Calculating Cost of Living



It is important to consider the cost of living for employees when negotiating a

contract because you want to have an understanding of what an employee would

need to make in order to be able to financially support themselves. If the current

financial proposal does not provide the employees with enough money to cover

basic expenses, this can be an issue for both the employees and the employer.

If an employee can not make enough money to cover their basic expenses, they

either need to find another job or live in debt. Likewise, the employer may have

a difficult time finding qualified employees who are willing to work for them if they are not able to provide a living wage.

Because of this, the changes in the cost of living become an important bargaining point during negotiations.

How To Calculate The Cost Of Living For A Single EE

An Employee (EE) works as a caregiver in Coopersville at an Assisted Living Center.  She has two children and she rents a three bedroom home in Allendale, Michigan. Figure out below how much she must make yearly in order to pay her bills:


Step 1:


Calculate the amount of her expenses for a month

This employee rents a 3 bedroom home in Allendale, MI and has two young children. Consider this when thinking about her monthly expenses.

Rent: $1,000

Food: $700

Car Payment: $200

Gas: $100

Clothing: $80

Health Insurance: $450

Incidentals: $200

Hair Cuts
Basic Cable
Monthly Expenses: $2,730/month


Yes, the numbers above are just estimates but you should do sufficient research beforehand so that you can defend your estimates at negotiations. Many of these numbers can be found on the web.

Step 2:


Calculate the amount of her expenses for a year

If you multiply her monthly estimated costs by twelve (12), you will get her estimated costs for a year, which is $32,760.

Step 3:


Calculate how much the EE makes each year

Research on the web (maybe Bureau of Labor Stats) and find the average wage for a caregiver at a nursing home/assisted living facility for the local area.

               Take the employee’s hourly salary and multiply it by 2080 (52 weeks x 40 hours):

               Yearly Earnings: $12.00 x 2080 = $24,960

Step 4:


Compare the employee’s yearly earnings with her yearly expenses.


 $24,960 (Yearly Earnings) – Yearly Expenses ($32,760) = -$7,800

This employee would have to borrow nearly $8,000 annually in order to adequately support her family living in Allendale, MI. Her family cannot live off of this wage.

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