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Wages have increased significantly over the past few years, but many U.S. workers are still just scraping by.
Around 44% of full-time American employees don’t make enough to cover their family’s basic needs, assuming a dual-income household with two children, according to a new report from Dayforce, a human capital management software company, in partnership with the Living Wage Institute, a benefit corporation focused on making a living wage part of corporate business strategy. (Dayforce is the current sponsor of the CHRO Daily newsletter.)
The report used data from 600,000 full-time American staffers, and analyzed it using MIT’s living wage calculator. The average livable wage in the U.S. is around $23 per hour, according to the institute, but varies widely in different regions. For example, a couple that both work full time and have two kids living in Sacramento County, California, would need to both earn $31.43 hourly to stay afloat, according to MIT’s calculator. But for a household in Marshall County, Kansas, that number falls to $22.46.
“This report should be a wake up call,” Kavya Vaghul, cofounder and chief product officer of the Living Wage Institute, tells Fortune. “It tracks really closely with what we hear the American public is experiencing when it comes to the inflationary environment. You have prices skyrocketing on basic goods and services, and as a result of that, many people are not able to meet basic needs.”
The brunt of the economic pain is experienced by people in low-paying jobs, of course, who are often women and people of color. Only half of full-time female employees earn a livable income compared to 62% of male staffers, according to the report. Working women earn on average $4.20 less per hour than men doing the same work. Vaghul says systematic underpaying of women, devaluing of domestic work, and locking marginalized groups out of higher-paying industries are all contributing to the problem.
“With women, there are several factors that drive the report’s findings, and they're all connected to a pernicious history of societal biases as well as discriminatory and unequal labor market policies that are continuing to contribute to the disparities that we see by gender,” she says.
The report also found that only 40% of Black and Latino workers in full-time roles earn a living wage, and are nearly twice as likely to not make ends meet compared to their white counterparts. The groups earn $8.20 and $7.70 less per hour, respectively, than white staffers.
“Again, this is occupational segregation and systemic biases that exist both within our personal attitudes as well as the labor market,” Vaghul says.
Jason Rahlan, VP of corporate responsibility and sustainability for Dayforce, tells Fortune that employers can combat this problem in a straightforward way: increasing wages. Otherwise, they run the risk of losing talent to other companies
“People not making a living wage are more likely to report struggling to pay for housing, overdrawing their checking and savings accounts, skipping healthcare and purchasing medicine,” he says. “When workers are at higher risk of suffering these negative outcomes, they're going to be more at risk for leaving a workplace and seeking another job opportunity because they need the opportunity for a life of health, fulfillment, and dignity.”
And while financial assistance benefits can be helpful, the most direct way to challenge this issue is for business leaders to recognize the compensation inconsistencies within their own organizations and resolve them. He says that it’s not only an ethical move, but a smart strategy for bosses to avoid negative health implications for their workforces, like the stress and depression that come along with being unable to meet basic needs.
“Companies making the choice to invest in their people and address living wage gaps in their workforce is not only the right thing to do for their people, but the smart thing to do for their business,” he says.
Emma Burleigh
emma.burleigh@fortune.com
