COUNTY OF ALBEMARLE

 

EXECUTIVE SUMMARY

 

 

AGENDA TITLE:

Living Wage

 

 

SUBJECT/PROPOSAL/REQUEST:

Information on the Impact of a Living Wage Adjustment for Albemarle County

 

STAFF CONTACT(S):

Tucker, White, Davis, Suyes, Gerome, S. Allshouse

 

 

LEGAL REVIEW:  Yes

 

AGENDA DATE:

April 5, 2006

 

ACTION:                              INFORMATION:  

 

CONSENT AGENDA:

  ACTION:                            INFORMATION:     X

 

 

ATTACHMENTS:    No

 

 

REVIEWED BY:

 

 

 

BACKGROUND:

During the Board to Board presentation at the March 1st Board meeting, the Board posed a question to the School Board Chairman on the “living wage”  issue and whether the School Board had looked at the impact of increasing the “living wage” for the School Division.  Board Chair, Sue Friedman, indicated that it had not been reviewed, but the issue could be researched and information presented back to the Board. Human Resources and OMB staff have prepared background information on the living wage and the fiscal impact of an adjustment for  both the School Division and Local Government.  The School Division will receive this same information at their April 20th meeting.

 

STRATEGIC PLAN:

Goal 4.1: Provide effective, responsive and courteous service to our customers.

 

DISCUSSION:

The living wage is an annual income (or the equivalent hourly wage) that enables a person working full-time to meet their family’s basic needs.  These basic needs adjusted for the costs in a given locality include the combined annual costs of housing, food, childcare, healthcare, transportation, taxes and other necessities.  Described below are two different methods for calculating the living wage:

 

1. The Economic Policy Institute (EPI), a non-partisan think tank, bases its analysis on seven categories of need shown below and estimates that a family income for two working adults and two children needs to be $44,592 for the Charlottesville Metropolitan region. When this annual income is divided by full-time work or 2080 hours, the living hourly wage is $10.72

 

 

 

 

 

Table I

 

 

 

January 2006 Hourly, Monthly, and Annual Estimated "Basic Needs" Budget

for the Charlottesville Metropolitan Area (Two Working Adults, Two Children)

 

 

 

 

 

 

 

Need

 

Monthly Cost

Hourly Cost

 

Taxes

 

$349

 

$1.00

 

 

Other Necessities

$359

 

$1.03

 

 

Transportation

$375

 

$1.08

 

 

Health Care

$401

 

$1.16

 

 

Food

 

$587

 

$1.69

 

 

Housing

 

$744

 

$2.15

 

 

Childcare

 

$904

 

$2.61

 

 

Subtotal

 

$3,716

 

$10.72

 

 

 

 

 

 

 

 

 

Annual Total

$44,592

 

$44,592

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 2.  Federal Living Wage Responsibility Act, 2003. The federal government defines the living wage as consisting of two factors:

 

(1) an hourly wage (or salary equivalent) sufficient for a worker to earn, while working 40 hours a week on a full-time basis, the amount of the Federal poverty level for a family of four (as published in the Federal Register by the Department of Health and Human Services under the authority of section 673(2) of the Community Services Block Grant Act (42 U.S.C. 9902(2))); and

 

(2) an additional amount, determined by the Secretary based on the locality in which a worker resides, sufficient to cover the costs to such worker to obtain any fringe benefits not provided by the worker's employer.

 

For 2006, the official poverty threshold across all 48 states for a family of four is $20,000, which for a full-time worker equates to $9.62 an hour. It is important to note that the $9.62 reflects wages only. The cost of benefits a worker would need if they were not offered them by their employer is estimated by the federal government to be an additional $2.50 an hour for a total wage of $12.12.

 

3. Market Competitiveness

The University recently increased their lowest entry wage to $9.37 per hour based on recent market survey data and estimated that their total benefit package added an additional $3.45 above wages for a total compensation of $12.82 per hour for the lowest paid employee.  

 

The City of Charlottesville recently raised their lowest entry wage to $9.36 per hour based on the 2005 federal living wage standard.

 

Albemarle County’s lowest pay rate for entry level positions is currently $8.63 an hour. The proposed classified salary scale for 2006-2007 will increase that minimum rate to $8.84 per hour. County employees have a benefit package, which is approximately 30% of salary or an additional $3.80 an hour for the lowest paid employee, which equates to a total hourly compensation of $12.64 for the lowest paid employee.

 

Financial Impact of a Living Wage Adjustment

 

Option 1 -  Increasing the Living Wage to $9.62/hour

There are currently 116 employees making less than $9.62/hr; 6 in local government and 110 in the schools, mostly custodians, food service workers and after-school workers.

The cost to increase the living wage to $9.62 based on the federal living wage guidelines would be $106,250; $11,180 for local government and $95,071 for the schools.

 

 

Option 2 - $10.72 – Increasing the Living Wage to $10.72/hr

There are currently 287 employees making less than $10.72 an hour; 13 in local government and 274 in the schools.

 

The cost to increase the living wage to $10.72 as estimated by the EPI for a family income of $44,592 would be $259,597; $20,685 for local government and $238,912 for the School Division.

 

Option 3 - $9.37 – Increasing the Living Wage to be market competitive with the University and the City of Charlottesville

 

There are currently 78 positions making less than $9.37 an hour; 5 in local government and 73 in the schools.

 

The cost to increase the living wage to $9.37 to be market competitive with the City of Charlottesville and the University would be $24,104; $1,890 for local government and $22,214 for the School Division.

 

BUDGET IMPACT:

 

LIVING WAGE

$9.62/hr

LIVING WAGE

$10.72/hr

 

COMPETITIVE

 

$9.37/hr

County Total

$106,251

County Total

$259,597

County Total

$24,104

Local Govt Total

$11,180

Local Govt Total

$20,685

Local Govt Total

$1,890

School Total

$95,071

School total

$238,912

School Total

$22,214

 

 

 

 

 

 

 

RECOMMENDATIONS:

This report provides information on potential living wage calculations, as well as the financial impact if the Board chose to increase the living wage for the lowest paid employees to $9.62 or $10.72 or the $9.37 competitive market adjustment comparable to the University and the City of Charlottesville.  If the Board has an interest in pursuing either of these options, Human Resources will need additional time to analyze the impact on salary compression for other employees if the lowest paid wages were increased to determine the total financial impact of proceeding. The School Division will be reviewing this same information at their April 20th meeting.

 

 

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