Final answer:
A living wage is the indexed wage that aligns minimum wage with the means to avoid poverty at 40 hours of work per week. It takes into account cost of living and poverty standards to ensure that full-time work provides a basic standard of living.
Step-by-step explanation:
A living wage is an index wage that requires the minimum wage to be at least what someone who works 40 hours a week needs to stay out of poverty. This concept of a wage floor is essential to understanding why some local governments push for wages higher than the federal minimum wage. The U.S. federal minimum wage in 2016 was $7.25 per hour, providing an annual income of $15,080 for a single person, which is just above the Federal poverty line. As the cost of living increases, the federal minimum wage can periodically be adjusted to meet new standards of living.
Advocates of the living wage suggest that the minimum wage fails to ensure a decent standard of living, particularly for families. They argue that a working adult should not be in poverty despite working full time, hence pushing for a living wage. For instance, a family with two adults earning minimum wage and children may struggle to stay above the federal poverty line, amplifying the call for higher wages.