Living wage 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 his/her 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.
IDH facilitates the implementation of living wages in several sectors and countries. We are increasingly building intelligence on how each stakeholder can make informed decisions towards closing the living wage gap in supply chains. In addition, we are helping companies realize concrete steps to most effectively move towards this goal.
When estimating a living wage, we work with the Anker Methodology. This methodology has been used to estimate living wages in nine countries for a multi-national corporation while it was being developed and has now been used to estimate living wage for over 30 additional locations globally, with strong uptake and interest among both local and international stakeholders. Overview of the Anker living wage methodology: The living wage methodology has two main components. The first estimates the cost of a basic but decent lifestyle for a worker and his/her family in a particular place. The second component determines if the estimated living wage is being paid to workers. Several aspects of this methodology are new and groundbreaking. First, the methodology emphasizes participation of local people and organizations in order to increase its credibility and acceptance by stakeholders. Second, housing costs are estimated using international and national standards for decent housing, allowing the methodology to enable different living wage estimates within countries and helps ensure that workers can afford decent housing. Third, the methodology requires transparency and detailed documentation and analysis to ensure that the living wage estimate is solid and credible, which includes critical appraisal of available secondary data and adjustments to these data when required. Fourth, a judicious combination of new local data collection and available secondary data is used to make the methodology simultaneously practical and credible, such as local food prices, housing, education, health care and transportation costs, to make sure that workers are paid enough to afford these necessities. Finally, the estimation of living wage is explicitly separated from the determination of whether particular workers receive a living wage or particular employers pay a living wage. The evaluation of wage levels by certification bodies requires considering not only gross cash payment, but also deductions from pay, overtime pay, bonuses, and in-kind benefits.