Important building block on the way to social justice: Calculation of reference values for living wages and incomes

Toni-Kaatz-Dubberke

Many companies have recognized that livelihood-securing income for small-scale producers is in their own interest. It is important to know how high a living wage should be at least. However, complete studies on this are often time-consuming and cost-intensive. These obstacles can be overcome with a new method. Together with Fairtrade and the experts for living wages Richard and Martha Anker, GIZ has developed a quick and cost-effective alternative for calculating living wages and incomes worldwide. The development was supported by the Global Living Wage and the Living Income Community of Practice and other partners.

 

The demand for "benchmarks" is growing

 

The quick calculation methodology helps above all to gain a first impression of the situation and to identify those sectors in which wages and incomes are particularly low. The benchmarks can also be calculated quickly for countries that are not easily accessible. In this way, living costs can also be disclosed for crisis areas or regions that are difficult to reach. The demand from companies and organizations for estimates of living wages and living incomes has increased sharply in recent years. Measuring the differences between what producers in global supply chains earn and what they and their families need for a decent standard of living is a basis for promoting improvements in the living situations of people in the global south together with all relevant actors. Such reference values have thus long since become an important building block in international cooperation.

 

New methodology: values for regions rather than for a location

 

The Anker reference values are calculated based on 40 existing Anker studies (11 in Africa, 20 in Asia and nine in Latin America). They show the average living wage and living income for rural and urban areas within each country, rather than for a specific location. By analyzing past data, the reference values predict the net living wage (or the "take-home" wage) and what the living wage should be for a given developing country. The calculation’s margin of error is a maximum of ten percent.

 

Living wages and incomes are net values. Deductions such as compulsory payroll and income taxes are currently not included. Each year the reference values are updated by taking into account inflation, economic development and changes in income tax levels.

 

The first 16 Anker reference values on living wage and income values with country profiles can now be found under the following link: https://www.globallivingwage.org/

 

In the following online training course, you can learn more about the new methodology for calculating living wage and income: https://vimeo.com/436783506 and the discussion afterwards can be accessed here: https://vimeo.com/43827793