Living Wage for a Decent Life - Global Estimates Martin Guzi Masaryk University Working poor •Growing discrepancies between wages and labor productivity growth in a large number of countries. •Working poor with a job but at risk of poverty. (also in EU 8.3 % of the working population at risk of poverty) •Targeted social security benefits to low-income households. •Properly designed minimum wages, are an effective policy tool which can provide a decent wage floor. • In-work at-risk-of-poverty rate by age and sex (ilc_iw01) https://ec.europa.eu/eurostat/databrowser/view/ilc_iw01__custom_70535/bookmark/table?lang=en&bookma rkId=3970db81-3b05-4390-bbe7-2e0968b08737 Minimum wage (MW) •A minimum wage is the lowest hourly, daily or monthly remuneration that employers may legally pay to workers. •Defined and updated by politicians therefore does not reflect increases in prices. •Supporters say MW increases the standard of living of workers, reduces poverty, reduces inequality, boosts morale and forces businesses to be more efficient. •Opponents say MW increases poverty, increases unemployment (particularly among low productivity workers) and is damaging to businesses. • • • Other poverty indicators: Minimal acceptable living standards •Real value of the (relative) poverty threshold, 3EUR/day in RO, 7-8EUR in CEE but 50EUR in LU. •Budget Standard Approach, basic standard of living is calculated based on the cost of a specific basket of goods and services – necessities largely differ between regions. i.e. covering things like food, clothing, personal care, health related costs, household goods and services, educational costs, housing , transport, fuel. Used in UK, IE and developed in the EU www.referencebudgets.eu/ •Poverty measurement by the consumption approach, the poor are distinguished from the non-poor by how much of their income they spend on basic necessities . e.g. Housing Cost Overburden (8.7% in the EU in 2022) • r/europe - % of population at risk of poverty A graph of a number of people Description automatically generated with medium confidence A graph of a number of people Description automatically generated with medium confidence • r/europe - Difficulties with making ends meet - a subjective indicator of poverty - in European households A Living Wage = A Human Right • •Human right (since 1919 defined by ILO) “…ultimate objective is to ensure to workers a minimum wage that will provide a satisfactory standard of living to them and their families.” • •However there is no accepted definition of what a Living Wage is and no agreed methodology on how to measure it. • •The Mexican Constitution (1917) states: the general minimum wage must be sufficient to satisfy the normal necessities of a head of family in the material, social and cultural order and to provide for the mandatory education of his children. •The Brazilian Constitution (1988) stipulates: national minimum wage be capable of satisfying their basic living needs and those of their families with housing, food, education, health, leisure, clothing, hygiene, transportation and social security, with periodical adjustments to maintain its purchasing power. What is a ‘Living Wage’? •The Living Wage is based on the concept that work should provide an adequate income to cover the necessary living costs of a family. •Calculated for a family, not a single worker •Based on actual expenses in a given community, and taxes and gov’t benefits •The motto of many living wage campaigns is to ‘make the minimum wage a living wage’ •Living wage is voluntary, not legislated. • • • 13 Living Wages are key in achieving several SDGs 14 Definitions of Living Wage •Global Living Wage Coalition: “A remuneration received for a standard work week by a worker in a particular place sufficient to afford a decent standard of living for the worker and her or his family. Elements of a decent standard of living include food, water, housing, education, health care, transport, clothing, and other essential needs, including provision for unexpected events”. •Asia Floor Wage “proposes a wage for garment workers across Asia that would be enough for workers to live on”. •New Zealand defines a living wage “as the income necessary to provide workers and their families with the basic necessities of life”. •Campaign in Vancouver defines living wage “on the principle that full-time work should provide families with a basic level of economic security, not keep them in poverty”. Definitions of Living Wage •Global Living Wage Coalition: “A remuneration received for a standard work week by a worker in a particular place sufficient to afford a decent standard of living for the worker and her or his family. Elements of a decent standard of living include food, water, housing, education, health care, transport, clothing, and other essential needs, including provision for unexpected events”. •Asia Floor Wage “proposes a wage for garment workers across Asia that would be enough for workers to live on”. •New Zealand defines a living wage “as the income necessary to provide workers and their families with the basic necessities of life”. •Campaign in Vancouver defines living wage “on the principle that full-time work should provide families with a basic level of economic security, not keep them in poverty”. D:\Research\ESF\05work Slapanice - living wage\Logo living wage\living wage new zealand.jpeg D:\Research\ESF\05work Slapanice - living wage\logo_asia_floor_wage.gif D:\Research\ESF\05work Slapanice - living wage\Logo living wage\LivingWage-scottish.jpg Image result Image result for living wage campaign global http://d3n8a8pro7vhmx.cloudfront.net/youcanvote/sites/3/meta_images/original/DWWP_horizontal-knocko uorange.png?1425678437 Greater Manchester Living Wage Campaign logo D:\Research\ESF\05work Slapanice - living wage\Logo living wage\logo i want to live.jpg Site http://www.industriall-union.org/issues/social-justice-and-globalization/living-wage http://www.ontariolivingwage.ca/ https://www.glasgowlivingwage.co.uk/index.aspx?articleid=1760 Bangladesh, sweatshops, sweatshop labor, sweatshop workers, forced labor, human rights, workers rights, eco-fashion, sustainable fashion, green fashion, ethical fashion, sustainable style, eco-friendly T-shirts, sustainable T-shirts, infographics, MacLean's •workers receive 12 cents per shirt—or just 2 percent of the wholesale cost. https://cleanclothes.org/campaigns/europe-floor-wage In-work poverty •Growing discrepancies between wages and labor productivity growth in a large number of countries. •Working poor = workers with a job but at risk of poverty. (also in EU 9.5 % of the working population at risk of poverty) •Properly designed minimum wages, are an effective policy tool which can provide a decent wage floor. •Alternative policy includes targeted social security benefits to low-income households (public budgets are limited). •A living wage should make sure people earn enough to make ends meet. • • In 2010, only three cities had minimum wages that exceeded state or federal minimum wages, but by 2020, there were 42 • 30 states and 62 localities have a minimum wage higher than the federal minimum (as of January 2024). Minimum wage in the US makes people poor •Individuals earning below $14,580 per year are considered poor in 2023 •Poverty threshold is $30,000 per year for family 2+2. •Federal minimum wage of $7.25 per hour provides a full-time worker with $15,000 annual income (working 40 hours per week for 52 weeks). •Family depending on minimum income (determined by government) is therefore considered poor by the same government. http://livingwage.mit.edu/metros/42660 https://www.thebalance.com/federal-poverty-level-definition-guidelines-chart-3305843 https://www.healthcare.gov/glossary/federal-poverty-level-fpl/ The living wage shown is the hourly rate that an individual in a household must earn to support his or herself and their family. The assumption is the sole provider is working full-time (2080 hours per year). The tool provides information for individuals, and households with one or two working adults and zero to three children. In the case of households with two working adults, all values are per working adult, single or in a family unless otherwise noted. The state minimum wage is the same for all individuals, regardless of how many dependents they may have. Data are updated annually, in the first quarter of the new year. State minimum wages are determined based on the posted value of the minimum wage as of January one of the coming year (National Conference of State Legislatures, 2019). The poverty rate reflects a person's gross annual income. We have converted it to an hourly wage for the sake of comparison. Federal taxes are taken from the Urban-Brookings Tax Policy Center Microsimulation Model (version 0217-1) 24 and include: individual income taxes (after tax credits including the refundable portion of earned income and child tax credits), payroll taxes (including both the employee and employer portion of social security and medicare taxes), corporate income tax, estate tax, and excise tax. The federal tax rate for the middle quintile was 14.0% in 2017. Living wage in the US •2021 US Federal poverty level is $26,500 (family 2+2) and federal minimum wage of $7.25 per hour •The living wage in the Texas is $20 per hour ($27 in California), before taxes for a family with 2 children and 2 working adults •Example: Dallas County, Texas • • • • http://livingwage.mit.edu/metros/42660 https://www.thebalance.com/federal-poverty-level-definition-guidelines-chart-3305843 1 ADULT 2 ADULTS 2 ADULTS (1 WORKING) (1 WORKING) (BOTH WORKING) Children 0 1 2 3 0 1 2 3 0 1 2 3 Living Wage $15.21 $30.62 $37.32 $47.83 $24.12 $29.01 $32.41 $35.33 $12.06 $16.62 $20.43 $24.00 Poverty Wage $6.13 $8.29 $10.44 $12.60 $8.29 $10.44 $12.60 $14.75 $4.14 $5.22 $6.30 $7.38 Minimum Wage $7.25 $7.25 $7.25 $7.25 $7.25 $7.25 $7.25 $7.25 $7.25 $7.25 $7.25 $7.25 The living wage shown is the hourly rate that an individual in a household must earn to support his or herself and their family. The assumption is the sole provider is working full-time (2080 hours per year). The tool provides information for individuals, and households with one or two working adults and zero to three children. In the case of households with two working adults, all values are per working adult, single or in a family unless otherwise noted. The state minimum wage is the same for all individuals, regardless of how many dependents they may have. Data are updated annually, in the first quarter of the new year. State minimum wages are determined based on the posted value of the minimum wage as of January one of the coming year (National Conference of State Legislatures, 2019). The poverty rate reflects a person's gross annual income. We have converted it to an hourly wage for the sake of comparison. Federal taxes are taken from the Urban-Brookings Tax Policy Center Microsimulation Model (version 0217-1) 24 and include: individual income taxes (after tax credits including the refundable portion of earned income and child tax credits), payroll taxes (including both the employee and employer portion of social security and medicare taxes), corporate income tax, estate tax, and excise tax. The federal tax rate for the middle quintile was 14.0% in 2017. Typical Expenses (Dallas County, Texas 2021) 1 ADULT 2 ADULTS 2 ADULTS (1 WORKING) (1 WORKING) (BOTH WORKING) Children 0 1 2 3 0 1 2 3 0 1 2 3 Food $3,177 $4,670 $6,990 $9,294 $5,825 $7,238 $9,305 $11,345 $5,825 $7,238 $9,305 $11,345 Child Care $0 $7,042 $14,083 $21,125 $0 $0 $0 $0 $0 $7,042 $14,083 $21,125 Medical $2,760 $8,866 $8,554 $8,694 $6,270 $8,554 $8,694 $8,347 $6,270 $8,554 $8,694 $8,347 Housing $9,333 $12,799 $12,799 $17,055 $10,489 $12,799 $12,799 $17,055 $10,489 $12,799 $12,799 $17,055 Transportation $5,113 $9,378 $11,672 $13,896 $9,378 $11,672 $13,896 $12,611 $9,378 $11,672 $13,896 $12,611 Civic $1,811 $3,889 $3,554 $4,127 $3,889 $3,554 $4,127 $3,982 $3,889 $3,554 $4,127 $3,982 Other $2,875 $4,687 $5,144 $6,216 $4,687 $5,144 $6,216 $6,235 $4,687 $5,144 $6,216 $6,235 Required annual income after taxes $25,070 $51,331 $62,797 $80,408 $40,538 $48,961 $55,037 $59,574 $40,538 $56,003 $69,120 $80,700 Annual taxes $4,064 $8,321 $10,180 $13,035 $6,572 $7,937 $8,922 $9,658 $6,572 $9,079 $11,205 $13,083 Required annual income before taxes $29,134 $59,652 $72,977 $93,443 $47,110 $56,899 $63,959 $69,232 $47,110 $65,082 $80,325 $93,782 These figures show the individual expenses that went into the living wage estimate. https://livingwage.mit.edu/counties/48113 • www.btlonline.org Living Wage vs Minimum Wage Note: Hourly rates in national currency. Minimum wage Living wage Gap between LW and MW 2024 2017 2024 2017 2024 2021 2019 2017 Ireland 12.7 9.25 14.75 11.7 16% 15% 21% 26% New Zealand 23.15 15.75 27.85 20.2 20% 14% 16% 28% United Kingdom 11.44 7.5 11.44 8.45 0% 7% 10% 13% London 11.44 7.5 13.85 9.75 21% 22% 29% 30% University of Reading (age 18-20) 8.6 5.6 11.44 8.45 33% 45% 65% 82% Vancouver 17.4 11.35 25.68 20.62 48% 34% 106% On 21st November 2023, The UK Government has announced their new 'National Living Wage' rates for 2024 as £11.44 an hour. > http://www.durhamlivingwage.org/ http://www.minimum-wage.co.uk/ https://www.rusu.co.uk/campaigns/winningprioritycampaigns/uorlivingwage/ Calculating Living Wage • Living Wage calculation based on Engel’s law Living Wage calculation: 1. Estimate the food expenditure for a family 2. Estimate non-food spending using Engel’s law 3. The cost of living is the sum of food and non-food spending 4. Living Wage is determined such that total income earned by family members is equal to the cost of living. Intuitively, we need a minimum amount of food to even stay alive; in that sense food is truly a necessity Reference budgets •Reference budgets are baskets of goods and services that are considered necessary to reach an acceptable standard of living for an individual household within a given country, region or city. •This method requires information about social needs and prices of many goods and services. •Fully developed and used in Belgium, the UK and Ireland. •EU platform on reference budgets is a project funded by the European Commision that aims to develop comparable reference budgets in all EU Member States • • • • http://www.minimumincome.org.uk/london • Living-Wage-Infographic http://www.livingwageforfamilies.ca/what_is_living_wage • Image result Living Wage estimation method developed by Richard Anker WageIndicator Living Wage •Calculated Living Wage for more than 170 countries /2700 regions globally •Methodology based on transparent principles •Easy to update regularly (prices are collected continuously) •All information is available at the dedicated website D:\Research\ESF\05work Slapanice - living wage\Logo living wage\LivingWageIndicator.org.jpg The cost of living includes these items 38 Clothing Health Education Phone 5% extra Housing Transport Housing Water Food Taxes The collection of prices for Living Wages? 39 39 1 Face to face with paper or app Phone, with the app National WageIndicator Websites, one item from the online survey Cheap Food Webshops, with the app Facebook / Whatsapp groups, with the app 2 3 4 5 shops and markets in low to low middle income areas, including housing prices of these areas FOCUS Data collectors are trained Data used in the calculation •WageIndicator Cost-of-Living price survey since January 2014: oPrices are reported by web visitors, via offline surveys, and scrapped from webshops oPrices on 60 food items, rental prices, education and health expenditure, public transport, phone, healthcare •Other price data (e.g. Numbeo.com, national surveys) •FAO food balance sheets to construct a food basket •World Bank data on fertility and employment rates Cost of Living Survey • • From raw data to a workfile •Use prices collected over the last five years •Adjust dated prices for inflation •Filter extreme prices : oConvert prices to USD and drop high/low prices (outliers) oDetermine median price for each item, and drop prices below 1/3*median and above 3*median •Take price at 25th and 50th percentile for each item •Produce interval estimates of living costs oMore realistic approach relative to point estimates oAccounts for the shopping preferences and variation of prices at which different products are accessible oIn highly developed countries the upper estimate based on the median prices is preferred. • • Example of food basket in Slovakia • •Food basket is scaled to 2,100 cal/person/day •Adults and children have the same caloric requirement Food item Grams per day Energy (kcal) Price per kilo Wheat, barley and cereals products 275 728 1.4-2 Rice 6 22 .9-1 Meat (beef, pork, poultry) 113 169 4.5-6 Oils (soyabean, olive, palm) 19 172 1-1.3 Sugar (Raw Equivalent) 69 245 .6-.7 Maize and products 0 0 1.6-2 Milk - Excluding Butter 292 135 .5-.6 Vegetables, Other 95 25 1.2-1.5 Potatoes and products 106 69 .4-.6 Butter, Ghee 31 201 4.6-5.2 Groundnuts (Shelled Eq) 9 27 2-2.4 Pulses, Other and products 1 4 .8-1 Egg (price per 10 eggs) 33 45 1.1-1.4 Sunflowerseed Oil 4 37 1.3-1.8 Fish products 18 12 5-7 Beer (0.5 liter/pint) 145 71 1.2-1.6 Sweeteners, Other 30 66 .7-1 Beans 1 2 1-1.6 Sweet potatoes 0 0 1-2 Bananas 13 8 1-1.3 Soyabeans 0 0 2-4 Apples and products 21 9 .7-1 Tomatoes and products 16 3 1-1.2 Onions 12 4 .5-.8 Oranges, Mandarines 33 7 1-1.5 Plantains 3 2 1-1.6 Peas 1 4 .8-1 Roots, Other 0 0 1-1 Seeds and kernels 2 5 2-4.1 Wine (bottle) 8 6 4-4 Pineapples and products 2 1 - Cream 3 6 1.6-4 Olives (including preserved) 1 2 4.9-6 Honey 2 7 4.9-6 Citrus, Other 1 0 1-1.2 Lemons, Limes and products 5 1 1-1.2 Tea (including mate) 0 0 2-4 Grapefruit and products 2 0 1-1.2 Coffee and products 10 4 5-10 Housing cost •Cost of Living Survey asks about the rental price of apartment with 1 and 2 bedrooms, the location and utilities included in the rent (electricity, water, garbage collection, Internet, and taxes). •Add housing prices from Numbeo.com (wisdom of the crowd) •Drop housing prices below 1/5*median and above 5*median •We estimate housing equation to produce a harmonized estimate of a reference apartment (Goedemé et al. 2015). •The housing cost for a family (an individual) is then a typical rent for a 2-bedroom apartment (1-bedroom apartment) in an average urban area, outside the city center. •The housing equation captures regional differences. Education and health •Subjectively reported costs. •We asks respondents about the minimal monthly expenses on personal and health care for a 2+2 family. •Health expenses for an individual are taken at one quarter of expenses reported for a 2+2 family. • •We ask respondents about the minimal monthly expenses on education (assuming that children attend public school) for a 2+2 family. • •We take reported costs at 25th and 50th percentile. Transport •Most people commute for work or travel for their daily activities (e.g. shopping). •The price of a regular monthly public transportation pass is taken as the cost of transport. •Children are assumed to travel for free. •We complement prices on public transportation from Numbeo.com. • • Taxes and mandatory deduction •In the WageIndicator wage survey we ask respondents about their gross and net earnings. Using the ratio of gross/net income we calculate the share of earnings spent on taxes and mandatory deductions of low-earning workers. •Gross living wage is constructed using this information. EUR Effective tax rate on minimum wage Expenditure and Living Wage calculation 2019, in EUR •Living Wage is calculated for a 2+2 family. The family employment rate is 1.8 (one adult is a full-time worker and the second adult works 4 days per week). The total living costs are obtained by summing the costs of food, housing, travel, health and education. The 5% margin is added on top. Housing cost is the rent of a two-bedroom home. EUR exchange rate is taken on March 1, 2019. • A screenshot of a cell phone Description automatically generated Presentation of Living wages in context Note: Prevailing wages of workers are taken from WageIndicator global dataset on work and wages. A screenshot of a cell phone Description automatically generated CZ A screenshot of a cell phone Description automatically generated A screenshot of a cell phone Description automatically generated PL SK HU Minimum Wages versus Living Wages - Low Skilled Wages - in OECD countries ▸ ▸ 51 Observations for OECD countries: In case Living Wages are higher, the gap is very small. Example Ireland, Israel. Some countries have substantial higher Minimum Wage (UK, Australia) which give arguments to bring in a Living wage Plus, (a client pledge) next to the WageIndicator global Living Wage. BUT there are some Eastern European countries, but also Mexico, Turkey with a substantial Living Wage/ Minimum Wage gap. Note for this graph: we compare Living Wage country averages with the lowest Minimum Wages. Next step analysing which Minimum structure is more beneficial than the other. A chart of different colored lines Description automatically generated with medium confidence Living wage as a measure of cost of living 52 Living Wages - Minimum Wages - Low Skilled Wages - in 92 non-OECD countries 53 It will take a while before are countries in the world have a higher Minimum Wage, and therefore a Living Wage. Living wage summary https://youtu.be/lyVAA5Ci7a8 Living Wages: Impact •The UN, ILO, consultancies, refer to our data (https://www.unglobalcompact.org/what-is-gc/our-work/livingwages) •MNCs use our data to implement the LW in their supply chains Living Wage Impacts •The EU Reporting Guidelines and UN Global Compact refer to our methodology as a source for Living Wage data. • •Our methodology is recognized by IDH in its benchmark finders and used in B-Lab criteria for its B-Corp Certification • • •Social partners, workers, employers: Benchmark for wage bargaining • •Leading corporations (over 500) use our LW data • • •WageIndicator living wage data is used on the ground by wage negotiators and social partners Much Responsibility. But Do Our Living Wages Measure What We Claim? Do Living Wages measure what we claim? Research: •Do workers that can afford more LW baskets face lower risk of material deprivation, hardship, or are they more satisfied with their lives? •Is there a structural break in this relationship at the level of living wage? (i.e. an extra Euro below LW reduces the risk of material deprivation more than the extra Euro above the LW) • Methods: •Combine our LW data with World Values Survey (W7), ILO wage data •Unit of analysis: occupation (ISCO 1-digit) •37 countries, 7 occupation groups, mostly 2018-2020. •Statistical analysis to measure this relationship •Controls for countries Results: •YES IT WORKS! Proxies for decent living: Material deprivation (1-4 scale) • •In the last 12 months, how often have you or your family: • •Gone without enough food to eat • •Gone without needed medicine or treatment that you needed • •Gone without a cash income Subjective satisfaction (1-10 scale) •All things considered, how satisfied are you with your life as a whole these days? •How satisfied are you with the financial situation of your household? • Preliminary results Deprivation and LIVING WAGE baskets (25th percentile) Individual Deprivation indicators: Family stayed without enough food to eat in the last 12 months (Often/Sometimes/Rarely) Family stayed without needed medicine or treatment in the last 12 months (Often/Sometimes/ Rarely) Family stayed without cash income in the last 12 months (Often/Sometimes/ Rarely) Financial dissatisfaction with life measured on the scale 1-10 (1-5) Source: WVS 2017-2022, WIF Living wage, ILO wage dataset Note: Each circle represents one of seven occupation groups in 37 countries A graph of different types of blue and black lines Description automatically generated with medium confidence Overall Deprivation and LIVING WAGE baskets (25th percentile) Composite Deprivation indicators: A person is deprived if they or their family experienced AT LEAST ONE of the four primary material deprivations ( stayed without shelter, food, needed medicine, or cash income) in the last 12 months (Often/Sometimes/Rarely) Source: WVS 2017-2022, WIF Living wage, ILO wage dataset Note: Each circle represents one of seven occupation groups in 37 countries A group of blue and black graphs Description automatically generated with medium confidence Overall Deprivation and MINIMUM WAGE baskets Composite Deprivation indicators: A person is deprived if they or their family experienced AT LEAST ONE of the four primary material deprivations ( stayed without shelter, food, needed medicine, or cash income) in the last 12 months (Often/Sometimes/Rarely) Source: WVS 2017-2022, WIF Living wage, ILO wage dataset Note: Each circle represents one of seven occupation groups in 37 countries A group of blue and black dotted graphs Description automatically generated Estimates from threshold regression Wage variables Without food Without medication Without cash Composite material deprivation Living wage (upper) 0.46 0.57 0.60 0.92 Living wage (lower) 0.56 0.68 0.77 1.18 Minimum wage 1.47 1.14 1.47 1.47 Adequate wage 1.43 1.43 2.07 1.81 Our results •Our research identifies a structural break at the calculated Living Wage threshold, where income reduces deprivation and boosts satisfaction most effectively below the LW level, but once above it, the marginal benefits decrease significantly. • •Living Wages mark that threshold more effectively than current minimum wages or adequate wages • •This validates the Living Wage concept and its calculation • •Policy implication: Bring minimum wages to living wages • • • •Comments are welcome: •Martin.Guzi@econ.muni.cz Výsledok vyhľadávania obrázkov pre dopyt living wage employer Výsledok vyhľadávania obrázkov pre dopyt living wage employer Výsledok vyhľadávania obrázkov pre dopyt living wage employer What is living wage? A.Wage that allows decent living standard for a worker and their family. B.Monthly wage higher than twice the minimum wages C.Fair wage above the poverty line. D.Living wage is set at 60% of median wage in a country E. What is not true about living wage? A.Some countries include the guarantee of a living wage in their constitution B.Living wage is voluntarily paid by employers C.Living wage campaigns are organized in rich and poor countries D.There is approved methodology on how to calculate Living wage E.