A living wage is the remuneration received by a worker that is sufficient to afford a decent standard of living for the worker and their family.
Elements of a decent standard of living include adequate food, water, housing, education, healthcare, transportation and other essential needs, including provisions for unexpected events.
Estimated values of a living wage, what we call living wage benchmarks, are published by various organizations using their own methodologies. To establish a living wage benchmark, these organizations gather data on local costs of, among others, food, housing, education, healthcare, transportation, and more (as aligned with global standards, such as the World Health Organization and The Food and Agriculture Organization).
To understand the wage that is needed for one worker to afford such costs of living, these costs are divided by the typical number of wage earners in a family and the mandatory deductions (such as social security or taxes) are accounted for.
In order to calculate the gap between current wages and living wages, companies need reliable living wage benchmarks for every region they source from. In the next chapters you can find out how to recognize robust living wage benchmark methodologies that are available in the market.