2025 Living Income Standard Methodology
View the 2025 Living Income Standard dashboard
The 2025 Living Income Standard (LIS) captures how much income working people and families need to afford basic expenses. BTC develops an LIS for every county in North Carolina approximately every two years. We use actual cost data to estimate how much money families need to pay for eight basic types of expenses: 1) housing, 2) food, 3) child care, 4) health care, 5) transportation, 6) other necessities, 7) taxes, and 8) savings. The addition of a very small amount for savings is new for 2025. Many of the data sources and calculations used in the LIS are based on the work of the Economic Policy Institute’s (EPI) Family Budget Calculator, and we’re grateful for their analysis and support.[1]
Raw data for the LIS comes from a variety of federal and state surveys and analyses. The methodology is intentionally designed to produce conservative estimates of what families need to make ends meet. Food costs, for example, assume that a family prepares every meal at home and never eats in restaurants. The LIS also excludes the value of benefits and work supports like the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps) and housing vouchers, for which a family might be eligible. The exception is some tax credits for working families that are included in our estimated tax payments.
All data is the most recent available at the time of analysis, unless otherwise specified below. All inflation adjusted data is adjusted to October 2024 dollars. When adjusting for inflation, we use the most relevant component of the Bureau of Labor Statistics consumer price index for urban consumers (CPI-U) that is available. This means that we use data for the South when it is available, and that we use the most specific component for the cost we are measuring. When underlying data is available only at the annual level, we divide by 12 to estimate monthly income needs.
Family Types
The LIS constructs budgets for a single adult and five family types with 1 to 3 children. All adults are assumed to be non-elderly and between 20 and 50 years old. (For costs that require a specific age input we assume adults are 40 years old.) The age of children impacts a variety of costs. For example, child care for young children is more expensive than for school-aged children, but their food costs are lower. The assumptions we make about children’s ages is in the below chart:
| Number of Children | Ages of Children |
| One Child | 3 years old |
| Two Children | 3 and 7 years old |
| Three Children | 3, 7, and 11 years old |
Geography
To reflect regional variations in living costs, the LIS generates budgets for each family type in all 100 North Carolina counties. We also create a statewide average LIS. When cost data is not available at the county level we create a weighted average for North Carolina as a whole, and this is described in the methods for individual costs.
Housing
The LIS assumes that families rent rather than own their own homes. Housing costs are based on the U.S. Department of Housing and Urban Development (HUD) Fair Market Rent (FMR) values for each county in 2025.[2] FMRs are based on surveys of actual market rents and are set at the 40th-percentile rent, to capture the rental cost of modest homes. This means that 40 percent of the units in an area rent for less than the FMR, and 60 percent rent for more. FMR includes the cost of necessary utilities other than telephone, cable, and internet service. This means it includes electricity, gas, water, and garbage costs.
We follow HUD guidelines that state that parents and children should have separate bedrooms and that two children can share a bedroom.[3] We assume that a single adult has a studio apartment, one or two adults with one to two children has a two-bedroom home, and that two adults with three children have a three-bedroom home. Housing costs for North Carolina are a weighted average of county FMRs, weighted by the number of renter households per county according to the 2019-2023 American Community Survey.[4]
Food
Food costs are based on national estimates from the October 2024 Thrifty Food Plan developed by the U.S. Department of Agriculture (USDA).[5] The Thrifty Food Plan is the basis for Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps) benefits. It is based on the estimated cost of groceries needed to prepare nutritious meals at home for a family of four. There is no allowance for meals purchased outside the home or eaten in restaurants.
Plan costs are based on the age and gender of adults and teenagers, and the age of children. For adults we average male and female costs for 20- to 50-year-olds. For families with children, we use costs for 2- to 3-year-olds for the first child, 6- to 8-year-olds for the second, and 9- to 11-year-olds for the third. We use USDA guidelines to adjust for family size.
Child Care
Child-care costs use the 2021 Market Rate Survey for licensed child-care facilities conducted by the NC Department of Health and Human Services’ Division of Child Development and Early Education (DCDEE).[6] Market rates are the amounts that child-care providers charge each month to care for a child. DCDEE releases this survey every 3 years and uses the results to set payments for child-care providers that participate in the state’s subsidy program for eligible low-income families. We use the 2021 Market Rate Survey rather than the 2024 survey because the 2024 survey showed very high costs in a small number of counties, potentially due to small sample sizes, and we were unsure of their accuracy. Using 2021 market rates and adjusting for inflation gave us comparable results in most counties to the 2024 rates.
The rates vary by the type of provider (child-care center or family child-care home), their quality rating (one through five stars), the age of the child, and the county. Subsidy payment rates are set to the 75th percentile of market rates in the survey.
For the LIS we assume that families use child-care centers with a four-star quality rating. We use four-star centers as the default because most providers in the state are centers and have four or five stars. For 3-year-old children we use 3- to 5-year-old rates, and for older children we use school-age rates, which apply to all children over 5. (See Family Types for more details on our assumptions about children’s ages.)
The LIS assumes that all adults in a family work full-time. For 3-year-old children we use the cost of full-time year round care. For 7-year-old children, we use the cost of full-time care for 2.5 summer months, and care for one-third of the day for 9 months of before and after school care (about 46 percent of year-round care). For 11-year-olds we only use the cost of full-time care for 2.5 summer months (about 21 percent of year round care). We adjust costs for inflation using the CPI-U for child care in the United States.[7]
Health Care
Health care costs include insurance premiums and out-of-pocket expenses. We assume that people receive health coverage through an employer-sponsored plan and pay a portion of the premium, in addition to paying out of pocket for some costs. Spending data comes from the Medical Expenditure Panel Survey (MEPS) sponsored by the U.S. Department of Health and Human Services.
MEPS provides 2023 estimates of employee costs for insurance plans based on family size at various geographic levels.[8] For one adult we use single coverage. For one adult and one child we use employee plus one coverage. For all other family sizes we use family coverage. We use the average annual employee contribution for private-sector employees in North Carolina and for state and local public sector employees in the South Atlantic region. (Public sector estimates are not available at the state level.) For each county we use a weighted average based on the private and public sector employment share in that county in 2023. We exclude federal employees when calculating employment share, as they are not included in the MEPS estimate and account for a very small portion of civilian workers in North Carolina. Data on public and private employment share is from the Bureau of Labor Statistics and North Carolina Department of Commerce Quarterly Census of Employment and Wages.[9] We adjust insurance costs for inflation using the CPI-U for health insurance in the United States.[10]
We combine estimated insurance costs with 2022 MEPS data on average out-of-pocket spending on medical care.[11] This data is available for different age groups at the national level, and for all people in the United States by region. We use the 18- to 44-year-old group for adults, the under 5-year-old group for the first child, and the 5- to 17-year-old group for second and third children. We adjust these costs for the Southern region with a multiplier based on mean spending for all persons in the United States and in the South. We adjust out of pocket spending for inflation using the CPI-U for medical care in the South.[12]
Transportation
Transportation spending estimates are from the Center for Neighborhood Technology’s Housing and Transportation (H+T) Index for 2019.[13] The H+T Index uses a variety of sources to estimate annual household-level transportation costs at small geographic levels, including counties. The H+T Index accounts for the availability of public transportation, access to daily needs in walking distance, and the cost of driving. The H+T Index assumes that people purchase used cars, and driving costs include costs of financing and car maintenance in addition to fuel. We use the estimated cost of transportation for middle-income households (those with incomes at 80 percent of the area median.)
We then adjust transportation costs for inflation, type of trip, and for household type. We adjust for inflation using the CPI-U for transportation in the South Atlantic.[14] We adjust for type of trip to include only work-related and other necessary travel, and exclude all social trips. Data on trip type is from the Federal Highway Administration’s 2022 National Household Travel Survey.[15] We use data on annual vehicle miles travelled by trip purpose for the South Atlantic region and estimate that 70 percent of travel is for non-social and recreational purposes.
To adjust for household size and type we use the Bureau of Labor Statistics 2023 Consumer Expenditure Survey (CEX) to create a multiplier for each household type.[16] The CEX estimates spending by household type, or “consumer unit,” in three separate tables: number of people in the household, family composition, and number of earners. The table below shows how the household type categories in the CEX correspond to LIS family types and gives the numbers of the relevant CEX tables.
| LIS Family Type | Household Size (Table 1400) |
Composition (Table 1502) |
Number of Earners (Table 1600) |
| One Adult | One person | Single person | Single consumers: One earner |
| One Adult and One Child | Two people | One parent, at least one child under 18 | Consumer units of two or more: One earner |
| One Adult and Two Children | Three people | One parent, at least one child under 18 | Consumer units of two or more: One earner |
| Two Adults and One Child | Three people | Married couple with children: Total | Consumer units of two or more: Two earners |
| Two Adults and Two Children | Four people | Married couple with children: Oldest child 6 to 17 | Consumer units of two or more: Two earners |
| Two Adults and Three Children | Five or more people | Married couple with children: Oldest child 6 to 17 | Consumer units of two or more: Two earners |
For each category, we sum spending for four categories: used cars and trucks, gasoline, other vehicle expenses (which includes loan payments and maintenance,) and public and other transportation, and then divide this total by spending for all consumer units to create a multiplier for that household type. The multiplier for each LIS family type is an average of the three multipliers for that family type’s size, composition, and number of earners. We then multiply the inflation-adjusted transportation cost for non-social trips by this value. To calculate state-level transportation spending we calculate a weighted average using the number of households in each county, according to the 2019-2023 American Community Survey.[17]
Other Necessities
We estimate the cost of miscellaneous necessary expenses using the 2023 CEX for the second 20-percent-income quintile. We use the following cost categories: clothing, educational supplies, household furnishings, housekeeping supplies, life and other personal insurance, personal care items, reading materials, telephone and cell phone services, other household expenses (this includes home internet costs), and miscellaneous costs (this includes consumer debt).[18] We calculate spending on these items as a percent of spending on housing and food combined, which comes to about 32 percent. For each family type we apply this percentage to our estimates of food and housing costs to estimate miscellaneous costs.
Savings
For the first time, we include a very modest amount of savings in the LIS. We set the monthly savings so that after one year, a household would have saved enough money to live for one month at 150 percent of the federal poverty level with no additional income. 150 percent of the federal poverty level is equivalent to an annual income of $46,800 for a family of four.[19]
Taxes
We estimate tax costs for each family type using the National Bureau of Economic Research’s TAXSIM microsimulation model.[20] This model uses family income and expenses to predict federal personal income tax, federal Social Security and Medicare payroll taxes, and state income taxes. This includes key tax credits for working families like the Earned Income Tax Credit (EITC), the Child Tax Credit, and the Child and Dependent Care Credit.
TAXSIM uses 2023 federal tax law and 2021 state tax law. Policymakers in North Carolina have passed tax cuts that have steadily reduced the personal income tax rate since 2013. The state personal income tax rate was 5.25% in 2021, 4.5% in 2024 and is 4.25% in 2025.[21] This means that TAXSIM overestimates the cost of state taxes in North Carolina.
For the wage input into the TAXSIM model, we sum all portions of the annual LIS except taxes. Using post-tax income as the input leads to an underestimate because it excludes taxes on the share of income that would be used make tax payments. This underestimate helps to balance the modest overestimate that we get from using state personal income tax rates from 2021.
In addition to total family post-tax wages, other inputs to the TAXSIM model include:
- Marital status: Unmarried for 1 adult households and married for 2 adult households
- Age of adults: 40 years old for all adults
- Age of Children: 3 years old for one child family, 3 and 7 years old for two-child family, 3, 7, and 11 years old for three child family
- Child-care costs: Based on child care market rates, as described in Child Care above
Many other types of taxes are accounted for in other cost items. Gas taxes are included in transportation, sales taxes are included in the cost of other necessities, and property taxes paid by landlords are passed along in rent and so are included in housing.
Income and Wage Calculations
After getting data for each type of cost, for each family type, in each county and statewide, we sum the costs to get the total income a family needs to meet basic needs. We first calculate monthly incomes and then multiple by 12 to arrive at the annual LIS. We round all cost data to the nearest $10. In some cases, this means that rounded cost categories may not sum to the total rounded LIS.
We calculate the hourly wage needed to earn the LIS by dividing the annual LIS by 2,080 hours for each adult in the household. This assumes that adults work full-time at 2,080 hours per year, or 40 hours a week for 52 weeks per year. Hourly wages are rounded to the nearest 10 cents.
We also compare the LIS to minimum wage pay in North Carolina. Hourly minimum wage in the state is $7.25, equal to the federal minimum wage. We estimate how many hours of work would be required per week to earn the LIS by dividing the annual LIS by $7.25 and by 52 weeks. For two-adult households we then divide by two to calculate how many hours each adult would need to work. In many cases we find that it’s impossible for families with children to earn a Living Income Standard at minimum wage, because it requires more hours of work than there are in a week.
Footnotes
[1] Economic Policy Institute. “Family Budget Calculator.” Economic Policy Institute, January 2024. https://www.epi.org/resources/budget/.
[2] HUD Office of Policy Development and Research. “Fair Market Rents (40th Percentile Rents).” HUD User, October 2024. https://www.huduser.gov/portal/datasets/fmr.html#year2025.
[3] U.S. Department of Health and Human Services Administration for Children & Families. “Occupancy Standards.” Office of Refugee Resettlement, May 22, 2019. https://www.acf.hhs.gov/orr/policy-guidance/occupancy-standards.
[4] U.S. Census Bureau. “Tenure.” American Community Survey 5-Year Estimates Subject Tables, Table B25003, 2023. https://data.census.gov/table/ACSDT5Y2023.B25003.
[5] U.S. Department of Agriculture Food and Nutrition Service. “Official USDA Thrifty Food Plan: U.S. Average, October 2024.” USDA Food Plans: Monthly Cost of Food Reports, November 2024. https://www.fns.usda.gov/research/cnpp/usda-food-plans/cost-food-monthly-reports.
[6] NC Department of Health and Human Services - Division of Child Development and Early Education. “North Carolina Child Care Market Rate Study 2021.” NC Department of Health and Human Services Division of Child Development and Early Education, July 2022. https://ncchildcare.ncdhhs.gov/Portals/0/documents/pdf/C/Child_Care_Market_Rate_Study_2021_Final_Report_7-20-22.pdf.
[7] Bureau of Labor Statistics. “CPI for All Urban Consumers (CPI-U), Day Care and Preschool in U.S. City Average, Series ID CUUR0000SEEB03,” December 15, 2024. https://data.bls.gov/timeseries/CUUR0000SEEB03.
[8] Agency for Healthcare Research and Quality. “Medical Expenditure Panel Survey (MEPS) Insurance Component (IC),” 2023. https://datatools.ahrq.gov/meps-hc/.
[9] Bureau of Labor Statistics and NC Department of Commerce. “Quarterly Census of Employment and Wages (QCEW).” D4 - Demand Driven Data Delivery. Accessed December 4, 2024. https://d4.nccommerce.com/QCEWSelection.aspx.
[10] Bureau of Labor Statistics. “CPI for All Urban Consumers (CPI-U), Health Insurance in U.S. City Average, Series ID CUUR0000SEME,” December 15, 2024. https://data.bls.gov/timeseries/CUUR0000SEME.
[11] Agency for Healthcare Research and Quality. “Medical Expenditure Panel Survey (MEPS) Household Component (HC),” 2022. https://datatools.ahrq.gov/meps-hc/.
[12] Bureau of Labor Statistics. “CPI for All Urban Consumers (CPI-U), Medical Care in South Urban, Series ID CUUR0300SAM,” December 15, 2024. https://data.bls.gov/timeseries/CUUR0300SAM.
[13] Center for Neighborhood Technology. “Housing and Transportation Affordability Index.” Accessed January 7, 2025. https://htaindex.cnt.org/.
[14] Bureau of Labor Statistics. “CPI for All Urban Consumers (CPI-U), Transportation in South Atlantic, Series ID CUUS0350SAT,” December 15, 2024. https://data.bls.gov/timeseries/CUUS0350SAT.
[15] Federal Highway Administration. “National Household Travel Survey,” 2022. https://nhts.ornl.gov/.
[16] Bureau of Labor Statistics. “Consumer Expenditure Surveys Tables,” 2023. https://www.bls.gov/cex/tables.htm.
[17] U.S. Census Bureau. “ACS Demographic and Housing Estimates.” American Community Survey 5-Year Estimates Subject Tables, Table B25003, 2023. https://data.census.gov/table/ACSDP5Y2023.DP05.
[18] Bureau of Labor Statistics. “Consumer Expenditure Surveys Tables,” 2023. https://www.bls.gov/cex/tables.htm
[19] U.S. Department of Health and Human Services. “Federal Poverty Guidelines for FFY 2025.” LIHEAP Clearinghouse, April 1, 2024. https://liheapch.acf.hhs.gov/profiles/povertytables/FY2025/popstate.htm.
[20] National Bureau of Economic Research, “TAXSIM,” 2022, https://taxsim.nber.org/.
[21] North Carolina Department of Revenue. “Tax Rate Schedules.” Accessed January 7, 2025. https://www.ncdor.gov/taxes-forms/tax-rate-schedules.
