Many companies are struggling in the face of a global labour shortage.¹
Like them, your company may be experiencing the effects of “The Great Resignation,” which has seen workers leave in droves or simply not returning after a termination or lay-off.
The reality, however, is that we are facing a WAGE shortage.
Fortunately, leading companies have found a sensible solution: pay people a wage that they and their family can reliably live on.
In this blog post, we explore the right to a living wage to help you to understand why it is relevant for companies and how you can get started on your living wage journey.
What is a living wage?
The topic of a living wage has long been confused and conflated with that of a minimum wage. A minimum wage is precisely that: it’s the minimum that an employer is legally required to pay an employee, as per legislation. It does not account for cost of living, does not account for inflation, and is intended only to curb the extent to which employees are exploited.
By contrast, a living wage is one that affords a decent standard of living for the worker and their family.² This includes food, water, housing, education, health care, transportation, clothing, and other essential needs, including provisions for unexpected events. It is a wage that helps families to achieve independence and an existence worthy of human dignity.
Paying a living wage is not an act of benevolence.
The right to “just and favourable remuneration ensuring for [themselves] and for [their] family an existence worthy of human dignity“ was declared in 1948 in the UN Universal Declaration of Human Rights.³ This right was ratified by the UN General Assembly in 1966 and enshrined into international law in 1976.⁴
If your company commits to respecting human rights, ensuring a decent wage in your organisation and your value chain needs to be part of that agenda.
And a living wage or living income (for those who are salaried) is a foundation, not a destination. Most definitions of a living wage do not account for savings or retirement, and many are still not yet explicit in differentiating between a living wage for an individual and a living wage for a family. As such, a living wage should be understood as the true minimum that a worker can be paid towards building and maintaining a livelihood that meets their needs and the needs of their family.
Why do we need it now?
From North America⁵ ⁶ to Europe⁷ and China,⁸ hundreds of millions of people worldwide are living paycheque to paycheque, even during these times of labour scarcity. Economic models would expect to see rising wages and stronger workers’ bargaining power. Instead, we have seen anti-union laws and activities, take-it-or-leave-it employment situations and working poverty: in short, employment approaches that fail to treat employees like the assets they are.
And, now that the extent of our burgeoning wealth gap⁹ is common knowledge, workers are organising – such as those, for example, who found they had been earning too little at their full time jobs to even qualify for unemployment benefits.¹⁰ In addition, the pandemic has been a wakeup call. Millions are refusing to go back to the jobs they previously held because the work is hard and the pay is bad, and they have decided not to suffer it further.
For many industries, the implications are costly, and threaten to be long-term.
Why a living wage matters to your company
The answer to finding and securing a reliable workforce is simple and straightforward: companies need to provide fair compensation.
This is not only a matter of respecting human dignity and human rights; it’s a strategic imperative for business continuity and for a healthy, equitable economy. As Unilever puts it: “…economic growth is only inclusive and sustainable when workers receive fair wages – and our business flourishes when those around us are doing well.”¹¹
Paying employees a living wage can help to improve your company’s reputation and attract quality candidates; reduce employee turnover, absenteeism, and retraining costs; improve performance and productivity; and ensure that your company’s investments in capacity-building are retained within the organisation.
Becoming a living wage employer is a complex pursuit, and it requires more than just loosening the purse strings. Effective implementation of a living wage program in your company requires both executive support and collaboration by – and input from – internal working group(s) of affected departments, such as HR, marketing, and operations. For Vancity, the implementation of a living wage¹² resulted in various changes across the organisation, especially in employee compensation packages and procurement.
For many companies, the more challenging transition is to engage their value chain on supporting their living wage mandate.
What should you consider on your living wage journey?
If your company is ready to consider becoming a living wage employer and advancing income equity in your workplace and value chain, these questions are a good place to start:
1) Is a living wage really enough?
A living wage is often defined as the pay necessary to maintain a decent standard of living, but what is decent? Most often, what factors into an appropriate living wage are the cost of housing, essential expenses such as food and utilities, and modest residual for unforeseen events. However, this fails to account for any kinds of savings, or retirement, or allocations for children’s care and educational needs. The consideration of a living wage is also often based on a nuclear family constellation of two working parents with two children. However, actual income earners may have single parent households or more children, or they may be providing for sick parents or supporting a broader family. They themselves may also have unique and pressing needs that are not adequately accounted for.
A living wage is what is required just to reasonably get by – it is far removed from being a wage that will allow a worker and their family to thrive. Consider what a thriving wage¹³ would look like and mean for your employees, enabling them to pursue their hobbies, invest in personal development, and to help their families do the same.
2) Where can we have the biggest impact?
For many companies, the challenge of providing a living wage is not actually a matter of employee compensation, as many knowledge workers are paid more than a living wage. Instead, the challenge is the implementation within their value chain. Between research, understanding the context, navigating strategic implications, and providing oversight, it can be difficult for even large companies to leverage their influence within their value chain to ensure that workers are receiving fair remuneration.
Start within your own organisation and use that momentum and those learning outcomes in larger conversations with suppliers. Vancity discovered that its living wage mandate¹⁴ strengthened its partnerships with suppliers, and supplier advocacy of the living wage cascaded into broader industry associations.
3) Beyond a living wage, what does equitable remuneration look like?
Living wages are only part of the solution to enabling decent and dignified lives. Respect, transparency, working conditions, and benefits must also be part of a wholistic conversation about acceptable remuneration, as should flexible schedules and locations (when possible), and sick leave that reflects the needs of protecting workers and reducing transmission.
A good starting point involves taking the time to learn employees' stressors and ‘pain points’ to get a better idea of the types of support they need. You may be surprised to find that the means are readily available, and at costs lower than expected.
Be a part of the change
All of us need a living wage in order to live. It’s right there in the word. And no job should be without dignity. Paying less than a living wage is exploitative, keeps people in poverty, makes them dependent on handouts and charity, makes them desperate, and this – especially in the era of COVID-19 – is resulting in mounting uncertainty and continuity risks for business.
Well paid workers are happier, loyal, reliable workers. If your organisation has a vacancy and needs a person to fill it, ensure that role offers a living wage. Turns out, it pays off.
¹ "World Economic Situation and Prospects: November 2021 Briefing, No. 144.” United Nations, Department of Economic and Social Affairs, 1 November, 2021, https://www.un.org/development/desa/dpad/publication/world-economic-situation-and-prospects-november-2021-briefing-no-155
² “The Anker Methodology for Estimating a Living Wage.” Global Living Wage Coalition, n.d., https://www.globallivingwage.org/about/anker-methodology/
³ “Universal Declaration of Human Rights.” United Nations, 10 December, 1948, https://www.un.org/en/about-us/universal-declaration-of-human-rights
⁵ Wells, Victoria. “Posthaste: One in Three Canadians say they’re blowing through their entire paycheque each pay period.” Financial Post, 8 October, 2021, https://financialpost.com/executive/executive-summary/posthaste-one-in-three-canadians-say-theyre-blowing-through-their-entire-paycheque-each-pay-period
⁶ Fottrell, Quentin. “Millions of Americans live paycheck to paycheck.” MarketWatch, 29 March, 2021, https://www.marketwatch.com/story/americans-struggle-to-save-in-pandemic-year-2-and-live-paycheck-to-paycheck-2021-03-2
⁷ Midoes, Catarina. “Risking their health to pay the bills: 100 million Europeans cannot afford two months without income.” The Bruegel Newsletter, 7 May, 2021, https://www.bruegel.org/2020/05/two-months-before-the-cliff-millions-of-europeans-cannot-afford-food-and-lodging-after-two-months-without-income/
⁸ McSpadden, Kevin. “China’s ‘Moonlight clan’ generation lives pay cheque to pay cheque, but not because they are poor.” South China Morning Post, 21 April, 2021, https://www.scmp.com/news/people-culture/article/3130329/chinas-moonlight-clan-generation-lives-pay-cheque-pay-cheque
⁹ "Top CEOs Make 300 Times More than Typical Workers". Economic Policy Institute, 21 June, 2015, https://www.epi.org/publication/top-ceos-make-300-times-more-than-workers-pay-growth-surpasses-market-gains-and-the-rest-of-the-0-1-percent/#
¹⁰ King, Tyler. "The thriving wage: Compensating employees fairly". Less Annoying Business, 20 June, 2021, https://www.lessannoyingbusiness.com/post/the-thriving-wage
¹¹ “A Living Wage.” Unilever, n.d., https://www.unilever.com/planet-and-society/raise-living-standards/a-living-wage/
¹² “A Living Wage roadmap for large employers.” Vancity, n.d., https://www.vancity.com/SharedContent/documents/pdfs/Vancity-LivingWageRoadmap.pdf
¹³ King, Tyler. "The thriving wage: Compensating employees fairly". Less Annoying Business, 20 June, 2021, https://www.lessannoyingbusiness.com/post/the-thriving-wage
¹⁴ “A Living Wage roadmap for large employers.” Vancity, n.d., https://www.vancity.com/SharedContent/documents/pdfs/Vancity-LivingWageRoadmap.pdf