Beyond 'Surviving': Defining Economic Security

Originally published on April 14, 2011 12:28 pm

As President Obama and members of Congress debate national budgets, Shawn McMahon has been calculating individual and family budgets.

He's the research director for Wider Opportunities for Women, a group that works with low-income women and families. The nonprofit group just released its Basic Economic Security Tables index, which measures the minimum income workers need to achieve basic economic security.

"We're not talking about surviving," McMahon tells Morning Edition host Renee Montagne. "We are talking about economic security that allows people to live day to day without fear of a lot of the economic insecurity that we've been seeing in recent years."

According to the report, to achieve economic security the average minimum income needed for a family with two workers and two young children is $67,920 — that's with both parents working, and earning just over $16 an hour.

And a single worker with no children needs to make about $30,000 a year, which means working full-time and earning twice the minimum wage.

"We're more interested in people moving up the ladder so that they are at a place where they can meet their basic expenses and they can save a little bit to prevent them from ever falling back into poverty," McMahon says.

The index includes a range of monthly expenses including housing, utilities, food, transportation, child care, basic personal and household items, health care, taxes, and emergency savings and retirement savings.

It does not include middle-class amenities such as vacations, dinners at restaurants, flat-screen TVs, cable subscriptions, movie tickets or other entertainment.

The biggest expense is generally housing and utilities.

"However, once a family has two or more children, then child care is often a bigger expense," McMahon says.

The income requirements in the index are about three times more than the federal poverty line, which is $21,756 for a family of four and $10,956 for an individual.

"The federal poverty level was actually developed about 50 years ago on a very basic assumption on what families needed to buy food," McMahon says. "So, the federal poverty level bears little resemblance to reality. It didn't many years ago, and it doesn't today."

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To talk more about this, we called Shawn McMahon. He's head of research for a group called Wider Opportunities for Women. It works with low income women and families. And he calculated the group's basic economic security tables or best index.

SHAWN MCMAHON: It's not a middle class income measure. It's certainly not a poverty measure. It measures the amount of income that a family needs to have very basic economic security across a lifetime, and hopefully to promote inter-generational security as well.

MONTAGNE: What expenses do you include in your survey?

MCMAHON: The list includes: housing, utilities, food, transportation, childcare, healthcare, taxes, and then two very important elements: emergency savings and retirement savings.

MONTAGNE: So therefore it might include clothes but it doesn't include fancy running shoes.

MCMAHON: Correct. It doesn't include any of the amenities that a lot of people associate with the middle class, such as vacations or meals at restaurants, no cable television, no movie tickets. It's just the bare basics.

MONTAGNE: Is there a single biggest expense that applies to just about everyone?

MCMAHON: As you can imagine, housing and utilities is generally the biggest expense. However, once a family has two or more children, then childcare is often a bigger expense even than housing and utilities. For households with two workers, transportation can actually be bigger than housing expenses as well.

MONTAGNE: All right, so what is the bottom line, as you've measured it, for a basic income for a family? And I guess the standard is family of four - two children, two parents.

MCMAHON: Well, for that standard family, two workers and two young children, each of the workers needs to earn just over $16 an hour or a total of about $68,000 a year.

MONTAGNE: And for an individual?

MCMAHON: A single worker without any children requires about $30,000 a year. That's roughly twice the federal minimum wage full-time.

MONTAGNE: I think a lot of people will think those numbers sound high. And that's partly because many of us have heard of the federal poverty line, which is quite a bit lower than the numbers that you've come up with.

MCMAHON: Well, the federal poverty level was actually developed about 50 years ago on a very basic assumption about what families needed to buy food. And then a multiple of that was used to calculate a total family budget. So the federal poverty level bears little resemblance to reality.

MONTAGNE: So this no-frills - I'd say almost extreme no-frills - existence for an individual still costs above $30,000.

MCMAHON: It does. And sometimes people look at the bottom line and they get something of a sticker shock. But when you look at the actual tables, and you go expense by expense, people tend to agree that these numbers are quite reasonable. It's just that when we add everything up at the bottom of the table, and when workers add things up at the end of the month, they're often surprised with just how expensive life is these days, particularly compared to their shrinking wages.

MONTAGNE: Thank you very much for joining us.

MCMAHON: Thank you for having me. Transcript provided by NPR, Copyright NPR.