How Living Wages are Calculated
In most municipalities, the living wage is calculated based on the income needs of a two-parent family with two young children. It considers the hourly rate of pay needed for a household to maintain a modest standard of living, once government transfers have been added to the family’s income, and taxes have been subtracted. After months of collaboration, the Alberta Living Wage Network developed a standard methodology for calculating living wages across the province and worked with Puzzle Rock Coding to calculate them.
The methodology assumes that both parents are working full-time hours and includes more than the basics of food, clothing and shelter, the calculator also takes into account unexpected costs, small investments in education, and childcare. Below we have provided additional details about how living wages in Alberta are calculated. In municipalities where the living wage is equal to the minimum wage for a family of four, a second calculation for a single person was done and the weighted average of the two was used to calculate the living wage.
Based on the Market Basket Measure (Statistics Canada) for Shelter, which assumes a 3-bedroom rental accommodation. The rental prices are based on the 2016 Census. Statistics Canada estimates the median cost of 3-bedroom rental units occupied by households in the second income decile. The shelter cost also includes an amount to reflect that some households have to provide their own appliances, as well as an amount for tenant’s insurance. This is adjusted by the Alberta Spatial Price Index (or close proxy based on the size and location of municipality) outside the large cities.
Based on the Alberta Nutritious Food Basket (sourced directly from Alberta Health Services) for food costs, which represents a basic, healthy diet that would fulfill current nutrition recommendations and reflect the typical food purchasing patterns of the target population. Registered dietitians and trained volunteers within specified communities go to grocery stores in their community to determine how much the food basket costs in their community. Alberta Health Services and Alberta Agriculture and Forestry collect the prices of these food items in approximately 50 communities across the province.
The food basket includes a mix of fresh, frozen, and minimally processed foods that Albertans can routinely purchase in full-service grocery stores at any time of the year. Examples include the following:
- Milk, partly skimmed, 1%
- Beef, ground, lean
- Salmon, sockeye, canned
- Broccoli, bunches, raw
- Bread, whole wheat
- Vegetable oil, canola
The amount of each food item allocated to the family is determined by the age and sex of the individuals in the family.
See Methodology for the Implementation of the National Nutritious Food Basket in Alberta (Alberta Health Services, 2017) for a full list of food items included in the basket.
Clothing & Footwear
Based on the Market Basket Measure (Statistics Canada) for clothing, which includes footwear and clothing for a family of four for most common work, school and social occasions. Examples include the following:
- Women’s athletic shoes, 1 pair, replaced annually
- Girl’s socks, 6 pairs, replaced annually
- Boy’s dress pants, 1 pair, replaced annually
- Men’s shorts, 1 pair, replaced every 2 years
See First Comprehensive Review of the Market Basket Measure of Low Income (Human Resources and Skills Development Canada, 2010) for a full list of clothing & footwear included.
Based on the Market Basket Measure (Statistics Canada) for Transportation, which recognizes the costs necessary to travel to and from work, to do shopping, and meet other everyday needs. The costs are specific to municipality size: in rural areas, the only mode of transportation used is a car; most large urban areas have effective public transit; public transit may be less effective in small and medium sized cities and suburbs.
The private transportation costs include the purchase of an eight-year-old compact car (based on a basket of 5 cars) along with 1,200 litres of gas per year. The public transportation costs include monthly public transit passes for two adults and one child and an additional amount for 12 round trip taxi rides. The proportions allocated to private and public transportation are based on 2016 Census data (the question on the mode of commuting to work).
Includes the cost of 12 months of child care for the 4-year old, based on each community finding the actual costs of local providers (and, for Calgary, based on information from Canadian Centre for Policy Alternatives). Also includes 10 months of before- and after-school care and 2 months of day camps for the 9-year-old, based on each community finding the actual costs of local providers.
The Alberta Childcare Subsidy is included in calculations and for living wages under its income threshold of $90,000 for a family.
Based on the cost of the premiums for Alberta Blue Cross health insurance. The plan selected is Blue Choice, with Place C extended health benefits, dental coverage, and prescription coverage.
Based on the cost of Athabasca University undergraduate courses (and, for Edmonton, the cost of taking Social Work courses from Norquest College): one parent taking one course per semester (a total of two courses). A tax credit is calculated for tuition and eligible fees.
Other household items
Based on the Market Basket Measure (Statistics Canada) for Other expenses. It is made up of the following expense categories:
- Telephones and telephone services
- Household supplies
- Furniture, furnishings, electric appliances
- Personal care
- Home entertainment, sports, and recreation
- Reading materials and supplies
How we calculate inflation
When calculating expenses we always use the most recent data available and adjust using the Consumer Price Index (CPI) as needed. For a particular year’s CPI, we average the twelve-monthly CPI values, and the most recent CPI available is for the year 2020. We also refer to the Market Basket Measure. We refer to the MBM to determine the costs for clothing, shelter, and transportation however the most recent MBM numbers available are for 2019 so we consider inflation increases by adjusting them to 2020 costs using category-specific CPI values.
Tax & benefit programs
Important changes to taxes and benefits occurred in 2020-2021, including the end of the Alberta Climate Rebate, and the consolidation of the Alberta Child Benefit and the Alberta Family Employment Tax Credit into a single program, and the Alberta Child and Family Benefit. The annual income threshold for the Alberta Child Care Subsidy was increased from $75,000 to $90,000, so this was included in most living wages for Alberta unless it was too high to qualify for the subsidy as was the case with Fort McMurray and Canmore. For more information, check out New funding allocation for child care is driving down the cost of living in Alberta, but not for everyone.