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.

More on Living Wage Essentials

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.

The Anker methodology is widely accepted, and it has played an important role in catalyzing wage improvement in global supply chains. IDH recommends the use of this methodology, which is supported by members of the Global Living Wage Coalition that IDH works with.

Additionally, IDH acknowledges that there are other methodologies available to calculate living wage benchmarks. IDH has developed a process to recognize other robust living wage benchmark methodologies that are available in the market which can be used when an Anker methodology benchmark is not available.

IDH is committed to assist companies from the starting point of closing living wage gaps with up-to-date, credible living wage estimates benchmarks that are relevant to their respective locations.

  • Collecting data

    Estimate living wage based on data collected and representative of the location of the living wage benchmark

  • Cost of living

    Measure the cost of living of a typical family in a region (family size is estimated based on regional/national family size data or birth-rate data)

  • Items of cost of living

    The cost of living based on requirements for good nutrition, housing, education, healthcare, household goods, transportation, personal care, etc.

  • Working adults

    Factor in the expected number of working adults in a family by dividing the total cost of living by 1+ the employment rate

  • Sufficient net income

    Account for statutory deductions from gross income, such as taxes, union fee, etc.

  • Differences in context

    City/region-specific or at least account for urban and rural differences

  • Conflict of interest

    No inherent conflicts of interests. Methodologies must have sufficient distance from funding sources to maintain integrity. In addition, individual benchmark results must not be influenced by the funding source

  • Transparency

    Publish a clear and consistent methodology for data collection and calculation elements

  • Inflation estimation

    Update the estimates yearly for inflation. Estimates can be updated for up to 5 years (considering local circumstances) before a new benchmark is needed

These criteria do not represent a new living wage estimate methodology. They are objective criteria for the minimum elements a living wage methodology needs to include to be recognized by IDH. The list of recognized living wage benchmark methodologies that demonstrated meeting these characteristics will be published on IDH’s website.

Each living wage benchmark is specific to a time and location. Still, it may be the case that more than one benchmark meets the above criteria for a location. In case of multiple benchmarks available, IDH recommends prioritizing benchmarks that are:

  1. Endorsed or vetted by a legitimate and representative local organization, for instance, through a mechanism for vetting living wage estimates with stakeholders in an open and transparent way.
  2. Most specific to the area (first location-specific, then urban or rural benchmarks).

IDH process for recognizing living wage benchmark methodologies:

Apply for recognition as living wage benchmark methodology

If your organization manages a living wage benchmark methodology and is interested in applying for IDH recognition, we will be pleased to send additional information. Please send us your contact information and we will get back to you:

Contact our team


Download our recognition process for living wage benchmark methodologies

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