Living Wage Report




Information for Board consideration to implement a living wage



Tucker, White, Davis, Suyes, Zimmermann, Gerome





February 14, 2007


ACTION:     X                      INFORMATION: 



  ACTION:                           INFORMATION: 










As directed by the Board of Supervisors and the School Board, a team comprised of two members from each Board and staff members reviewed information and developed recommendations to implement a “living wage” for Albemarle County and School Division employees.  The team provides information for Board consideration on the methodology for determining living wage and estimated costs based on full decompression.




Methodology for determining living wage

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.  Adjusted for the costs in a given locality, these basic needs include the combined annual costs of housing, food, childcare, healthcare, transportation, taxes and other necessities.  The team reviewed methods for calculating the living wage from the following: The Economic Policy Institute, Federal Living Wage Responsibility Act of 2003, Virginia Organizing Project, and the Self-Sufficiency Standard for Virginia


Recommended methodology

As the Economic Policy Institute and the Self Sufficiency Standard for Virginia use local data to calculate the “living wage”, the team identified the following strategy to determine “living wage” for Albemarle County:

Average the EPI and the Self Sufficiency Standard for Virginia to arrive at the County’s living wage.

·         The Economic Policy Institute (EPI), a non-partisan think tank, bases its analysis on seven categories of need (taxes, other necessities, transportation, health care, food, housing, childcare) 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 (2080 hours), the living hourly wage is $10.72.

·         The Self-Sufficiency Standard for Virginia developed as part of the State Organizing Project for Family Economic Self-Sufficiency estimates the level of income necessary for a working adult to meet their basic needs without subsidies of any kind. The standard takes into account that many costs differ not only by family size but also by the age of children and accounts for regional variations in cost.  The standard includes seven basic categories of expenditures (basic shelter/utilities, transportation, food, health care, child care, taxes and miscellaneous expense of 10% of all other costs).   The Self Sufficiency Standard for Virginia for a family of four (preschooler and school age) is an annual salary of $44, 844 or hourly wage of $10.78.


            Hourly Living Wage:

Average the EPI (currently $10.72) and the Self Sufficiency Standard for Virginia (currently $10.78) to arrive at the County’s living wage of $10.75 per hour.  However, neither the Self Sufficiency Standard for Virginia nor the Economic Policy Institute adjusts their identified living wage amounts annually.  Historical data for the Virginia Self Sufficiency Standard indicates that the rate in 2002 was $9.24 and the next adjustment occurred in 2006 to $10.78.  Therefore, the team recommends projecting an annual increase by using the Albemarle County scale adjustment projection.  For FY 07/08, the recommended scale adjustment is 3%, so the living wage amount would adjust from $10.75 to $11.07.


Administrative Considerations:


The team discussed implementation of a living wage for employee groups to include:

1.       Full and Part Time Employees on the County classified pay scale 

2.       Substitutes and Temporary Employees

Staff recommends implementation include both groups, however the team did not arrive at consensus on this issue.


Compression issues

The team recognized that raising the minimum hourly rate not only impacts those employees currently paid less than the new rate, but also creates salary compression problems.   “Salary compression” is the situation where the pay rate for experienced employees is near or equal to the pay rate for newly hired employees in the same position.   For example, an employee in a paygrade 1, hired seven years ago, who received “exceeds on expectations” on every performance evaluation has a current hourly salary of $9.87.  Employees with fewer years of service and newly hired employees would be hired at $9.75.   Salary compression creates an inequitable pay relationship, and is extremely detrimental to employee morale and retention.


Various methods of addressing compression were modeled and evaluated.  Several models of “partial” decompression were evaluated, but due to the subjectivity and potential morale issues in limiting decompression to only selected pay grades, the team recommends implementation with a full decompression model.  The full decompression model recommended was created with a declining adjustment, so that the level of increase progressively goes down with each higher pay grade.


Impact on self sustaining programs

The team recognized the budgetary impact for Child Nutrition and EDEP.  These costs are provided.




Estimated Costs (Attachment #1):

Costs are provided based on the identified County living wage of $11.07, as well as $9.75 per hour (the placeholder for budgeting identified at the October Joint Board meeting based on living wage amounts for the City of Charlottesville and the University of Virginia.)




The team provides information for Joint Board consideration in implementing a living wage for Albemarle County employees as follows:

·         A recommended methodology for determining living wage based on averaging the EPI (currently $10.72) and the Self Sufficiency Standard for Virginia (currently $10.78) and applying the scale adjustment to arrive at a living wage for County employees of $11.07 per hour.

·         Estimated costs include full and part time employees on the County classified pay scale and substitutes and temporary employees.

·         Estimated costs are based on a full decompression model


Staff requests direction from the Board of Supervisors and the School Board in setting a minimum living wage for the FY08 budget, as well as approving the scope of the employees to be covered and the methodology for addressing compression. 




Attachment A – Estimated Costs, Full Decompression Model

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