Methodology for the 2022 Living Income Standard

The 2022 Living Income Standard (LIS) strives to capture how much income a working family with children needs to afford basic expenses. The LIS uses actual cost data to approximate how much money is required for four representative family types to pay eight basic types of expenses: 1) housing, 2) food, 3) childcare, 4) health care, 5) transportation, 6) other necessities, 7) taxes, and 8) consumer debt payments.

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Raw data for the LIS comes from a variety of federal and state sources, predominantly official government surveys and data. The methodology is intentionally designed to produce conservative estimates of what families need to make ends meet. Food costs, for example, are based on the U.S. Department of Agriculture’s “Thrifty Food Plan,” which assumes that a family always buys bulk groceries, prepares every meal at home, never eats out, and seldom purchases meat. Another example is only consumer debt payments are included, not student loans, mortgages, and other common forms of household debt. By using conservative estimates, the LIS provides a basic budget for a very modest lifestyle with no financial cushion against family emergencies like illness or the loss of a job.

The LIS also generally excludes the value of work supports, such as SNAP (formerly known as food stamps) and housing vouchers, for which a family might be eligible. Exceptions include an allowance for public health insurance, non-group health insurance subsidies, and certain tax credits. By excluding the value of work supports, the LIS shows how much a family would need to earn to meet its basic needs without any assistance.

Most of the procedures underlying the LIS are based on the work of the Economic Policy Institute (EPI), a nonprofit research organization in Washington, D.C.

Below are detailed descriptions of the methods used to craft the LIS. All dollar figures have been adjusted for inflation to represent 2022 values. Where necessary, dollar amounts from earlier years have been adjusted to their 2022 equivalents by using the U.S. Bureau of Labor Statistics’ Consumer Price Index for all urban consumers (CPI-U). Because inflation varied widely by type of cost (e.g. food has been outpacing other many other goods in recent months) we use CPI components that are specific to the cost category wherever possible. For example, when updating health care premium costs to 2022 values, we use the health insurance subcomponent of the CPI-U instead of the overall inflation index.

1. Family Types

According to the U.S. Census Bureau, more than 1.2 million families with children reside in North Carolina.[1] Owing to the impossibility of creating detailed budgets for every family, the LIS constructs budgets for four representative family types. The age of children does impact the costs estimated using the methodology described below. For example, child care for infants is more expensive than for school-aged children, but infants also consume less food. The following chart summarizes the characteristics of each model family.

Family Type Family Characteristics
Two-person family One adult (age 20-50); one infant (age <1)
Three-person family One adult (age 20-50); one infant (age <1);  school age-child (age 6-18)
Four-person family Two adults (age 20-50); one infant (age <1); school age-child (age 6-18)
Five-person family Two adults (age 20-50); one infant (age <1); one preschooler (age 3-5); one school age-child (age 6-18)

2. Geography

To reflect regional variations in living costs, the 2022 LIS generates budgets for each family type in all 100 North Carolina counties.

3. Housing

The LIS assumes that families rent rather than own their own homes. This is consistent with national research showing that low-income households are more apt to rent their homes.

Housing costs are based upon the U.S. Department of Housing and Urban Development (HUD) Fair Market Rent (FMR) values for each county in the 2022 fiscal year.[2] FMR is a survey estimate of the actual market rent for a modest apartment in the conventional marketplace. FMR measures shelter rent and the cost of all tenant-paid utilities except for telephone, cable, and internet service. Area FMR values are set at the 40th-percentile rent. This means that 40 percent of the units in an area rent for less than the FMR, and 60 percent rent for more.

Assumptions about the appropriate size of an apartment mirror HUD’s occupancy standards. HUD guidelines state that parents and children should have separate bedrooms and two children can share a bedroom. Therefore, the LIS assumes that two-, three- and four-person families require a two-bedroom apartment, while a five-person family requires a three-bedroom apartment.

In 2022, monthly FMR for a two-bedroom apartment in North Carolina ranged between $724 and $1,223. Monthly FMR for a three-bedroom apartment varied from $895 to $1,676.

4. Food

 Food costs are based on the December 2021 Thrifty Food Plan (TFP) developed by the U.S. Department of Agriculture (USDA).[3] December 2021 data was the most recent available at the time LIS costs were calculated. Therefore, food costs are likely understated in the LIS, given price increases in the early months of 2022. The TFP, which is the basis for the Supplemental Nutrition Assistance Program — formerly known as food stamps — allotments, reflects the estimated costs associated with purchasing the food required to prepare a nutritionally sound diet at home. There is no allowance of any kind for meals purchased outside of the home or eaten at any kind of restaurant.

Plan costs are tied to both the age and gender of adults and teenagers, but for children, only age factors in. For infants, the plan costs for a 1-year-old are used. For preschoolers, the TFP reports separate costs for 2- to 3-year-old and 4- to 5-year-old children. We average plan costs for both age groups to estimate preschooler food expenses. Similarly, the TFP provides different costs for school-aged children and teenagers based on the nutritional needs of each age group. The plan reports costs for 6- to 8-, 9- to 11-, 12- to 13-, and 14- to 19-year-old children and teenagers. To provide a robust estimate of the food costs families face depending on the age of their children, we weight the TFP costs to reflect an average for different aged children. The formula for school-age children’s weighted food costs is below. Additionally, separate costs for males and females in the 12- to 13- and 14- to 19-year-old age groups are averaged to account for differences in food cost by gender. For parents, we similarly prevent assuming gender or excluding same-sex households by averaging the male and female plan costs in the 20- to 50-year-old age band.


\frac{{(\text{6- to 8-yr-old cost} \times 3)}+{(\text{9- to 11-yr-old cost}) \times 3}+{(\text{12- to 13-yr-old cost} \times 2)}+{(\text{14- to 17-yr-old cost} \times 4)}}{12}

In 2021, the USDA adjusted the methods used to calculate the TFP based on congressional guidance in the 2018 Farm Bill. For decades, Congressional guidance largely focused on adjusting for inflation, not changes in dietary guidance and other changes in food consumption. The 2018 Farm Bill called for current dietary guidance, consumption patterns, food prices, and food composition data to form the basis of the TFP reevaluation. As a result of improved understanding of what constitutes an adequate diet, among other factors, the 2021 TFP increased by roughly 20 percent above the previous version.[4]

5. Child Care

Child-care costs are based on a survey of market rates for licensed child-care facilities conducted by the NC Department of Health and Human Services’ Division of Child Development and Early Education (DCDEE).[5] This survey is conducted every 3 years and is used by DCDEE to determine the amounts paid to child-care providers that participate in the state’s child care subsidy program for eligible low-income families. Subsidy payment rates are different in each county and are based on the 75th percentile of market rates for that county. Due to the COVID-19 pandemic, the most recent market rate survey was conducted in 2018.

The LIS assumes that all adults in a family work full-time, and all children — infants, preschoolers, and school-aged children — require regular, age-appropriate care in licensed child-care centers that have received a four-star rating from the North Carolina Division of Child Development and Early Education. North Carolina rates all licensed child-care providers on a five-star scale. A one-star rating means that a facility meets basic standards. Additional stars are awarded to facilities that meet higher quality requirements measured by staff education and other standards. Many factors such as transportation and work schedules force families to choose child-care options close to where they work and live. Although a one-star facility may be less expensive, it may not be feasible for a family to choose that care center. The LIS accounts for this by using four-star child-care centers as the baseline for child care costs. While four-star centers have higher rates than lower-quality facilities, this choice reflects the most common option available to families as two-thirds of child-care centers in North Carolina have a four- or five-star rating.

Child-care rates vary by age, with higher costs for younger children. Because the LIS family types assume all families have an infant child, this may overestimate child-care costs for families with older children. For school age children, we adjust the cost of care to reflect full-time care for 2.5 months during the summer and care for one-third of the day during the remaining months of the year for after-school care. This comes to approximately 47% of the cost of full-time care for school age children.

Since the market rate survey has not been updated since 2018, the LIS uses inflation-adjusted 2018 market rates to estimate working families’ child-care costs in 2022. Given rapid overall inflation and a lack of child-care centers coming out of the pandemic, this adjustment likely underestimates the near-term real cost of child care.

6. Health Care

While the sad reality is many families go without health insurance, the LIS includes the cost of health care as a basic necessity. Health expenses are complicated to estimate given the different ways families secure coverage and the real costs they then face. Families may purchase coverage through an employer-sponsored group plan, obtain non-group insurance through the private market, or receive public insurance. For North Carolinians obtaining non-group insurance through the private market, they may receive a subsidy based on their individual or family income per the Affordable Care Act.

For families with employer-sponsored health insurance, the LIS bases the cost on the average private-sector employee’s share of premium costs. This figure comes from the 2020 Medical Expenditure Panel Survey (MEPS) sponsored by the U.S. Department of Health and Human Services.[6] MEPS provides several different plan options. The LIS uses the “employee plus one coverage” for the two-person family structure and the “family coverage” option for three-, four-, and five-person families. The annual estimate is divided by 12 to produce a monthly cost estimate, and this figure is then adjusted for inflation using the health insurance subcomponent of the CPI-U’s medical care component.

For families with non-group health insurance, monthly premium costs are taken from the Kaiser Family Foundation’s (KFF) Health Insurance Marketplace Calculator,[7] which estimates premium costs and ACA marketplace subsidies based on family characteristics.

The KFF calculator generates costs for non-group health insurance quotes based on the “Second Lowest Cost, Silver Plan” for each county for 40-year-old adults and for children (whose rates are the same because they are under 18). The LIS assumes families do not use tobacco products, as actual costs are likely to be significantly higher for tobacco users. The KFF calculator determines subsidy and premium amounts based on family income, so the statewide weighted average income level for each family structure from the 2019 LIS was used as the income input. These income levels are adjusted for inflation to reflect 2022 dollars.

Most families with modest incomes will likely minimize costs where possible while still purchasing goods and services to maintain a good quality of life. If they are relatively healthy and do not use health care services very often, families with non-group health insurance might choose to enroll in the lowest-cost bronze plan. This level of health coverage offers the lowest monthly premium payments, but higher copays for using health services. We instead used the silver plan to reflect a family that can afford decent health coverage that better insulates them from massive out-of-pocket expenses.

To estimate out-of-pocket medical costs, the LIS uses 2019 MEPS household survey for selected age groups.[8] We adjust these costs for the Southern region with a multiplier based on mean out-of-pocket expenditures for all persons in the United States and in the South. For each family type, the appropriate expenditures by age are summed and divided by 12 to yield a monthly amount. We use the CPI-U subcomponent for medical care to adjust costs to reflect 2022 dollars.

Finally, health care costs for each family type are weighted using a revised and updated version of a formula developed EPI for the 2019 LIS. Formula weights reflect the percentages of families that have employer-sponsored, direct-purchase (non-group), and public insurance, as measured by the U.S. Census Bureau’s 2020 American Community Survey five-year estimate. The universe for deriving percentages is people under 65 years old with one type of health insurance, excluding those who receive Medicaid or TRICARE/military coverage. We exclude Medicaid recipients because most people eligible for Medicaid in North Carolina have incomes far below the LIS. Public insurance includes VA Health Care and Medicare, which for people under 65 primarily applies to people with disabilities. We multiply each premium costs by the relevant share of the relevant population and sum to produce a weighted average cost for health care.

The final formula for health care costs is:

(0.14 \times \text{nongroup insurance premium}) + (0.83 \times \text{employer sponsored premium}) 
\\\ + (0.03 \times 0 \text{[no premium for public insurance]}) + \text{out of pocket costs}

7. Transportation

The LIS assumes that a family relies upon a private automobile to travel to work and school, as well as to conduct essential family business. Automobile travel is North Carolina’s dominant mode of transportation due to low-density settlement patterns, a general separation between employment and residential centers, and relatively limited public transit networks. In fact, roughly 80 percent[9] of North Carolina workers commute to their jobs by themselves in a private automobile, according to the U.S. Census Bureau’s 2020 American Community Survey five-year estimate.[10]

Raw transportation data come from two sources: the 2017 National Household Travel Survey (NHTS)[11] sponsored by the U.S. Department of Transportation and the 2022 per-mile deduction rate computed by the U.S. Internal Revenue Service (IRS). The IRS per-mile rate (58.5 cents) measures the cost of owning, repairing, maintaining, and registering an automobile.[12]

To estimate transportation costs for each family type, a four-step process is used.

First, the state’s 100 counties are categorized as urban or rural based on the North Carolina Rural Center’s classification because transportation costs are generally higher in rural communities. The Rural Center uses county population density and data from the 2020 US Census to determine whether a county is urban, suburban, or rural. The Rural Center considers counties with population densities less than 250 people per square mile as rural, population densities between 250 and 750 people per square mile as suburban, and population densities above 750 people per square mile as urban. We collapse the urban and suburban categories into simply urban. Using these definitions, there are 78 rural and 22 urban counties in North Carolina.[13]

Second, NHTS data showing the average annual vehicle miles per driver are calculated for urban and rural North Carolinians. The appropriate values then are assigned to each county based on its urban or rural classification. The 22 urban counties are given a value of 12,172 miles per driver per year. The state’s 78 rural counties are assigned a value of 13,332 miles per driver per year.

Third, NHTS travel-day data are analyzed to isolate the annual person-miles of travel strictly for work and nonsocial purposes. This is a conservative estimate which does not account for a significant portion of travel that families often engage in.

Finally, a formula developed by EPI is used to generate a monthly estimate for transportation costs based on the number of adults in a family. The formulas are below. In two-parent families, we assume only one parent takes on the driving responsibilities for non-social trips.

Family Type Formula
One-Parent 0.575(work and non-social trips of 1st adult) * (Average annual miles per driver/12) * 0.585(IRS cost/mile)
Two-Parent [0.575(work and non-social trips of 1st adult) * Average annual miles per driver/12 * 0.585(IRS cost/mile)] + [0.213 (work trips 2nd adult)* Average annual miles per drive/12 * 0.585(IRS cost/mile)]

8. Other Necessities

Other necessary expenses incurred by families with children include clothing, personal care items, household supplies, reading materials, internet, school supplies, other household expenses, and telephone service. Based on an analysis of the U.S. Bureau of Labor Statistics’ (BLS) 2019 Consumer Expenditure Survey (CEX).[14] The average expenditures for the bottom two quintiles of households, which tend to spend less on other goods and services than more affluent households totaled 13 percent of other costs included in the LIS.

The 2020 CEX is available through BLS, but, because COVID-19 had such a dramatic effect on household spending patterns, the pre-COVID estimates for 2019 were used. This is intended to capture a more “normal” state of consumer spending which is likely to better reflect the post-COVID environment.

9. Taxes & Credits

Tax costs are computed for each family type using the National Bureau of Economic Research’s TAXSIM microsimulation model.[15] This model uses family income and expenses like child care and rent, to predict federal personal income tax, federal Social Security and Medicare payroll taxes, and state income taxes.

TAXSIM also incorporates family tax credits including the Earned Income Tax Credit (EITC), the Child Tax Credit, and the Child and Dependent Care Credit. Because the several COVID response bills created short-term tax credits (including the stimulus payments and child tax credits), the model was run for 2019 to remove these temporary policy changes to federal tax policy.

Tax changes made to North Carolina’s tax code in 2013 altered the personal income tax from a three-tier rate structure to a flat tax rate, and legislation in subsequent years further reduced the flat tax rate. North Carolina’s 2022 state budget cuts the personal income tax rate down to 3.99 percent over six years. For 2022, the state personal income tax rate is 4.99 percent for all tax filers, regardless of income level. As such, using 2019 as the model year will modestly overestimate tax payments in future years if the personal rate continues to drop as currently laid out in statute.

Given the necessary income to cover basic expenses for families, all the one adult, one infant and most of the two-children families qualify for the EITC. While the LIS generally does not include the value of work-support benefits, the value of the Federal EITC is included because it is a tax benefit that offsets the regressive nature of payroll and excise taxes.

To calculate specific tax amounts for each representative family, the after-tax family budget necessary to meet basic needs is identified by totaling the annual cost of food, housing, childcare, health care, transportation, and other necessities for each family type in each North Carolina county. These wages were then used as the input for the TAXSIM model. Using post-tax disposable income as the input for the TAXSIM model results in a modest underestimate because it excludes taxes on the share of income that would be used to pay tax liabilities. This underestimate helps to control for the modest overestimate noted above resulting from using North Carolina personal income tax rates from 2019. The model then predicts the total federal and state income payroll tax liabilities for each family type in each county. Tax liabilities are added to the family budget necessary to meet basic needs.

In addition to total family post-tax wages, other inputs to the TAXSIM model include:

  • Marital status = Unmarried for 1 parent households and married for 2 parent households
  • Age of parents = Assumed to be 40 years old for both parents
  • Age of Children = 1 infant for a 1 child family; 1 infant and one preschooler for a 2 child family; 1 infant, 1 preschooler, and 1 school-aged child for 3 child families
  • Rent paid = Based on calculation described above for housing costs
  • Child care = Based on costs described above

Families’ annual tax liability on the pre-tax income is divided by 12 to produce a monthly tax estimate and added to the other costs described above.

Many other taxes are accounted for in the appropriate budget item. Gas taxes, for example, are included in the transportation estimate. Similarly, part or all of the property taxes landlords pay are passed along in rent so are included in the housing data, while the value of sales taxes is captured in the price of other necessities.

10. Consumer Dept Payments

Carrying consumer debt is a fact of economic life for most families. Particularly families without extensive savings, paying for significant expenses like a new vehicle, appliances, and health emergencies often requires taking on consumer debt. This is precisely what we should expect families earning around the LIS to face because the overall methodology does not allow for an income that would generate savings needed to address unexpected or large expenditures. The Federal Reserve Board tracks household consumer debt burdens and found average consumer debt payments in the 4th quarter of 2021 to equal 5.5 percent of disposable personal income.[16] This debt level is toward the middle of the distribution over the past several years, which has fluctuated between just over 5 percent in 2010 to 5.8 percent just before the COVID-19 pandemic. The LIS multiplies this figure by the total cost of food, housing, childcare, health care, transportation, and other necessities to produce an estimate of consumer debt payments for each family type.

11. Income & Wage Calculations

After compiling budget data for each line item, for each family type, in each county, the values are summed to show the total amount of money that a family would need to meet its basic expenses. Annual totals are then converted into monthly and hourly wage figures. These figures represent the amount of income a family requires to meet its budget. For two-parent families, estimates are produced to reflect what the total family income, and the average earnings for each working parent, would need to be to meet the LIS in each county.

For comparative purposes, the annual income figures are also shown as a percentage of the federal poverty threshold and an annual income based on working full time at minimum wage. The LIS is also used to calculate how many hours each parent would need to work at minimum wage to meet the LIS in each county.

Consistent with the conservative approach taken throughout the LIS, hourly wage figures assume full-time employment, meaning 40 hours per week for 52 weeks per year. As such, the LIS makes no allowance for a worker taking any unpaid time off for vacation, illness, child care, or other purposes. Research suggests that low-wage workers often are unable to work consistently and instead are subject to unexpected layoffs and changes in hours. As a result, reported wages represent a best-case scenario, and the real hourly wage needed to meet the LIS is likely higher.

Because these are estimates and cannot capture the real needs of families down to the dollar, results have been rounded to reflect the inherent uncertainty in this type of analysis. Cost have been rounded to the nearest $10, hourly wages have been rounded to the nearest 25 cents, and hours worked at minimum wage to meet the LIS to the nearest full hour.

To create a statewide figure for each family type, the LIS uses a weighted average. Individual costs, total budgets, wages, and hours worked to meet the LIS at minimum wage for each county are multiplied by the county’s share of total state population, and those values are then summed to produce a population weighted average for the entire state of North Carolina. Population figures come from the July 2022 population estimates prepared by the State Demographer.[17]


[1] U.S. Census Bureau, “American Community Survey,” 2020.

[2] HUD’s Office of Policy Development and Research, “Fair Market Rents and Income Limits” (U.S. Department of Housing and Urban Development, 2022),

[3] U.S. Department of Agriculture, “Thrifty Food Plan, 2021,” 2021,

[4] U.S. Department of Agriculture.

[5] NC Department of Health and Human Services – Division of Child Development and Early Education, “Child Care Market Rate Study,” 2018,

[6] the U.S. Department of Health and Human Services, “Medical Expenditure Panel Survey (MEPS),” 2021,

[7] Kaiser Family Foundation, “Health Insurance Marketplace Calculator,” 2022,

[8] the U.S. Department of Health and Human Services, “Medical Expenditure Panel Survey (MEPS).”

[9] U.S. Census Bureau, “American Community Survey.”

[10] U.S. Census Bureau.

[11] U.S. Department of Transportation, “National Household Travel Survey,” 2017,

[12] U.S. Department of Revenue, “Standard Mileage Rates for 2022,” n.d.,

[13] NC Rural Center, “NC Rural Counties,” 2020,

[14] U.S. Bureau of Labor Statistics, “Consumer Expenditure Survey,” 2019,

[15] National Bureau of Economic Research, “TAXSIM,” 2022,

[16] U.S. Federal Reserve Board, “Household Debt Service and Financial Obligations Ratios,” 2022,

[17] N.C. State Demographer, “Projected Annual County Population Totals, 2020-2029,” 2022.