Why is living wage important

We would expect our members to take a mature approach to accommodating these increases in the journey towards a full living wage. Breadcrumb Home issues. Raising wages: an urgent imperative A wage that's enough to meet basic needs and to provide some discretionary income - why is this still elusive for so many workers? Living wage guidance and resources In the past decade, retailers and brands have made some progress in getting their suppliers to pay their workers their statutory entitlements - in other words, the prevailing minimum wage plus any pension contributions, sickness or holiday pay they are entitled to.

Without a living wage workers may be compelled to work excessive overtime hours or multiple jobs become bonded labourers put their children into work instead of school be denied their basic human rights to food, shelter, nutrition, health, housing and education and suffer social deprivations such as being unable to take part in cultural events be unable to withstand crises such as ill health.

Workers on living wages are likely to be more productive — because they are better motivated less likely to leave — reduced attrition means lower recruitment and training costs healthier — reducing loss of working hours due to sickness. How does living wage differ from minimum wage? A minimum wage is a national floor level set by the government.

A living wage is what workers need to provide their families with decent standards of living The national minimum wage in many countries is often not sufficient to enable a worker to provide his or her family with a decent living standard; ie, provide basic needs and allow some discretionary income for emergencies etc. Why is living wage rising on the global agenda? The gap between national minimum wages and cost of living increasing The growing awareness and concern of consumers about working conditions heightened further by incidents such as the Rana Plaza collapse The continued development of international standards for business and ethics.

What are the challenges to achieving living wages? Wage levels come about through a complex economic process of labour supply and demand, through negotiations, established policy norms, the power relations between workers and employers etc. Artificially setting wages may be impracticable or may lead to unintended consequences. If overall budgets are not increased, increasing wages for some workers could lead to others being laid off or not recruited — ie increased unemployment Lower skilled workers, may be priced out of the job market because the value they add is not seen to be equivalent to the new higher level of wages Companies may be unwilling or unable individually to increase the prices they pay to suppliers for products In a top down approach, if higher prices are paid, suppliers may not pass price increases on to workers, particularly if workers have no bargaining power.

What can brands and retailers do? Incentivise employers to pay living wages — eg by increasing orders to those suppliers. Improve productivity and efficiency to enable the value chain to accommodate wage growth. Mitigate the impact of wage increases on unemployment or other unintended consequences in your supply chains. Join forces with other ETI members, companies, NGOs and trade unions, to share lessons on working towards living wages.

All of the above! Will paying under 25 year olds less than the National Living Wage for the same work constitute discrimination? How do we support adoption of this new national minimum wage in our supply chains? Get the latest Subscribe to our email newsletters and stay up to speed on ethical trade.

Ethical Trading Initiative Registered No. What constitutes a living wage may vary slightly depending on who's defining it. Despite some deviations, the organization found certain common themes when comparing how it is defined in human rights declarations, by non-governmental organizations NGOs , and others.

So what exactly is a living wage? The general consensus is that a living wage is one that provides individuals with enough income to support themselves without falling below the federal poverty line FPL.

In essence, it gives workers and their families the means to maintain a decent standard of living so they can afford:. Although the idea of a living wage isn't new, it became a hot topic following the Great Recession. The economic crisis highlighted the fact that some individuals just can't afford to make ends meet. Some experts believe that people who don't earn a living wage face certain challenges, such as having to work more than one job, pulling their children out of school, and succumbing to unexpected health issues that they can't afford to address.

Of course, a living wage varies by family size and the cost of living in a particular city or location. As noted above, the movement for a reasonable living wage is hardly new. Boston ship carpenters came together in to demand higher pay. The American Federation of Labor AFL , founded in , proposed a general living wage that adequately supported a family and maintained a standard of living higher than the 19th-century European urban working class.

The passage of the law marked a turning point for the labor movement in the United States. There is a strong labor movement in the U. Don't confuse the living wage with a minimum wage. The latter is the lowest amount of money a worker can earn as mandated by law. Many commentators argue that the federal minimum wage should be increased to align with a living wage. They point out that the minimum wage does not provide enough income to survive as it doesn't rise with inflation; the minimum wage can only increase with congressional action.

Although the minimum wage dollar amount has risen since its introduction by President Franklin Delano Roosevelt in , the constant dollar amount, which accounts for the effects of inflation , has decreased for American households since Most states have their own minimum wage laws to try and align it more closely with a living wage. In some states, the minimum wage is actually below the federal minimum wage.

When this occurs, the federal minimum applies. In , the U. The bill died in the Senate, but the debate about whether to lift the minimum wage rages on. Under President Joseph Biden's administration, the Act may get a second look. Poverty in the U. The Raise the Wage Act of , an updated version from , could help reduce or eliminate low wages that do not lift families and individuals out of poverty.

The bill aims to increase the federal minimum wage over five years for regular employees, along with those who receive tips and new workers under the age of As such, working and earning the federal minimum wage isn't enough to get out of poverty and not enough money to be classified as a living wage.

Living wages are very controversial. As such, the idea surrounding them and their effects on the economy are hotly debated. We've outlined some of the arguments for and against living wages. Supporters of a living wage argue that paying employees higher salaries actually benefits corporations as a whole. They claim that employees who earn a living wage end up being more satisfied, which helps to reduce staff turnover.

Another advantage to living wages is that they reduce corporate costs associated with recruitment and training. Proponents of living wages point out that higher wages boost employee morale, which can often lead to higher productivity. This, in turn, allows, companies to benefit from increased worker output.

Despite the obvious support, there are critics who suggest leaders should scrap the idea of living wages altogether. Naysayers believe that implementing a living wage establishes a wage floor, which harms the economy by hurting companies, especially small businesses that can't afford to raise salaries.

Moreover, companies may reduce the number of employees hired if they are forced to pay increased wages. This creates higher unemployment, resulting in a deadweight loss , as people who would work for less than a living wage no longer get offered employment.

As noted above, a living wage is not the same thing as a minimum wage. Earning a living wage means you can pay necessary costs, including shelter, food, health care, childcare, taxes , and transportation. In addition, a living wage may be different depending on your circumstances, including the state and town in which you live. This online calculator provides the living wage, minimum wage, and poverty-wage for 50 states plus counties.

Many of the relationships we have with the brands now involved in ACT were forged through the Accord context. There has to be a willingness to work together, but also to jointly commit to a common set of rules and systems that work.

This is the only path toward systemic, sustainable change in this industry on this issue. Even before the Rana Plaza tragedy, however, various brands had built foundational relationships with trade unions through global framework agreements that are now feeding into collective, industry action in this area. ACT is focused on building more positive relationships between brands and suppliers and between suppliers and workers through enforcement of collective bargaining in the industry.

And it is increasing internal awareness within Inditex on our living wage efforts. The more brands that join this effort, the more powerful the impact will be. But, before ACT, there was never any means of dealing with the issue in any effective way.

After the Bangladesh Accord, we built on the relationships with IndustriALL and other brands that were strengthened as part of that effort to tackle living wages. How many environments are there where you have brands, retailers, manufacturers, governments, trade unions and employer associations all at the same table?

This is real innovation. Putting freedom of association and collective bargaining at the center, the ACT model is comprised of three distinct but interrelated components:. It is working to bring additional brands on board to further increase its scope and influence and avoid competitive disadvantages.

Yes, this takes time, but it is the only way to tackle systemic, structural challenges. We need to thoroughly look at both our positive and negative impacts on people and then take action, collectively and independently, from there.

As international non-governmental organization NGO campaigns have highlighted since the early s, wages remain low in the Malawian tea business despite it being the largest formal employer in all of Malawi. Research commissioned to calculate what a living wage would be in the Malawian tea industry concluded that wages and in-kind benefits would need to double to achieve a living wage. In , 20 different groups along the Malawian tea chain got together and agreed that more had to be done to tackle the serious issue of worker wages in their industry.

The resulting Malawi Tea Revitalisation Programme Malawi Tea is a coalition of Malawian tea producers, the largest international tea buyers, NGOs, relevant certification organizations, and donors. But once that has happened, you must then have shared knowledge about what the problem is; and then shared commitment across brands, producers, workers and governments to practical approaches that will have a real impact.

In addition, a key highlight of the program has been its ongoing work around sustainable procurement practices. Scale and traction are needed to effect real change when tackling these complex issues.

Skip to content Back to Resources. Sustainability and Human Rights Respect. By Sara Blackwell. August Individual Company Action. Individual Company Action The human rights to freedom of association and collective bargaining play central roles in company action on living wages.

Mature industrial relations are key in figuring out what a living wage means in a particular context and in generating feedback loops that help maintain the provision of living wages over time. Improved wage management systems and more comprehensive strategies for promoting fair wages can address many elements that influence whether a living wage is provided in the long-term. Such elements include timeliness of payments; fair working hours; pay adjustments based on skills, experience levels and performance; and open communication channels between workers and management.

Collaborative initiatives that drive systemic change at both industry and government levels can greatly inform and enhance individual company action on living wages. Producer-buyer partnerships are possible and can facilitate direct involvement from workers in determining living wages in specific work sites, thereby having a real impact on the lives of workers and their families via the provision of a living wage while collaborative initiatives with a larger scale are built at a national level.

Collective Action. Collective bargaining across an industry bolsters meaningful stakeholder engagement between employer associations and trade unions, as well as between suppliers and buyers, while also facilitating access to remedy when commitments are not met. The re-examination of key aspects of the core business, including product quality investment and purchasing practices , can clarify the contribution of global brands to systemic labor rights issues and inform holistic responses.