a household needs to afford the basic necessities defined by the Household Survival Budget. This budget calculates the actual costs of basic necessities (housing, child care, food, transportation, health care, a smartphone, and taxes) in Michigan, adjusted for different counties and household types.

Merriam-Webster also has a definition or two – a subsistence wage or a wage sufficient to provide the necessities and comforts essential to an acceptable standard of living.

At Oryana, we are using the term “Sustainable Wage.” We chose this language because it has the same intent as a living wage, but we felt we could better define something that does not already have numerous definitions. As the name implies, our Sustainable Wage program is in place to provide a base level of wage to sustain an individual.

For Oryana’s Sustainable Wage program, we’ve chosen to work with a model created by NCG (National Co-op Grocers) in partnership with CDS Consulting Co-op. This model has been adopted by many likeminded co-op grocers across the country. From our perspective, a Sustainable Wage is able to sustain an employee’s* basic needs, specific to Grand Traverse County, as well as to allocate funds that can be saved for retirement and/or an emergency. Basic needs refer to housing, food, health care, transportation, telephone, and a miscellaneous category which covers items such as clothing, household and personal supplies and entertainment. The model takes into account the costs listed above, but also allows Oryana to contribute to these costs, meaning, the model correctly assumes that Oryana, as an employer, is contributing to the cost of an employee’s participation in the group health insurance plan. This contribution from Oryana decreases the hourly rate needed to be a Sustainable Wage as the cost of insurance is covered in part by Oryana.

We originally implemented our Sustainable Wage program in March 2017, when the model resulted in an hourly pay rate of $12.66 per hour. We made an adjustment in April 2019 which resulted in an hourly pay rate of $13.27 per hour. All staff, no matter the position or number of hours worked, will reach this Sustainable Wage amount by the time they have reached 6 months of employment. While this Sustainable Wage amount is not paid to each employee upon their start date, staff start with a pay rate of at least 20% above Michigan’s minimum wage and immediate access to the store discount. Staff are eligible for a pay increase at their evaluation that follows their 60 day Introductory Period, benefit eligibility follows soon thereafter, and, if an employee has not already reached the Sustainable Wage at 6 months of employment, their pay automatically increases.

While there are aspects of the varied definitions above that we do not cover, the main reason is that we are choosing to look at an individual employee separate from their life circumstances. This is not because we think all staff don’t have life circumstances; they do. But to treat staff fairly and reflect the work they do at Oryana, we are removing the aspects that may be a differentiating factor in some living wage models. For example, an employee with a child needing childcare does not receive a higher pay rate than one who does not have a child needing childcare. An employee with inexpensive housing costs does not receive a lower pay rate than one who has expensive housing costs. The model uses readily available, geographically specific data from HUD, USDA, BLS Consumer Expenditure Data, actual Oryana insurance costs, and others to help provide the most accurate data possible.

Implementing this type of program has not been easy. Why? Because even though it’s been the right thing to do, a change like this has real costs and our initial implementation was a drastic change. It also resulted in wage compression that needed to be addressed. We’ve had to look more closely at each position and determine if there are efficiencies to be gained or overall store operations that needed to be improved. We hope that you, our owners and customers, have noticed that we’ve been able to implement these pay changes and make very minimal, if any, changes to the overall costs of our products as a result of this change. We want staff (and others!) to know that grocery can be a fulfilling and rewarding career where there is room for growth and development, and these changes to our compensation program reflect that.

*The model assumes the employee is full-time and working 40 hours per week. However, the hourly rate applies to all staff, no matter the number of hours worked.