Living wage

Outline

The Working Group on Living Wages focuses on ensuring that all workers receive a living wage that provides a basic but decent standard of living for themselves and their families. This inquiry addresses the significant challenges arising from recent labor market developments, such as the rise of the gig economy, the creation of “bad” jobs, and exploitative conditions for informal and immigrant workers. It aims to explore the interplay between public policies and corporate practices in determining wages and ensuring decent working conditions.

The Working Group adopts a comprehensive approach that involves defining and measuring living wages, understanding the determinants of earnings and non-earnings working conditions, and exploring policy instruments to achieve living wage objectives.

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Focus of Inquiry

Defining and Measuring Living Wages

A living wage is typically defined as a wage that allows workers and their families to achieve a basic but decent standard of living, considering the local context. Approaches to calculate a living wage involve

  • Defining the quantities of goods and services that constitute a basic but decent standard of living.
  • Computing the total costs for this basket of goods and services, considering geographical price variations.
  • Translating household disposable income into gross earnings required for a living wage, accounting for taxes, social contributions, and social transfer

Policy Instruments for Achieving Living Wage Objectives

The Working Group will explore various policy instruments to achieve living wage objectives though conventional Instruments (minimum wage regulations and interventions to raise earnings in the informal sector, such as training or regulatory changes) and non-conventional Instruments (policies to encourage and support firm-driven achievement of living wage objectives and policies to address employer power in labor markets and reduce product market power to increase wages and improve working conditions).

Determinants of Earnings and Non-Earnings Conditions

The aim is to bridge the gap between the latest analytical developments and the discourse in civil society and among policymakers The Working Group will analyze the determinants of wage earnings and non-wage compensation, focusing on

  • Differences between formal and informal sectors in determining earnings and non-earnings outcomes for workers.
  • The impact of employer power (monopsony and oligopsony) on wage and non-wage work conditions.
  • The effect of product market power on wage and non-wage conditions.

Stakeholders and Expectations

The Working Group involves a range of stakeholders, including workers, worker representatives, trade unions, firms, policymakers, and international organizations like the International Labour Organisation (ILO). The expectations for each strategic area include

Conceptualization, Definition, and Measurement of a Living Wage

  • Engage with stakeholders to set and introduce living wage thresholds tailored to specific contexts and business needs.
  • Integrate considerations of social needs, decency norms, and macro-economic effects into the definition of living wages.
  • Address gender-specific needs and norms and new family arrangements (e.g., single-parent households, divorced households).

Determinants of Earnings and Non-Earnings Conditions

  • Analyze the determinants of wage earnings and non-wage compensation in both formal and informal sectors.
  • Assess the impact of employer power and product market power on wage and non-wage conditions.
  • Facilitate discussions among analysts, civil society, and policymakers to establish areas of agreement and disagreement.

Policy Instruments for Achieving Living Wage Objectives

  • Explore both conventional and non-conventional policy instruments to achieve living wage objectives.
  • Address employer power in labor markets and product market power to enhance wages and working conditions.

Coordinators

Romina Boarini : Director, Centre on Well-Being, Inclusion, Sustainability and Equal Opportunity, OECD

Ravi Kanbur : Professor of economics and world affairs, Cornell University