Living Wages: Why Paying Legal Minimum Wages Is Not Enough

Posted on January 8th, 2020

Living Wages: Why Paying Legal Minimum Wages Is Not Enough

Living Wages: Why Paying Legal Minimum Wages Is Not Enough

Worldwide discussion is ongoing on paying sufficient wages to the people making the products we use every day.

Some countries, especially in Asia, have been forced to raise the unacceptably low legal minimum salaries. This is a result of employee and labor union demonstrations and backing from international organizations who have conducted research and outreach to get consumers concerned.

Ironically, even many ethical certifications use the legal minimum wage of a country as the minimum requirement in regards payment for artisans and employees. One should consider that legal minimum wages are not equal to living or sufficient wages. Rather, legal minimums are more of an easy way out. Determining living wages requires proper calculations on the actual living costs of workers that differ greatly between countries and from one region to another within countries.

The minimum wage of a country is a bare minimum standard, and in many cases not enough for the workers to buy food for their family or to provide decent housing or education for their children. Not only can minimum wages be inappropriately low to begin with, but in many countries, the minimum wages are rarely revised (sometimes with a gap of years or even decades) and do not reflect inflation. In such situations, the legal minimum wage for full-time employment may barely reach the poverty line.

The discrepancy between legal minimum wages and living wages is easily visible in the calculation of the Asia Floor Wage Alliance (below). In many Asian hubs for global manufacturing, the legal minimum wage is just a fraction of the sum people would actually need to cover their basic living costs. Settling for paying only the minimum wage creates the issues discussed in our latest post: in-work poverty, expansive overtime and borrowing money, leading to precarious situations for the workers.

If all businesses, including the mainstream or the “unethical” ones, are expected by the law to pay the bare minimum wage, it is natural to expect ethical businesses to take a further step by aiming to pay a living wage to people making their products. An ethical business is expected to be aware of their whole supply chain, including the payment to workers, whether they employ the people making the products or buy finished products from their suppliers by piece.

Working towards paying and calculating living wages may seem complicated, but luckily, tools, benchmarks and expert support has been made available for all recently. Still, it is a long term process that requires patience. The most important assets needed are the willingness and motivation to start discussing and researching on the topic with your manufacturing partners.

You can start by checking the minimum wages of your country of production from Wage Indicator and My Wage. In the upcoming communications, we will provide you with the latest research and tools for living wages.

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