The median job wage in Minnesota pays only modestly more than what is needed to meet basic needs for a small family, according the 2017 Minnesota Cost of Living Study prepared by the Minnesota Department of Employment and Economic Development (DEED). There is significant variation among Minnesota regions in the extent to which wages satisfy basic needs. In one region, over half of all jobs don’t pay enough to meet the basic needs of a typical family.
The most recent version of the DEED Cost of Living Study examines 2017 living costs based on seven basic need areas: food, housing, health care, transportation, child care, net taxes, and other necessities. According to the report, these basic needs represent neither a poverty living nor a typical middle-class living, but rather a very basic living standard that meets essential health and safety needs; excluded from these basic needs are several common categories of expenses, including savings, vacations, entertainment, eating out, tobacco, and alcohol.
An online cost of living tool from DEED lists the basic needs hourly wage for families of varying sizes and employment situations. The published version of the report focuses on what is described as a “typical family” of two adults and one child, with one adult working full-time and one part-time for a combined 60 work hours per week. The basic needs hourly wage for this typical family is calculated on a statewide basis and within each of Minnesota’s thirteen Economic Development Regions (EDRs).*
The report compares the 2017 typical family basic needs hourly wage to the first quarter 2016 median hourly wage estimate for all occupations statewide and in each EDR. The analysis below compares the 2017 basic needs hourly wage to the first quarter 2017 median hourly wage estimate. (Median hourly wage estimates for the first quarter of 2017 were not available when the 2017 Minnesota Cost of Living Study was published in March.) For this reason, the findings presented below do not align precisely with the findings from the published report. The median wage estimates used in the following analysis were obtained from Occupational Employment Statistics (OES) information compiled by the Bureau of Labor Statistics and DEED.
The EDRs with the highest typical family basic needs wage also tend to have the highest median wage and vice versa.† For example, both the highest basic needs wage ($19.63 per hour) and the highest median wage ($21.55 per hour) are in the Twin Cities metro region (EDR 11), while the second lowest basic need wage ($13.67 per hour) and the second lowest median wage ($15.93 per hour) are in the Upper Minnesota Valley region (EDR 6W).
On a statewide basis, the estimated median wage exceeds the typical family basic needs wage by eleven percent. In other words, the typical family with an hourly wage equal to the state median could meet its basic needs as defined by DEED and could still dedicate $1.93 per hour—or about $6,200 per year—to non-basic needs, such as retirement savings, vacations, or the occasional movie or meal out. The chart below shows the estimated median wage relative to the typical family basic needs wage statewide and for each Minnesota EDR.
In ten of Minnesota’s thirteen EDRs, the estimated median wage exceeds the typical family basic needs wage by approximately ten percent or more; in two other EDRs, the median wage exceeds the typical family basic needs wage by four percent. In these twelve EDRs, over half of all jobs pay enough to meet these basic needs. The Northwest region (EDR 1) has the highest median wage relative to the basic needs wage; in that region, the median wage exceeds the basic needs wage by 25 percent. Nearly 55 percent of the state’s population and 62 percent of statewide employment are in the Twin Cities Metro region (EDR 11); the median wage in that region exceeds the basic needs wage by ten percent—slightly below the statewide average.
The East Central region (EDR 7E) is the only EDR in which the estimated median wage is below the basic needs wage; fewer than half of all jobs in the East Central region pay enough to meet basic needs for the typical family.
Minnesota’s median wage improved from six percent above the typical family’s basic need wage based on the 2016 Cost of Living Study to eleven percent above, based on basic need wage data from the 2017 Study and first quarter 2017 OES median wage estimates. This improvement was due to fairly slight growth in the state’s basic needs wage from 2016 to 2017, compared to somewhat stronger growth in the estimated statewide median wage. While it is possible that the increase in the state’s minimum wage, which took effect in August 2016, contributed to the improvement in the ratio of the median wage to the basic needs wage, at this point such conclusions are speculative.
As noted above, “basic needs” as defined in the 2017 Minnesota Cost of Living Study are based on a fairly short list of items necessary for getting by from day to day—and exclude other items that could be considered essential, such as retirement savings. Based on a North Star analysis of data from the DEED Cost of Living Study and OES data, an estimated 44 percent of all Minnesota jobs do not pay enough to meet even these limited needs for the typical family.
The next article in this series will compare the basic needs hourly wage for the typical family to the estimated median wage offer for job vacancies and the state’s minimum wage.
*The table and map below define the counties within each of Minnesota’s thirteen Economic Development Regions (EDRs).
†The correlation between the median wage and the typical family basic needs wage (R2=0.604) is statistically significant at the 0.01 level.