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:
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.
Car Payment: $200
Health Insurance: $450
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.
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.
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
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.