How to ensure a living wage? A call for true entrepreneurs.

170 countries in the world have minimum wage levels in place. But this legal level is not enough to live a decent life. Businesses need to go beyond compliance to help employees out of poverty, and there is broad commitment to do so.?

The challenges seem to lie currently in the implementation. This short article aims to briefly summarize the concept of a living wage, its importance, the difficulties businesses currently face as well as some thoughts on why true entrepreneurs are now needed.

What is a living wage??

There is currently no globally official definition of a ′living wage′, but this is no excuse for inaction. The Global Living Wage Coalition defines it as follows:?

“Remuneration received for a standard workweek by a worker in a particular [time and] place sufficient to afford a decent standard of living include food, water, housing, education, healthcare, transport, clothing and other essential needs including provision for unexpected events.”

The coalition further explains the difference between ′living wage′and ′living income′:?

“The concepts of “living wage” and “living income” are both about achieving a decent standard of living for households. The idea of a living wage, however, is applied in the context of hired workers (in factories, on farms, etc.), whereas living income is discussed in the context of any income earner, such as self-employed farmers.”

Why implement a ′living wage′?

Before listing all the benefits a business can enjoy when implementing a ′living wage′, one thought: Shouldn't it be an integral part of every business′ s purpose to pay workers enough to have a decent life??

Ensuring a living wage is an accelerator for achieving the Sustainable Development Goals (SDGs) like?

• Goal 1: No Poverty,?
• Goal 8: Decent Work and Economic Growth,?
• Goal 5: Gender Equality and?
• Goal 10: Reduced Inequalities.?

Furthermore, it improves the happiness, health and productivity of the workforce, reduces turnover costs, improves access to finance and addresses concerns from many stakeholders (consumers, shareholders, future talents etc.) about a company's respect for workers′rights.?

How to implement a ′living wage′for your employees??

The UN Global Compact recommends the following steps and explains them in the corresponding guide (see here):?

1. Secure commitment and support of Senior Leadership Team
2. Identification of external partners to support the operational process
3. Developing internal management procedures for implementing the living wage programme
4. Engage social partners in living wage discussions
5. Definition of a Living Wage, Geographic Scope of Application, and Categories of workers covered by the living wage programm
6. Determination of the elements of the base compensation and assessment of wages against the living wage framework
7. Adjustments to wage levels to align with the living wage benchmark
8. Awareness raising and training on the living wage programme
9. Conduct monitoring and update living wages
10. Scaling and global outreach: extend living wage commitments beyond direct employees

This all sounds very straightforward and I see broad commitment from businesses, but when listening to the people who are working on its implementation it crystallizes that it's not a quick and easy thing to do. At a recent UN Global Compact event, some panelists from the FMCG and IT sector shared the following challenges:?

• Multiple benchmarks, no global methodology: To cover all countries businesses are operating in, businesses need to decide country-by-country what benchmark provides most accuracy for this area, i.e. there is not one benchmark that is as equally accurate for all countries.
• Definition of ′wage`: even the definition of the existing ′wage′needs to be analyzed. What is the wage, what is a variable extra payment or a benefit?
• Definition of a ′family′: What type of family do you use? How do you factor potential workers in?
• Differences within one country exist. Even in the UK - for example between London and the rest of the UK. Or the US have big differences and are quite complicated to measure because of extra benefits besides the wage, like healthcare they are providing, and that need to be factored in. This means there is not one ′living wage′per country, but multiple.?
• Collaboration with internal and external partners is key: One panelist shared their best practice around the inclusion of the Sustainability department as guiding principle. They were not part of the definition or calculation the compensation team made, but were consulted when the team was stuck between decision, calculation and concept to find the best solution.?

To sum up - it seems like we have commitment from businesses, but we fail in the implementation with challenges like no-harmonized definition of a ′living wage′and ′benchmark methodologies′. It leads to intensive work for every single business keen to implement it.?

The way forward - a joint approach:?

I think - like with all other sustainable development goals - we can only solve this challenge jointly.

When looking at the UN Guiding Principles for Business and Human Rights we have three pillars:?

1. The duty of the state to protect
2. The responsibility of business to respect human rights?
3. Access to remedy for victims of business related abuses

This can serve as a guide on how to improve the state of play:

• What can states do to protect their workers? Define a ′living wage′and share available data with businesses?
• What can responsible businesses further do? Unite and share existing data?
• What can affected workers do? Unite to lift their voice via mechanisms like collective bargaining?

Isn't this a call for true entrepreneurs to bring this all together to make a true social impact??

Further resources:??

• For example the Global Living Wage Coalition shares their findings for many countries and regions: https://globallivingwage.org/
• For the US exists the living wage calculator: https://livingwage.mit.edu/
• The Fairwage Network: https://fair-wage.com/?
• UN Global Compact: https://www.unglobalcompact.org/what-is-gc/our-work/livingwages