Living wages: Beyond the Paycheck

squarerewardify
Nov 13
6 min read

Introduction: More Than Just a Paycheck

Imagine Priya, a garment worker in a bustling city. Despite her dedication, she struggles to afford nutritious food, decent housing, and school fees for her children. Her story is echoed by millions worldwide—workers who, despite their efforts, cannot secure a decent standard of living. The concept of a living wage is about changing this reality, ensuring every worker earns enough to live with dignity, participate in society, and support their families.

What is a Living Wage?

What exactly do we mean by the term ‘living wage’? In his 1997 book A Living Wage: American Workers and the Making of a Consumer Society, the historian Lawrence Glickman writes that in the historical development of the living wage movement, supporters used the living wage concept to define a wage level that offers workers ‘the ability to support families, to maintain self-respect, and to have both the means and the leisure to participate in the civic life of the nation. Glickman definition of a living wage bears a close correspondence with the ideas of the economist Amartya Sen on defining poverty relative to the achievement of what he calls ‘capabilities’ (for example, in his 2000 book Development as Freedom). These capabilities include such things as the ability to read and write, to lead a long and healthy life, to have freedom of movement, and to participate meaningfully in the civic life of the community.

This definition, which has been adopted by the Global Living Wage Coalition, is as follows:

Remuneration received for a standard work week by a worker in a particular place sufficient to afford a decent standard of living for the worker and her or his family. Elements of a decent standard of living include food, water, housing, education, health care, transport, clothing, and other essential needs, including provision for unexpected events. (Global Living Wage Coalition, 2016) A living wage is not just a number—it’s a promise. It is the remuneration received for a standard work week by a worker in a particular place, sufficient to afford a decent standard of living for the worker and their family. This includes food, water, housing, education, health care, transport, clothing, and other essential needs, including provision for unexpected events.

Unlike the minimum wage, which is a legal construct enforced by governments, the living wage is typically voluntary and set through collaboration, advocacy, and responsible business practices. The living wage goes beyond legal compliance, aiming for true fairness and sustainability.

The Anker & Anker Methodology: Measuring What Matters

The Anker & Anker methodology is widely recognized for its rigorous, transparent approach to calculating living wages. It involves:

Collecting local data on food, housing, healthcare, and education costs.
Adjusting for local labor force participation and employment rates.
Including all forms of remuneration—cash, in-kind benefits, and allowances.
Painting a picture of what it means to live on less than a living wage, and how basic the living standard would be for workers who earn a living wage.

Key Principles:

Transparency: Stakeholders can understand and question the standards and methods.
Normative Basis: Standards for nutritious food, healthy housing, healthcare, and education through secondary school.
Time and Place-Specific: Separate estimates for rural/urban areas and major regions.
International Comparability: Same principles everywhere.
Practical Cost: Mix of secondary data and new local data.
Comprehensive Remuneration: Includes cash, in-kind benefits, and allowances.
Beyond Numbers: Paints a picture of life below and at the living wage.

Living Wage vs. Minimum Wage—A Crucial Distinction

Minimum wage is a legal requirement, enforced by governments. Living wage, however, is usually voluntary, except in places where the two have merged. Governments set minimum wages balancing poverty reduction and economic growth, but these can be too low (leaving workers in poverty) or too high (leading to evasion and informal work). The living wage is about what’s truly needed for a decent life—not just what’s legally required.

How Is a Living Wage Calculated?

The Anker & Anker methodology starts with the cost of a basic but decent life for a reference-size family. This includes food, housing, essential needs, and a small margin for unforeseen events. The living wage is then calculated by dividing this cost by the number of full-time workers per family, adjusted for local labor force participation and employment rates.

Formula:

Net Living Wage = Cost of basic but decent life / Number of full-time workers
Gross Living Wage = Net Living Wage + Statutory payroll deductions and taxes

What Counts as Wages?

Wages aren’t just the basic salary. According to ILO Convention 100, remuneration includes all payments—cash or in-kind—arising from employment. The Anker methodology considers:

Basic wage (with cost of living adjustment)
Cash allowances and bonuses (if assured and received within a year)
In-kind benefits (like meals, housing, transport, childcare, medical care)
Some productivity bonuses

Excluded: Overtime pay, pay supplements for holidays/weekends/night work, deferred payments (pensions, severance), employer contributions required by law, and benefits not received within a year.

The Role of In-Kind Benefits

In-kind benefits can reduce the cash needed for a living wage. Acceptable in-kind benefits include:

Meals at work
Food rations
Housing (with utilities)
Transport to/from work
Childcare
School for workers’ children
Medical care not required by law

Not Acceptable: Work permits, work clothing, dormitories for seasonal workers, drinking water at work, land for kitchen gardens, charitable contributions, employer social security contributions.

Why Living Wages Matter—A Human and Business Case

Paying a living wage is not just ethical—it’s strategic. Companies that pay living wages report:

Lower employee turnover and absenteeism.
Higher productivity and morale.
Enhanced brand reputation and customer loyalty.
Stronger, more resilient supply chains.

Companies Leading the Way: Living Wage Compliant

Global Leaders

Unilever: Pays a living wage to all direct employees and is extending this commitment to its supply chain by 2030. Unilever supports suppliers with tools, resources, and capability-building programs, and advocates for public policies to create a level playing field.
L'Oréal: Partners with the Fair Wage Network to implement living wage programs across all regions. Annual audits ensure compliance, and living wage data is compared with employee compensation to identify and address gaps.
Novartis: Committed to paying a living wage to all employees, collaborating with Business for Social Responsibility (BSR) to update standards annually.
Costco and IKEA: Both retailers pay wages well above the legal minimum, resulting in lower turnover, higher productivity, and improved brand reputation.

Fashion Brands

O My Bag: Collaborated with Indian manufacturing partners and local NGOs to initiate living wage projects, reviewing wage gaps and providing premiums to cover the difference.
Fairphone: Works with the Fair Wage Network to assess and improve wage levels within their supply chain.

Accredited Employers

Thousands of companies have been certified by organizations like the Living Wage Foundation, including TfL (London’s transport authority), UNIQLO, Aardman Animations, and many more across sectors and regions.

Companies on the Journey: Progress and Commitment

Many companies are actively working towards living wage compliance:

Vodafone and Ball Horticultural: Progressing towards paying a living wage, sharing best practices and lessons learned on implementation, measurement, and reporting.
DSM-Firmenich: Publicly committed to increasing salaries and wages throughout their operations and supply chains, leveraging supplier assessment and engagement solutions.
Creative Group of Industries (Unilever Supplier): Working with Unilever to ensure fair living wages across regions while balancing cost pressures and competitiveness.

According to PwC’s 2023 Global Living Wage Survey, 54% of organizations expect to pay a living wage in the next five years, recognizing it as a strategic advantage for enhancing social agendas, reputation, and market resilience.

Organizations Helping Implement Living Wages

Several organizations and initiatives support companies on their living wage journey:

Fair Wage Network: Provides rigorous standards, methodology, and a global database for living wage thresholds. Offers gap analysis, certification, and ongoing support for compliance.
Business for Social Responsibility (BSR): Partners with companies like Novartis to update living wage standards and provide advisory support.
Living Wage Foundation: Certifies employers and provides resources for implementation.
EcoVadis: Enables over 10,000 companies to report on living wage metrics, offering supplier assessment and engagement solutions.
IDH – The Sustainable Trade Initiative: Partners with Unilever and others to support suppliers in capability-building and measuring living wage gaps.
National Employment Law Project (NELP): Advocates for higher minimum wages and living wage policies at federal, state, and local levels.
UN Global Compact: Encourages companies to promote and provide living wages as part of decent work and human rights due diligence.

How to Implement a Living Wage Program

Understand the Concept: Go beyond legal minimums to ensure fair compensation for employees.
Secure Leadership Support: Commitment from senior leadership is critical.
Identify Wage Gaps: Analyze current wages and compare with credible living wage estimates.
Engage Workers and Representatives: Consult with employees, trade unions, and worker committees.
Set Clear Targets: Develop transparent strategies and payment processes to address wage gaps.
Monitor and Report: Regularly review progress and communicate outcomes.

Conclusion: The Road Ahead

The journey to living wage compliance is challenging but transformative. It requires collaboration, transparency, and a commitment to fairness. Companies that lead the way not only uplift their workers but also build stronger, more resilient businesses and communities. Organizations and initiatives are ready to support every step, from gap analysis to certification and ongoing improvement.

Are you ready to join the movement? Start today—because every worker deserves a living wage.