SSOL Calculation Breakdown

While the rules page provides a broad overview, this page focuses on detailed examples. You can try a basic SSOL calculator here to see how it works in practice.

Identify the Components

Define the Region. SOL calculations are based on costs within a 30-minute radius of the employer's location, ensuring adjustments for regional differences. If you live in a urban or suburan area, many of these seem trivial. But if you live in a rural area or in so called "food deserts", finding and defining these components can be a lot harder.

Identify the transportation requirement. For highly urban areas with a robust public transit system, the transportation method can be buses or the subway. In rural areas, transportation typically requires a personal vehicle, such as a car or truck. Do not forgot the about fuel, insurance, and maintenance.

Identify the living situation. Is the housing component rent or a mortgage. Apartment, house, trailer, or other method of housing. Then what is the going rate for housing. The chosen housing type must have sufficient publicly available options at the calculated price to meet demand. If a housing unit does not meet the minimum requirement, it does not mean it cannot be rented; just that it cannot be included in the available price. The same goes if the housing is restricted in any ways, such as for employees only or retireees.

Identify the utilities. Identify essential utilities (water, electricity, gas, sewer, trash, etc.) and determine a fair usage rate, including all taxes and fees.

Furnish the housing. Identify the needed items to funish the housing unit, like a bed, table and chairs, couch, dresser and what the costs for those items would be. Make sure to include the delivery charge.

Locate Grocery and Retail Stores. Identify the meal plan for the individual. If relying on public transit, individuals can only shop for a few days' worth of groceries, as they must carry their purchases home. If the transportation method is a car, then the shopping trip can cover a week.

Locate the department store. Where is the individual getting there clothes and shoes from? What about household items like cooking supplies and appliances

Identify Communication Needs. This has gotten far simplier as technology has advanced. Currently it is a smart phone with a data plan.

Identify the health provider. Current health care means health insurance. The SSOL calculation must account for monthly premiums, deductibles, and accessible healthcare providers? Where are the general practitioners and hospitals? It does no good to have insurance if there is no where to get service.

 

Pricing

Now that all the different SSOL components have been accounted for, next is to get the public pricing. Public pricing means the price offered to the public at large without any gimmicks. For instance, when getting fuel, there is a public price and then the price that is a few cents cheaper if you are member of the gas stations rewards program. The price that is used is the public price.

Next, the price used must be in large enough quantity to meet the demand. If the public price for an apartment is $1000 but 2 new units become available and are priced at $800 , the question that must be answered is the demand such that those 2 units will support it?

While collecting this pricing data might seem overwhelming, the federal government already does this to calculate inflation rates. Instead of creating a new system, existing data collection methods can be refined and redirected toward SSOL calculations.

Once all the prices have been found, they need to be adjusted to a yearly cost. Monthly expenses are multiplied by 12, weekly expenses are multipled by 52, etc to determine annual costs.. Sum up all the expenses to get a yearly total, add the taxes, divide by 2000 hours, and you have the hourly minimum wage.

 

Create and Execute the Plan

Now that all the components have been defined and the prices determined, next come the SSOL breakdown. The employer would go to a website and retrieve the SSOL minimum wage with a complete breakdown of the SSOL components. If the employer downloads the information, they would then upload that information into their payroll system so the wage information can be adjusted. Then there would be announcement that SSOL would change at the beginning of the next quarter.

Employees can access the SSOL breakdown on the same website, ensuring transparency in wages. An employee earning the SSOL minimum, working 40 hours per week (with two weeks off per year), and following the SSOL plan exactly should be able to cover all essential living expenses without additional financial strain.

 

Other notes

• Transparency Every part of the calculation is publicly available. Employers receive a detailed breakdown of the SSOL calculations, which they share with employees. This ensures that workers understand how wages are structured and that they are being paid according to the costs.
• Wages: Instead of giving a fixed value, employers would represent the wage as SSOL, SSOL + $1, or SSOL + 10%. So when adjustments are made, wage increases can be carried forward
• Housing The housing component is defined as a whole. In figuring the cost of housing, it cannot be assumed the individual is going to have a roommate or anyone else to split the cost with.
• Employer benefits As per part 3 of the rules, employers can offer replacements for any section of the SSOL. The employee is free to accept or decline any offer.

 

I was presented a scenerio. A small town decided it wanted to lower its SSOL number to make it more attractive for companies to relocate there. The town owned the water company where the average bill for its residents was $30 a month, $360 a year, or $0.18 /hr in the SSOL calculation. When crunching the numbers, they figured after they factored in the printing, postage, collection, and processing of all the bills, the town was only getting around $22 from each bill. They decided to make the water free for up to 1200 gallons a month, which for that region was the expected water use of the SSOL. So for a company that has 500 full time employees ( 1,000,000 man hours a year ), the removal of the $0.18 / hr from the SSOL will save the company $180,000 a year.

The question arose: was this fair?

My response: Absolutely. In fact, this is the entire point of SSOL.

By lowering an essential cost, the town improved affordability for residents while making itself more attractive to businesses.

 

The reason for the SSOL is inelastic demand and the need to have the minimum wage meet the true costs of essential items. But it only works because of part 2 of the rules. Basic supply and demand; if supply increases and demand stays constant, then prices drop.

Right now, there really is not a reason for those who can increase the supply to increase the supply. At least not in any way that is going to affect the prices in a dramatic way because it is not going to benefit them financially. But if the SSOL is implemented, the incentive to increase supply is not to be able to make more money, but rather to keep labor costs in check.