Living Wage – Giving workers a decent standard of living

18 September 2023 was the landmark day when UN Global Compact launched the Forward Faster initiative to accelerate private sector progress to deliver on the 17 Sustainable Development Goals (SDGs) and meet the 2030 Agenda. The initiative has identified nine targets in five thematic areas – gender equality, climate action, living wage, water resilience and finance & investment. These thematic areas have been identified based on their potential to accelerate progress across all SDGs where the private sector can collectively make the biggest, fastest impact by 2030. Sanda Ojiambo, CEO and Executive Director of the UN Global Compact said: “Now more than ever companies are taking action on sustainability, but there’s still not enough progress towards meeting the 2030 Agenda. Companies must be more ambitious and put words into action. Forward Faster is here to guide companies on where they can make the biggest, fastest impact for 2030.”

We will try to unpack the theme of living wage as it directly impacts four of the 17 SDGs Goal 1: No Poverty: Goal 8: Decent Work and Economic Growth; Goal 10: Reduced Inequalities. Recent estimates suggest that today, over a billion working people worldwide – one third of all workers – are estimated to earn less than they need to afford a decent standard of living. By paying a living wage across our members can contribute to these SDGs, reduce inequalities and build more resilient supply chains.

Let us see what exactly is a living wage and how is it different from minimum wage. According to the definition adopted by the ILO minimum wage is “the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract” [1]. In contrast the concept of the living wage is the wage level that is necessary to afford a decent standard of living for workers and their families, taking into account the country circumstances and calculated for the work performed during the normal hours of work[2]. Elements of a decent standard of living include food, water, housing, education, health care, transportation, clothing, and other essential needs including provision for unexpected events[3]. The push for a living wage is a response to the fact that minimum wages often fail to meet workers’ needs and creates greater inequality in the society.

Estimates of the cost of living for a family of a determined size in a particular location – estimating the cost of food, housing, health, education and other essential goods and services or unforeseen events. Estimates involve some important assumptions about the number of workers in the household and the number of wage earners. For example, a particular wage may be sufficient to meet family needs if it is earned by two people in the household, but insufficient if there is only one wage earner[4].

The two targets under living are:

Target 1- 100% of employees across the organization earn a living wage by 2030.

Target 2- Establish a joint action plan with contractors, supply chain partners, and other key stakeholders to work towards achieving living wage/ income with measurable and time bound milestones.

India as the founder member of the ILO has welcomed the adoption of the Report of the Meeting of Experts on wage policies, including living wages by the Governing body of the ILO in it is 350th session in March 2024. The shift from minimum wages to living wages is aimed at accelerating efforts to lift millions out of poverty and ensure their well-being. India with more than 500 million workers, with 90% in the unorganised sector has reiterated its commitment to shift from minimum wages to living wages by 2025. India Network in partnership with ILO is committed to provide all necessary support to its members to achieve both these targets within their units. As on date 7 Indian companies have signed up for target 1 and of these 5 have also committed to the 2nd and broader Target.

UN Global Compact has developed a user friendly online Living Wage Analysis Tool helps companies identify actions and further opportunities to provide a living wage to ensure all workers, families and communities can live in dignity[5]. We have also[6] developed an action guide to show our members how they can make the biggest, fastest impact for 2030. We will work actively to enlist more companies to join this global network of responsible businesses and demonstrate their commitment toward collective action to make the world a safer, inclusive and equitable place by 2030.

Join UNGCNI now: https://globalcompact.in/participant-engagement/

Take proactive steps and join the movement: Join the UNGC Forward Faster Initiative

Read more: https://unglobalcompact.org/what-is-gc/our-work/social/gender-equality

Explore the comprehensive guide: https://forwardfaster.unglobalcompact.org/living-wage

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[1] https://www.ilo.org/global/topics/wages/minimum-wages/definition/WCMS_439072/lang–en/index.htm#1

[2] https://www.ilo.org/wcmsp5/groups/public/ed_norm/relconf/documents/meetingdocument/wcms_915989.pdf

[3] Home – Global Living Wage Coalition

[4] Living Wage Analysis Tool – Glossary (unglobalcompact.org)

[5] Living Wage Analysis Tool – Home (unglobalcompact.org)

[6] info.unglobalcompact.org/forwardfaster_living_wage