Estimating Living Wage Globally Martin Guzi Masaryk University, Czech Republic WTO Public Forum 2014.

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How To Calculate a Living Wage Globally

Presentation transcript:

Estimating Living Wage Globally Martin Guzi Masaryk University, Czech Republic WTO Public Forum 2014

What is living wage? 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. Instead there are many definitions and different methodologies.

Global Living Wage We propose a global living wage that can be estimated for a large number of countries with these characteristics: 1.Normatively based 2.Estimates sensitive to national conditions 3.Based on transparent principles and assumptions 4.Easy to update regularly 5.Estimates published online at

Calculation The formula to calculate Living Wage is consistent with other approaches reviewed in Anker (2011) Living wage = cost of food + housing cost + transportation cost + 10% margin Estimation for different family types on a monthly basis.

Database of prices The prices are taken from the Cost of Living survey initiated by WageIndicator in January Prices are provided by web visitors We collect prices on 50 food items, rental prices and the cost of public transportation Today we have sufficient data for 50 countries

Food expenses Food expenses are determined by the cost of a food basket that reflects actual food consumption in the country, valued at current prices. The composition of the food basket for each country is taken from the national food balance sheet published by FAO, together with the recommended food calorie intake per day for an adult person. The prices on 50 food items from the Cost of Living data base are used to calculate the cost of the food basket.

Food basket in South Africa

Housing cost The cost of housing for a one-member household is approximated by the monthly rental rate for a 1-room apartment outside urban centres. The housing cost for a family is derived from the rental rate for a 3-room apartment outside urban centres. These prices are collected in the COL survey.

Transportation costs The living wage includes the cost of transportation because most people commute for work or travel for their daily activities (e.g. shopping). Public transport services are usually available in most places, so the price of a regular monthly public transportation pass is taken as the cost of transportation for an adult. The challenge remains on how to estimate transportation costs in the detached rural areas.

Living wage in Africa Source: WageIndicator Note: Living wage is calculated for a one-person household on a monthly basis.

Wages in context Source: WageIndicator Note: Low-skill jobs include elementary occupations. Medium-skill jobs include occupations in categories 3-8 by ISCO-08.

Family living wage Source: WageIndicator, ILO, World Bank. Note: The typical family in the country includes a couple with number of children approximated by the current fertility rate. The family living wage is adjusted for the number of full-time workers in the household and the household economies of scale.

Conclusions We developed a concept that provides global estimates of living wage for the large number of countries. The calculation is country specific (e.g. food consumption, family composition, labor market) Living wage could serve as an indicator of economic adequacy and a practical basis to set minimum wages.

Comments are welcome: