Minimum wage vs living wage: the gap that decides how much you can send home
-
Key takeaways
Minimum wage is the legal floor an employer must pay; a living wage is an estimate of what’s actually needed to cover basic costs in a specific area.
A living wage varies enormously by location, since local costs of living differ dramatically.
The gap between the two directly shapes how much can realistically be sent home without straining personal financial stability.
A living wage calculation for a local area doesn’t account for a remittance commitment to family who aren’t part of the local household.
Comparing job offers by their relationship to a local living wage, not just the stated salary, gives a more meaningful sense of real financial breathing room.
Calculating how much of a paycheck can realistically be sent to family abroad means understanding the difference between minimum wage and a living wage, which explains why the math sometimes feels tighter than expected. Here’s the distinction.
What is a wage, and what is a living wage?
A wage is the amount paid for work, most commonly calculated hourly. Minimum wage is the legal floor an employer must pay, set by federal, state, or local law, while a living wage is an estimate of what someone actually needs to earn to cover basic living costs in a specific area, which is often considerably higher than the legal minimum.
Minimum wage vs living wage: key differences
Minimum wage | Living wage | |
|---|---|---|
Definition | The legal minimum an employer must pay | An estimate of what covers basic living costs in a specific area |
How it’s set | Set by federal, state, or city law | Calculated by researchers or advocacy groups based on local cost of living |
Varies by location | Yes, states and cities can set a higher minimum than the federal floor | Yes, and often more dramatically, since living costs vary enormously between areas |
Implications for workers | A legal guarantee, but not necessarily enough to cover expenses | A more realistic benchmark for what’s actually needed to get by |
Why the gap matters for your finances
Understanding where actual pay falls relative to a living wage for a specific area gives a much more honest picture of a financial situation than comparing pay only to the legal minimum:
Minimum wage is a legal floor, not a target. Employers are required to pay at least this amount, but it was never designed to represent what someone actually needs to live on in every area.
A living wage varies enormously by location. The same hourly wage might comfortably cover living costs in one city and fall well short in another, more expensive one.
The gap between the two directly affects how much can realistically be sent home. A wage that barely covers personal living costs means sending a consistent amount to family requires very deliberate budgeting.
What this gap means for immigrants sending money home
For immigrants working in lower-wage jobs, often while also supporting family abroad, the gap between minimum wage and a true living wage in a specific area directly shapes how much can consistently be sent home without straining personal ability to cover rent, food, and other essentials. Many workers understandably feel pressure to send as much as possible, sometimes more than their own budget can comfortably sustain, out of a sense of responsibility to family relying on that support, a tension also present in how immigrant income and tax obligations interact more broadly(opens in new window).
Calculating a realistic personal living wage, what’s specifically needed to cover essential costs where someone lives, before deciding what can be sent, protects against a cycle where supporting family comes at the cost of personal financial stability. Sending a smaller, sustainable amount consistently is generally more helpful to family long-term than sending a larger amount that leaves no room to cover essential needs.
Community context
The size of this gap, and what it means practically, varies enormously depending on someone’s specific job, city, and household situation. A worker in a lower-cost region with no local dependents faces a very different calculation than a worker in an expensive city also supporting children locally while sending money abroad. Neither situation is more or less legitimate, but the specific numbers that make sense for a sustainable remittance amount will look very different between them.
Why the gap between the two has grown in many places
In many parts of the country, the gap between minimum wage and a true living wage has widened considerably over recent decades, as housing, healthcare, and childcare costs have risen faster than minimum wage rates in most jurisdictions. Some states and cities have responded by setting their own minimum wage considerably above the federal floor, sometimes indexing future increases to inflation automatically, while others have left their minimum wage unchanged for extended periods even as living costs continued rising.
How living wage calculations account for family size
Living wage figures typically vary considerably depending on household composition, since the calculation accounts for the number of adults and children a wage needs to support, not just a single individual’s basic needs. A living wage calculated for a single adult with no dependents will be considerably lower than one calculated for a household with children, since costs like childcare, additional food, and larger housing needs scale up substantially with family size.
For someone sending a significant portion of earnings abroad to support family who aren’t part of the local household, it’s worth recognizing that a standard living wage calculation for a local area won’t reflect this additional financial obligation at all, since it’s designed around local household costs only. A genuinely sustainable wage, accounting for both local needs and remittance commitments, may need to sit meaningfully above even the calculated local living wage figure.
Living wage as a planning tool, not just an evaluation
Beyond simply assessing whether a current wage measures up, a living wage figure can serve as a genuinely useful planning tool when evaluating a new job offer, considering a move to a different city, or negotiating a raise. Rather than comparing offers purely by their stated salary, calculating what each option’s wage translates to relative to that specific location’s living wage gives a more meaningful comparison, since a higher salary in a considerably more expensive city might actually leave less real financial breathing room than a lower salary in a more affordable area.
Common questions about minimum wage and living wage
-
How do I find the living wage for my specific area?
The MIT Living Wage Calculator(opens in new window) is a widely used, free tool that estimates a living wage by county and metro area across the U.S., based on typical local costs for housing, food, child care, and other essentials. Searching for a living wage calculator specific to a state or city gives a more accurate, locally relevant figure than a national average.
-
If my wage is above minimum wage, does that mean I’m earning a living wage?
Not necessarily. Many jobs pay above the legal minimum wage while still falling short of a true living wage for that specific area, especially in cities with a high cost of living. Comparing actual pay against a local living wage estimate, not just the legal minimum, gives a more honest picture.
-
How much of my income is reasonable to send home if I’m not earning a full living wage?
There’s no single right answer, since this depends on specific expenses, obligations, and what family abroad genuinely needs. Building a realistic budget that covers essential costs first, then determining what’s genuinely left over to send, protects personal financial stability while still supporting family as consistently as the situation allows.
In Summary
The gap between minimum wage and a true living wage in a specific area shapes, more than almost any other single factor, how much can realistically and sustainably be sent home. Calculating honest personal numbers, rather than comparing only to the legal minimum, helps in supporting family in a way that doesn’t come at the cost of personal stability.
This publication is provided for general information purposes only and is not intended to cover all aspects of the topics discussed herein. This publication is not a substitute for seeking advice from an applicable specialist or professional. The content in this publication does not constitute legal, tax, or other professional advice from Remitly or any of its affiliates and should not be relied upon as such. While we strive to keep our posts up to date and accurate, we cannot represent, warrant, or otherwise guarantee that the content is accurate, complete, or up to date.