In public policy, a living wage is the minimum income necessary for a worker to meet their needs that are considered to be basic. This is not necessarily the same as subsistence, which refers to a biological minimum, though the two terms are commonly confused. These needs include shelter (housing) and other incidentals such as clothing and nutrition. In some nations such as the United Kingdom and Switzerland, this standard generally means that a person working forty hours a week, with no additional income, should be able to afford the basics for quality of life, food, utilities, transport, health care, and minimal recreation, one course a year to upgrade their education and childcare. However, in many cases education, saving for retirement, and less commonly legal fees and insurance, or taking care of a sick or elderly family member are not included. It also does not allow for debt repayment of any kind. In addition to this definition, living wage activists further define a living wage as the wage equivalent to the poverty line for a family of four. This is two adults working full-time with one child age 9 and another of age 4.
The living wage differs from the minimum wage in that the latter is set by law and can fail to meet the requirements to have a basic quality of life and leaves the family to rely on government programs for additional income. It differs somewhat from basic needs in that the basic needs model usually measures a minimum level of consumption, without regard for the source of the income.
A living wage is defined as the wage that can meet the basic needs to maintain a safe, decent standard of living within the community. The particular amount that must be earned per hour to meet these needs varies depending on location. In the 1990s the first living wage campaigns were launched by community initiatives in the US addressing increasing poverty faced by workers and their families. They argued that employee, employer, and the community win with a living wage. Employees would be more willing to work, helping the employer reduce worker turnover, and it would help the community when the citizens have enough to have a decent life.
The Poverty threshold is the income necessary for a household to be able to consume a low cost, nutritious diet and purchase non-food necessities in a given country. Poverty lines and living wages are measured differently. Poverty lines are measured by household units and living wage is based on individual workers.
A related concept is that of a family wage – one sufficient to not only support oneself, but also to raise a family.
- 1 History
- 2 Implementations
- 3 Impact
- 4 Living wage estimates
- 5 Living wage movements
- 5.1 Living Wage Movement Aotearoa New Zealand
- 5.2 New York City Living Wage
- 5.3 Harvard Living Wage Campaign
- 5.4 Miami University Living Wage Campaign
- 5.5 Johns Hopkins University
- 5.6 Swarthmore Living Wage and Democracy Campaign
- 5.7 Asia Floor Wage
- 5.8 Living wage
- 5.9 University of Virginia Living Wage Campaign
- 6 Criticism
- 7 See also
- 8 Notes
- 9 References
- 10 External links
Activists argue that a wage is more than just compensation for labor. It is a means of securing a living and it leads to public policies that address both the level of the wage and its decency. In his Wealth of Nations, Adam Smith recognized that rising real wages lead to the "improvement in the circumstances of the lower ranks of people" and are therefore an advantage to society. Growth and a system of liberty were the means by which the laboring poor were able to secure high wages and an acceptable standard of living. Rising real wages are secured by growth through increasing productivity against stable price levels, i.e. prices not affected by inflation. A system of liberty, secured through political institutions whereupon even the "lower ranks of people" could secure the opportunity for higher wages and an acceptable standard of living.
Servants, labourers and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part can never be regarded as an inconvenience to the whole. No society can surely be ﬂourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, clothe, and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed and lodged.
— Adam Smith, Wealth of Nations, I .viii.36
According to living wage advocates Smith advocated that labor should receive an equitable share of what labor produces; According to Smith, this equitable share amounts to more than subsistence. Smith equated the interests of labor and the interests of land with overarching societal interests. He reasoned that as wages and rents rise, as a result of higher productivity, societal growth will occur thus increasing the quality of life for the greater part of its members.
Activists argue that the greater good for society is achieved through justice. They argue that government should in turn attempt to align the interests of those pursuing profits with the interests of the labor in order to produce societal advantages for the majority of society. Smith argued that higher productivity and overall growth led to higher wages that in turn led to greater benefits for society. Based on his writings, one can infer that Smith would support a living wage commensurate with the overall growth of the economy. This, in turn, would lead to more happiness and joy for people, while helping to keep families and people out of poverty. Political institutions can create a system of liberty for individuals to ensure opportunity for higher wages through higher production and thus stable growth for society.
|“||No business which depends for existence on paying less than living wages to its workers has any right to continue in this country.||”|
In 1891, Pope Leo XIII issued a papal bull entitled Rerum novarum, which is considered the Catholic Church's first expression of a view supportive of a living wage. The Church recognized that wages should be sufficient to support a family. This position has been widely supported by the church since that time, and has been reaffirmed by the papacy on multiple occasions, such as by Pope Pius XI in 1931 Quadragesimo anno and again in 1961, by Pope John XXIII writing in the encyclical Mater et magistra. More recently, Pope John Paul II wrote, "Hence in every case a just wage is the concrete means of verifying the whole socioeconomic system and, in any case, of checking that it is functioning justly."
Today, one of major supporting groups for the Living Wage is the Universal Living Wage group. The group currently has over 1,500 followers and continues to grow.
In Australia, the 1907 Harvester Judgment ruled that an employer was obliged to pay his employees a wage that guaranteed them a standard of living which was reasonable for "a human being in a civilised community" to live in "frugal comfort estimated by current... standards," regardless of the employer's capacity to pay. Justice Higgins established a wage of 7/- (7 shillings) per day or 42/- per week as a 'fair and reasonable' minimum wage for unskilled workers. The judgment was later overturned but remains influential. From the Harvester Judgement arose the Australian industrial concept of the "basic wage". For most skilled workers, in addition to the basic wage they received a margin on top of the basic wage, in proportion to a court or commission's judgement of a group of worker's skill levels. In 1913, to compensate for the rising cost of living, the basic wage was increased to 8/- per day, the first increase since the minimum was set. The first Retail Price Index in Australia was published late in 1912, the A Series Index. From 1934, the basic wage was indexed against the C Series Index of household prices. The concept of a basic wage was repeatedly challenged by employer groups through the Basic wage cases and Metal Trades Award cases where the employers argued that the basic wage and margin ought to be replaced by a "total wage". The basic wage system remained in place in Australia until 1967. It was also adopted by some state tribunals and was in use in some states during the 1980s.
In Bangladesh salaries are among the lowest in the world. During 2012 wages hovered around US$38 per month depending on the exchange rate. Studies by Professor Doug Miller during 2010 to 2012, has highlighted the evolving global trade practices in "Towards Sustainable Labour Costing in UK Fashion Retail"  This white paper published in 2013 by University of Manchester, appear to suggest that the competition amongst buying organizations have implications to poor wages in countries such as Bangladesh. It has laid down a road map to achieve sustainable wages.
The United Kingdom currently has a statutory minimum wage but no statutory living wage. Some organisations voluntarily pay a living wage to their employees. The Greater London Authority has calculated the 2014 living wage as £8.80 for London and the Living Wage Foundation has calculated the rate for the rest of the UK - £7.65 
In the United States, the state of Maryland and several municipalities and local governments have enacted ordinances which set a minimum wage higher than the federal minimum that requires all jobs to meet the living wage for that region. This usually works out to be $3 to $7 above the federal minimum wage. However, San Francisco, California and Santa Fe, New Mexico have notably passed very wide-reaching living wage ordinances. U.S. cities with living wage laws include Santa Fe and Albuquerque in New Mexico; San Francisco, California; and Washington D.C. The city of Chicago, Illinois also passed a living wage ordinance in 2006, but it was vetoed by Mayor Richard M. Daley. Living wage laws typically cover only businesses that receive state assistance or have contracts with the government.
This effort began in 1994 when an alliance between a labor union and religious leaders in Baltimore launched a successful campaign requiring city service contractors to pay a living wage. Subsequent to this effort, community advocates have won similar ordinances in cities such as Boston, Los Angeles, San Francisco, and St. Louis. In 2007, there were at least 140 living wage ordinances in cities throughout the United States and more than 100 living wage campaigns underway in cities, counties, states, and college campuses. In 2014, Wisconsin Service Employees International Union teamed up with public officials to eliminate local living wages. According to U.S. Department of Labor data, Wisconsin Jobs Now - a non-profit organization fighting inequality through higher wages - has received at least $2.5 million from SEIU organizations in the years 2011-2013.
Although these ordinances are recent, a number of studies have attempted to measure the impact of these policies on wages and employment. Researchers have had difficulty measuring the impact of these policies because it is difficult to isolate a control group for comparison. A notable study defined the control group as the subset of cities that attempted to pass a living wage law but were unsuccessful. This comparison indicates that living wages raise the average wage level in cities, however, it reduces the likelihood of employment for individuals in the bottom percentile of wage distribution.
Research shows that minimum wage laws and living wage legislation impact poverty differently: evidence demonstrates that living wage legislation reduces poverty. The parties impacted by minimum wage laws and living wage laws differ as living wage legislation generally applies to a more limited sector of the population. It is estimated that workers who qualify for the living wage legislation are currently between 1-2% of the bottom quartile of wage distribution. One must consider that the impact of living wage laws depends heavily on the degree to which these ordinances are enforced.
"There is evidence that living wage ordinances modestly reduce the poverty rates in locations in which these ordinances are enacted. However, there is no evidence that state minimum wage laws do so." With minimum wage laws, the increased costs are passed to employers who in turn charge consumers higher prices if possible. Faced with higher prices, consumers purchase fewer goods thus leading to a redistribution among low wage workers. Those impacted by living wage legislation are typically low wage employees who are selling services to the local governments.
Living wage estimates
As of 2003, there are 122 living wage ordinances in American cities and an additional 75 under discussion. Article 23 of the United Nations Universal Declaration of Human Rights states that " Everyone who works has the right to just and favourable remuneration ensuring for himself and for his family an existence worthy of human dignity." In addition to legislative acts, many corporations have adopted voluntary codes of conduct. The Sullivan Principles in South Africa an example of a voluntary code of conduct which state that firms should compensate workers to at least cover their basic needs.
|Country||One full-time worker (four person household)||Average number of full-time worker equivalents in country (four person household)||One full-time worker (household size varies by country)||Average number of full-time worker equivalents in each country|
|Low income average||1.86||1.39||2.33||1.72|
|Lower Middle Income Average||2.42||1.93||2.50||2.02|
|Upper Middle Income Average||4.14||3.30||3.94||3.17|
|High Income Average||14.75||12.10||14.06||11.57|
In the above table, cross national comparable living wages were estimated for twelve countries and reported in local currencies and purchasing power parity(PPP). Living wage estimates for the year 2000, range from US $1.7 PPP per hour in low-income examples to approximately US$11.6 PPP per hour in high-income examples.
Living wage movements
Living Wage Movement Aotearoa New Zealand
In New Zealand a new social movement, Living Wage Movement Aotearoa New Zealand, was formed in April 2013. It emerged from a loose network that launched a Living Wage Campaign in May 2012.
In February 2013, independent research by the Family Centre Social Policy Research Unit identified the New Zealand Living Wage as $18.40 per hour. This was increased in 2014 to $18.80 per hour. This compares to a statutory minimum wage of $14.25 per hour.
On July 1, 2014 the first accredited NZ Living Wage Employers were announced. The twenty businesses for 2014-15 included food manufacturing, social service agencies, community organisations and a café.
New Zealand has gone from one of the most equal countries in the developed world in the 1980s to one of the most unequal. Most of that increase was due to larger pay increases for the top earners while those on low wages have been held back.
New York City Living Wage
The proposed law will inform tax-payers of where their investment dollars go and will hold developers to more stringent employment standards. The proposed act will require developers who receive substantial tax-payer funded subsidies to pay employees a minimum living wage. The law is designed to raise quality of life and stimulate local economy. Specifically the proposed act will guarantee that workers in large developmental projects will receive a wage of at least $10.00 an hour. The living wage will get indexed so that it keeps up with cost of living increases. Furthermore the act will require that employees who do not receive health insurance from their employer will receive an additional $1.50 an hour to subsidize their healthcare expenses. Workers employed at a subsidized development will also be entitled to the living wage guarantee.
Many city officials have opposed living wage requirements because they believe that they restrict business climate thus making cities less appealing to potential industries. Logistically cities must hire employees to administer the ordinance. Conversely advocates for the legislation have acknowledged that when wages aren't sufficient, low-wage workers are often forced to rely on public assistance in the form of food stamps or Medicaid.
James Parrott of the Fiscal Policy Institute testified during a May 2011 New York City Council meeting that real wages for low-wage workers in the city have declined substantially over the last 20 years, despite dramatic increases in average education levels. A report by the Fiscal Policy Institute indicated that business tax subsidies have grown two and a half times faster than overall New York City tax collections and asks why these public resources are invested in poverty-level jobs. Mr. Parrott testified that income inequality in New York City exceeds that of other large cities, with the highest-earning 1 percent receiving 44 percent of all income.
Harvard Living Wage Campaign
Harvard University students began organizing a campaign to combat the issue of low living wages for Harvard workers beginning in 1998. After failed attempts to get a meeting with Harvard president Neil Rudenstine, The Living Wage Campaign began to take action. As the movement gained momentum, The Living Wage Campaign held rallies with the support of students, alumni, faculty, staff, community members and organizations. Most importantly, the rallies gained the support of the Harvard workers, strengthening the campaign's demands for a higher wage. After various measures trying to provoke change among the administration, the movement took its most drastic measure. Approximately fifty students occupied the office of the president and university administrators in 2001 for a three week sit-in. While students were in the office of the president, supporters would sleep outside the building to show solidarity. At the end of the sit-in, dining hall workers were able to agree on a contract to raise the pay of workers. After the sit-in, The Living Wage Campaign sparked unions, contract and service workers to begin negotiating for fair wages.
Miami University Living Wage Campaign
The Miami University Living Wage Campaign began after it became known that Miami University wage was 18-19% below the market value. In 2003 the members of the Miami University Fair Labor Coalition began marching for university staff wages. After negotiations failed between the university and the American Federation of State and County Municipal Employees (AFSCME), workers went on strike. For two weeks workers protested and students created a tent city as a way of showing support for the strikers. Eventually more students, faculty and community members came out to show support. Even the union president at the time also went on a hunger strike as another means of protesting wages. In late 2003 the union was able to make an agreement with the university for gradual raises totaling about 10.25%. There was still an ongoing push for Miami University to adopt a living wage policy.
Johns Hopkins University
The Student Labor Action Committee (SLAC) of Johns Hopkins University took action by conducting a sit-in until the administration listen to their demands. In 1999, after a petition with thousands of signatures, Johns Hopkins University president, William R. Brody raised the hourly wage (to only $7.75) but did not include healthcare benefits nor would the wage adjust for inflation. The sit-in began in early 2000 to meet the demands of students for the university to adopt a living wage. A few weeks later, a settlement was made with the administration. SLAC now just ensures that the living wage policy is implemented.
Swarthmore Living Wage and Democracy Campaign
Starting in 2000, the Living Wage and Democracy Campaign of Swarthmore College began as small meetings between students and staff to voice concerns about their wages the lack of respect. Over the next two years the Living Wage and Democracy Campaign voiced concerns to the university administration. As a response in 2002, the wage is increased from $6.66 to $9 an hour. While the campaign was pleased with this first step, the believed the college still had a long way to go. The college president, Al Bloom created the Ad Hoc Committee to help learn what the living wage was and released a committee report. In the report suggested an hourly wage, childcare benefit, health coverage for employees and families.
Asia Floor Wage
Launched in 2009, Asia Floor Wage is a loose coalition of labour and other groups seeking to implement a Living Wage throughout Asia, with a particular focus on textile manufacturing. There are member associations in Bangladesh, Cambodia, Hong Kong S.A.R., India, Indonesia, Malaysia, Pakistan, the Philippines, Sri Lanka, Thailand and Turkey as well as supporters in Europe and North America. The campaign targets multinational employers who do not pay their developing world workers a living wage.
In 2013 the University of Manchester published a report suggesting that the competition amongst buying organizations has implications for poor wages in countries such as Bangladesh.
University of Virginia Living Wage Campaign
The Living Wage Campaign at the University of Virginia in Charlottesville, Virginia, composed of University students, faculty, staff, and community members, began in 1995 during the administration of University President John Casteen and continues under the administration of President Teresa Sullivan. The campaign has demanded that the university raise wages to meet basic standards of cost-of-living in the Charlottesville area, as calculated by the nonpartisan Economic Policy Institute.
In 2000, the campaign succeeded in persuading university administrators to raise the wage floor from $6.10 to $8.19; however, this wage increase soon fell to inflation and cost-of-living increases, and only applied to direct employees, not contracted workers. In the spring of 2006, the campaign garnered national media attention when 17 students staged a sit-in in the university president's office in Madison Hall. A professor was arrested on the first day of the protest. The 17 students were arrested after 4 days of protest and later acquitted at trial.
Beginning in 2010, the campaign has staged a series of rallies and other events to draw attention to the necessity of the living wage for UVA employees. They have also met with members of the administration numerous times, including with the president. In making the argument for a living wage, the campaign has claimed that continuing to pay low wages is inconsistent with the University's values of the "Community of Trust." They have also noted that University President Sullivan's 2011 co-written textbook, The Social Organization of Work, states that, "Being paid a living wage for one's work is a necessary condition for self-actualization." After rallies and meetings in the spring of 2011, President Sullivan posted a "Commitment to Lowest-Paid Employees" on the University President's website including a letter addressed to the Campaign. However, the university still does not pay a living wage.
On February 8, 2012, the Campaign released a series of demands to University administrators calling for a living wage policy at the University. These demands included a requirement that the University "explicitly address" the issue by Feb. 17. Although University President Teresa Sullivan did respond to the demands in a mass email sent to the University community shortly before the end of the day on February 17, the Campaign criticized her response as "intentionally misleading" and vowed to take action.
On February 18, the campaign announced that at least 12 students would begin a hunger strike to publicize the plight of low-paid workers and compel the university to raise wages. Several student organizations and community groups pledged their support to the campaign during the strike. As the action progressed other students joined the strike, by the end 26 students had participated in multiple days of the fast. Over 75 individuals participated in day-long solidarity fasts. The hunger strike garnered significant national attention. After 13 days the hunger strike came to a close without public concessions from the administration. Shortly after the end of the strike Charlottesville's city council voted to raise the base pay for full-time municipal employees to $13/hour, the same wage that the strikers were asking the University of Virginia to pay. This change effected 50 municipal workers not already making $13/hour. No changes have yet been made for the many part-time workers working up to 39 hours a week.
Other problems with the living wage is that the cost of living varies by location and is different for each individual situation. A living wage that is sufficient for a single person may be insufficient to raise a family on.
Another issue that has emerged is that living wages may be a less effective anti-poverty tool than other measures. Since living wage ordinances attempt to address the issue of a living wage, defined by its proponents as a family wage, rather than as an individual wage, many of the beneficiaries may already be in families that make substantially more than that necessary to provide an adequate standard of living. According to a survey of labor economists by the Employment Policies Institute in 2000, only 31% viewed living wages as an a very or somewhat effective anti-poverty tool, while 98% viewed policies like the US earned income tax credit and general welfare grants in a similar vein. On the other hand, according Zagros Madjd-Sadjadi, an economist with the State of California's Division of Labor Statistics and Research, the living wage may be seen by the public as preferable to other methods because it reinforces the "work ethic and ensures that there is something of value produced, unlike welfare, that is often believed to be a pure cash "gift" from the public coffers."
- Guaranteed Minimum Income
- Labor market
- Minimum wage
- Positive rights
- Precarious work
- Supply and demand
- Trade Boards Act 1909
- Working poor
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