Below is a brief description of how the Self-Sufficiency Standard calculates the cost of housing, child care, food, transportation, health care, miscellaneous items, and taxes/taxes credits. The Self-Sufficiency Standard follows several criteria to ensure the Standard is as consistent and accurate as possible, yet varied by geography and family composition. When possible, the data used in the Self-Sufficiency Standard are:
- collected or calculated using standardized or equivalent methodology nationwide
- obtained from scholarly or credible sources such as the U.S. Census Bureau
- set at minimum but adequate levels (e.g., nutrition levels)
- updated annually
- varied geographically and by age as appropriate.
For housing costs, the Standard uses the most recent Fair Market Rents (FMRs). These rates are calculated annually by the U.S. Department of Housing and Urban Development (HUD) for each state’s metropolitan and non-metropolitan areas to set levels of housing assistance. FMRs include utilities (except telephone and cable) and reflect the cost of housing that meets basic standards of decency. In most cases, FMRs are set at the 40th percentile, meaning that 40% of the housing in a given area is less expensive than the FMR.
Since HUD calculates only one set of FMRs for an entire metropolitan area, in multiple county metropolitan areas the Standard uses HUD’s Small Area Fair Market Rents (SAFMR) to estimate county variation within metropolitan areas.
To calculate the cost of child care, the Standard assumes market-rate costs (defined as the 75th percentile) by facility type, age of children, and geographical location. Most states conduct or commission market-rate surveys biannually for setting child care assistance reimbursement rates.
The Standard assumes infants (children 0 to 2 years old) and preschoolers (children 3 to 5 years old) are assumed to be in full-time care. Costs for schoolage children (6 to 12 years old) assume they receive before and after school care.
The Standard uses the U.S. Department of Agriculture Low-Cost Food Plan for food costs. The Low-Cost Food Plan was designed to meet minimum nutritional standards using realistic assumptions about food preparation time and consumption. As a conservative estimate of food costs, the Low-Cost Food Plan does not allow for any take-out, fast-food, or restaurant meals.
To vary costs within states, geographic differences in food costs are calculated using data from Map the Meal Gap, published by Feeding America.
If there is an “adequate” public transportation system in a given area, the Standard assumes workers use public transportation to get to and from work. A public transportation system is considered “adequate” if it is used by 7% or more of the working population in a given county. The cost of public transportation is calculated based on the price of a monthly adult pass.
If the area lacks “adequate” public transportation, private transportation is assumed. Private transportation costs are based on the average cost of owning and operating a car. One car is assumed for households with one adult and two cars are assumed for households with two adults (as both are working, but presumably at different places and/or different hours). Costs are calculated assuming that the car(s) will be used to commute to and from work five days per week, plus one trip per week per household for shopping and errands.
One adult in each household with young children is assumed to have a slightly longer weekday trip to allow for “linking” trips to a day care site. For per-mile costs, driving cost data from the American Automobile Association is used. The local commuting distance is computed from the National Household Travel Survey. The auto insurance premium is the average premium cost for a given state, calculated by the National Association of Insurance Commissioners. Geographic ratios are created using premiums for the automobile insurance companies with the largest market shares in the state.
To estimate the fixed costs of car ownership, the Standard uses Consumer Expenditure Survey amounts for families with incomes between the 20th and 40th percentile. The fixed costs include expenses such as fire, theft, property damage and liability insurance, license, registration, taxes, repairs, monthly payments, and finance charges. The monthly variable costs (e.g., gas, oil, tires, and maintenance) are also included, but the initial cost of purchasing a car is not.
The Standard assumes that an integral part of a Self-Sufficiency Wage is employer-sponsored health insurance for workers and their families. The statewide average health care premiums paid by workers are from the national Medical Panel Survey (MEPS) and vary for single adults and for a family.
To vary premium costs within state, a county index is created based on the second lowest cost Silver plan available through the state or federal market place. Health care costs also include out-of-pocket costs calculated for adults and children by age and Census region, obtained from the MEPS.
Miscellaneous expenses are calculated by taking 10% of all other costs. This expense category consists of all other essentials including clothing, shoes, paper products, diapers, nonprescription medicines, cleaning products, household items, personal hygiene items, and telephone service. It does not allow for recreation, entertainment, savings, or debt repayment.
Taxes include federal and state income tax, payroll taxes (Social Security), and state and local sales taxes where applicable. Additionally, the Standard includes federal tax credits (the Earned Income Tax Credit, the Child and Dependent Care Tax Credit, and the Child Tax Credit) and applicable state tax credits.
Emergency savings is the amount needed to cover living expenses when there is job loss net of the amount expected to be received in unemployment benefits. The amount calculated takes into account the average tenure on a job and the average length of unemployment of workers. In two-adult households, the second adult is assumed to be employed so that the savings only need to cover half of the family’s basic living expenses over the job loss period.