From #126, September - October 2006

How we built a Cooperative Model for a Livable Wage

B Y   C A R O L E E   C O L T E R 

The concept of paying a livable wage appeals to everyone—employees, managers, boards, co-op members, and the community at large. Although there’s no official definition and no agreed-upon methodology for calculating a livable (or living) wage, the Northwest Job Gap Study defines it as “a wage that allows [people] to meet their basic needs without resorting to public assistance and provides them with some ability to deal with emergencies.”

In 2002, Cooperative Grocers’ Information Network (CGIN) brought together a task force to develop a formula that co-ops across the country could use to determine a wage level that would pay for the basic costs of living for their local area. The original version of the model debuted in the spring of 2003, with funding from GreenStar Co-op in Ithaca, N.Y.; Brattleboro Food Co-op, in Brattleboro, Vt.; Twin Cities Natural Foods
Co-ops; and Cooperative Grocers Association–Midwest.

Since then we’ve been collecting feedback and updating the model in small ways each year. For 2006, we felt it was time for an “upgrade” to the whole model, with a close review of how all components worked in practice.

For this upgrade, Karen Zimbelman, CGIN’s executive director, and I as project manager worked with a task force of co-op managers:

• Michele Buchanan, financial and human resources manager-New Leaf Market


• Crystal Halvorson, general manager—Menomonie Market


• Kari Kaminski, human relations manager—Outpost Natural Foods


• Sharret Rose, human resources coordinator—La Montañita Food Co-op

The cost of getting around
The item that generated the most user questions and feedback by far over the past three years was the methodology for calculating transportation costs. We’d been using the Bureau of Labor Statistics’ consumer expenditures survey, which states expenditures in terms of the “consumer unit,” not the individual. To find the cost for a single employee, model users had to follow a highly unintuitive approach that caused much confusion.

Moreover, the Bureau of Labor Statistics’ survey runs about two years behind, meaning that the latest data available came from 2004, when the price of a barrel of oil was far below what it is today. Gas prices are volatile, and a co-op can’t keep adjusting its pay structure with every spike or drop in the price at the pump. However, with a more transparent formula for calculating transportation costs, users of the Cooperative Livable Wage Model can see how close their wage rate comes to paying for their employees’ cost of getting to work and obtaining access to other basic needs. Therefore the 2006 model has switched to an entirely different approach, based on the IRS mileage allowance and the national average commuting distance, plus some extra miles for “necessary trips.”

The cost of shelter
As the single largest part of cost of living, housing has also accounted for considerable debate among model users. Many co-ops found the rental data provided by the Department of Housing and Urban Development’s fair market rent survey to be too low for their area. To solve that problem we switched to a different set of tables from HUD showing median rents for an area, instead of the lower figures in the fair market rent survey.

The original model based housing costs on the rent for a studio apartment. Some co-ops have questioned whether the livable wage should be expected to subsidize living alone. They pointed out that among entry-level co-op employees, shared housing is much more the norm. In the end, the task force decided to use the rent for a two-bedroom apartment divided in half.

Will your co-op’s livable wage go down?
Although the switch in rental data raises the cost of housing, the change to a shared two-bedroom apartment lowers it enough that the net result may be lower housing costs overall—and therefore a lower livable wage than the one yielded by earlier versions of the model.

On the other hand, in the new version we propose that co-ops start paying the livable wage earlier in an employee’s career than the one-year anniversary established by those earlier versions. In fact, we found that some co-ops are already paying the livable wage upon date of hire, using it as a recruiting tool, while others start paying it at three months, six months, or some other point. (See the “Employee Compensation Survey.”) Now we are recommending implementing the livable wage either upon hire or upon completion of the trial period.

What price entertainment?
Most models for determining the cost of living in any given state or city do not include entertainment and recreation, but back in 2002 the first CGIN task force chose to do so, using figures obtained from a private marketing database. We no longer have access to that database. Even in 2002, the figures we used were somewhat arbitrary, based on average expenditures for tickets to entertainment and sports events, recreational equipment, and reading materials in seven different cities. For our upgrade, the new task force decided to take a fresh look.

Our challenge was the classic dilemma of choosing between prescriptive and descriptive methodologies. Prescriptive numbers reflect what expert studies claim people “should” spend, e.g. what they should spend on food in order to get adequate nutrition.

On the other hand, “descriptive” numbers come from an average of what people actually do spend. The average American spends more on entertainment than on health care up to age 45, and spends as much on both until age 54. But that level of expenditure is hardly necessary; it’s a choice based on individual priorities.

The task force debated whether an employer owes its employees a high enough wage to afford cable TV, wireless, or an iPod. In the end we decided to include entertainment and recreation in the Miscellaneous category along with clothing, housekeeping supplies, and personal care products. To cover the addition of costs to this category, we upped the allowance for Miscellaneous from 10% to 12.5% of all other expenses.

For more detail on these and other decisions involved in the Cooperative Livable Wage Model, read the background material on the CGIN website, www.cgin.coop. Thanks to the task force members for their hard work and creative efforts to help us improve the model, and thanks to the Howard Bowers Fund for funding help with this project.

***

Carolee Colter is a consultant to cooperatives and community-based organizations (250/505-5166 or caroleecolter@cdsconsulting.coop).

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