Living Wages: A Catalyst for Decent Work and Sustainable Development Goals(SDGs) Advancement

By Nazneen Shekh, Programme Officer, UN GCNI

Introduction

Addressing the needs of vulnerable populations, particularly those living in poverty, is central to achieving the Sustainable Development Goals (SDGs). A significant portion of the global workforce remains in poverty due to wages that fail to meet basic living standards. Despite economic growth, wage stagnation has deepened disparities between capital returns and labor compensation, fueling working poverty, weakening institutional trust, and creating systemic business risks. The inadequacy of legally mandated minimum wages, particularly in the context of rapid economic changes, underscores the urgency of implementing living wage frameworks.

Article 25 of the Universal Declaration of Human Rights affirms the right to an adequate standard of living that ensures the health and well-being of workers and their families. It is critical to ensure a living wage, sufficient to cover essentials like food, housing, healthcare, education, and transportation for fostering equitable, people-centered development that leaves no one behind.

The United Nations Global Compact (UNGC) champions living wages as essential for promoting decent work, responsible business practices, and alignment with international labor standards. Beyond enhancing individual well-being, living wages contribute to human capital development, economic resilience, and the reduction of systemic socio-economic exclusion.

While wage policy reforms have made progress, achieving universal wage adequacy requires sustained, multi-stakeholder collaboration among governments, businesses, and civil society to ensure fair compensation, reduce inequality, and promote inclusive global economic growth.

Concept of Living Wage

The International Labour Organization (ILO) tripartite agreement defines a living wage as: A wage level necessary to afford a decent standard of living for workers and their families, considering country-specific circumstances and calculated for work performed during normal hours. It should be determined in accordance with the ILO’s principles on estimating living wages and achieved through a wagesetting process aligned with ILO standards. Living wage methodologies should adhere to key principles, including:

● Evidence-based estimation of workers’ needs.
● Consultation with employers’ and workers’ organizations.
● Transparency in data sources and methodologies.
● Robust and representative data collection.
● Timely public availability of estimates.
● Consideration of regional and socioeconomic contexts.
● Regular adjustments for cost of living changes.
● Promotion of gender equality and nondiscrimination.

The living wage should be determined based on a basket of essential goods, including food, housing, healthcare, education, and other necessities, using locally relevant prices. Additionally, it should specify the number of wage earners per household and be presented in multiple formats (e.g., hourly, monthly, annual).

Key Points About Living Wage

● Different from Minimum Wage: The living wage is generally higher than the minimum wage, which is the lowest legal hourly wage an employer can pay their workers.
● Living wages are voluntary: Employers can choose whether to offer them – while minimum wages are required by law.
● Varies by Location: The cost of living can differ significantly between cities, states, and even countries. So, the living wage will also vary depending on the location.
● Essential Needs: Living wage calculations typically factor in costs like rent or mortgage payments, groceries, utilities, transportation, and potentially childcare. Ideally, it should allow for a portion of income to be saved for unexpected emergency expenses.
● Decent Standard of Living: The concept goes beyond just surviving. It aims to provide a level of income that allows for participation and dignity in society and a basic level of comfort.

Indian Context:

A tripartite Committee Viz., “The Committee on Fair Wage” was set up in 1948 to provide guidelines for wage structures in the country. The report of this Committee was a major landmark in the history of formulation of wage policy in India. Its recommendations set out the key concepts of the ‘living wage’, “minimum wages” and “fair wage” besides setting out guidelines for wage fixation.

Article 39 states that the State shall, in particular, direct its policy towards securing (a) that the citizen, men and women equally shall have the right to an adequate livelihood and (b) that there is equal pay for equal work for both men and women.

Article 43 states that the State shall endeavour, by suitable legislation or economic organization or in any other way, to give all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure, and social and cultural opportunities.

The Growing Global Commitment to Living Wages

Governments, businesses, and investors are increasingly recognizing the importance of living wages. Over 170 countries have minimum wage laws, but these do not always ensure a decent standard of living. As a result, businesses must go beyond legal compliance to fulfill their corporate responsibility to respect human rights, as outlined in the UN Guiding Principles on Business and Human Rights (UNGPs).

The Business Case for Living Wages

Living wages are increasingly recognized by businesses, civil society, and governments as a solution to working poverty and a necessary step toward addressing growing income inequalities. Research indicates that providing a living wage yields substantial business benefits. A study by the Living Wage Foundation found that 93% of companies paying a living wage experience benefits for their business; 87% report improved reputation; 75% report increased motivation and retention rates for employees; and 58% report improved relations between managers and staff.

Furthermore, businesses that proactively adopt living wage policies tend to strengthen their reputation, mitigate operational risks across supply chains, and align more effectively with international sustainability and corporate social responsibility (CSR) standards.

In sum, addressing wage disparities is not only a moral and social imperative but also a strategic business decision. By ensuring fair compensation, companies contribute to more resilient economies while enhancing their own long-term stability and growth potential.

Strategic Actions for Businesses to Ensure Living Wages

To effectively promote living wages across their operations and supply chains, businesses can adopt a structured, data-driven approach:

1. Commit to Paying a Living Wage

Formally pledge to become a living wage employer by ensuring that all employees—irrespective of employment status—receive fair compensation that meets or exceeds living wage benchmarks.

2. Assess Wage Gaps

Utilize analytical tools, such as the UNGC Living Wage Analysis Tool, to evaluate current wage structures, identify gaps, and determine areas for improvement within both internal operations and supply chains.

3. Develop a Comprehensive Implementation Plan

Establish clear, measurable objectives supported by realistic timelines for closing wage gaps. Secure leadership buy-in to ensure organizational alignment and accountability.

4. Engage Stakeholders Across the Value Chain

Collaborate with internal teams—including HR, procurement, legal, and finance—and consult external stakeholders, such as labor organizations, suppliers, and workers’ representatives, to develop inclusive strategies for wage improvements.

5. Adjust Purchasing Practices

Revise procurement policies to ensure fair pricing structures and contractual terms that empower suppliers to pay living wages, thereby fostering responsible supply chain practices.

6. Monitor Progress and Ensure Accountability

Implement robust monitoring frameworks using a mix of quantitative metrics and qualitative assessments to track progress, evaluate outcomes, and adjust strategies as needed.

Forward Faster Initiative – Living Wage

Through the Forward Faster Initiative, companies have a unique opportunity to accelerate progress across all 17 Sustainable Development Goals and drive meaningful, collective impact by 2030. To show their commitment and align their business, companies can formally pledge to become living wage employers, businesses can ensure that all employees—regardless of their employment status—receive fair compensation that meets or exceeds established living wage benchmarks. This commitment not only aligns with global sustainability efforts but also reinforces the role of businesses as leaders in promoting economic dignity and equitable growth.

The Forward Faster living wage targets include the following:

● 100 per cent of employees across the organization earn a living wage by 2030.
● Establish a joint action plan(s) with contractors, supply chain partners and other key stakeholders to work towards achieving living wages and/or living incomes with measurable and time-bound milestones.

Conclusion

Ensuring a living wage is a pivotal step in reducing poverty, enhancing worker well-being, and fostering a sustainable global economy. As momentum grows across governments, businesses, and investors, companies face both a responsibility and an opportunity to lead the charge toward fair wages for all. By taking meaningful action and prioritizing dialogue and collaboration, businesses can help create a world where decent work and economic dignity are not just ideals but realities for every worker and their family.

For more resources and tools on implementing living wages, visit:

● 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
● living wage analysis tool
● IDH Roadmap on living wage
● WageIndicator FAQ