Ensuring a Living Wage is an Essential Aspect of Decent Work

Working poverty is a reality worldwide. For many workers, a job does not provide a way out of poverty for them and their families. The COVID-19 pandemic has thrown into stark relief the vulnerability of low-paid workers and made clear the consequences of economic fragility on human capital development, making the provision of living wages all the more urgent. While a great deal of progress has been made to ensure living wages for all workers, more needs to be done to ensure we leave no one behind.

The UN Global Compact encourages companies to promote and provide a living wage as an essential aspect of decent work to ensure all workers, families and communities can live in dignity.

While there is no universally agreed definition of a living wage as a concept and no universally accepted monetary amount that defines such remuneration, a lack of consensus is no excuse for inaction. Importantly, there is broad consensus around what constitutes a living wage — it is a wage that enables workers and their families to meet their basic needs.

Governments have an important role to play in supporting wage-fixing mechanisms at a sectoral level. More than 170 countries have one or more minimum wages set through legislation or binding collective agreements. In many countries, however, companies must go beyond existing wage legislation as minimum wages do not always allow for a decent living. By going beyond legal compliance, businesses can ensure that all their employees have the income to support their needs and those of their dependents, raising standards of health and well-being.

As part of the corporate responsibility to protect and respect human rights outlined in the UN Guiding Principles on Business and Human Rights (UNGPs), working poverty caused by low wages in the workplace and supply chains should be reflected in the human rights due diligence approaches businesses conduct.

There is an increasing pressure on Governments and companies to address low wages and take action to ensure a living wage for all workers:

  • In 2023, the UN Global Compact launched the Forward Faster initiative to take action on living wage and accelerate progress across all 17 Sustainable Development Goals.
  • In 2020, the European Commission launched a new Directive on Adequate Minimum Wages.
  • In 2021, various industry platforms, such as UN Global Compact, Business for Inclusive Growth and Aim Progress published statements in support of living wage and living income economies.
  • In February 2022, the EU published a legislative proposal on the Corporate Sustainability Due Diligence Directive (CSDDD)(European Commission, 2022). Later that year, a collective of 60 companies and organizations advocating for living wages issued a public letter in support of the inclusion of living wage and income in the CSDDD as a human right, and to not compromise on the definitions of living wage and income.
  • The German, Dutch and Belgian Governments signed a joint declaration in January 2021 to promote living incomes and wages.
  • In April 2022, members of ShareAction’s Good Work Coalition – a coalition of 10 institutional investors worth GBP2.2 trillion and 108 individual investors, have filled a living wage resolution calling for Sainsbury’s to accredit as a living wage employer and is aiming to target other supermarkets as well (ShareAction, 2022).
  • At the June 2022 International Labour Conference, the International Labour Organization (ILO) adopted a resolution acknowledging the concept of a living wage and calling for ILO’s assistance to member states (ILO, 2022, article 45b).

A growing number of companies are committing to pay a living wage to their employees, and some are committing to work with their suppliers to achieve living wages in their supply chains. Change starts within the business, and firms seeking to promote living wages in supply chains need to have their own house in order. Companies can leverage their experience of achieving their commitment of paying all their direct employees — regardless of employment status — a living wage. Efforts on both fronts — ensuring a living wage for a company’s own workforce and efforts to achieve a living wage for all workers in their supply chain — can go hand-in-hand. 

Take Action

1. Become a living wage employer by paying all your employees — regardless of their employment status — a living wage.
2. Take concrete actions to improve wages for the lowest-paid workers in the supply chain to advance decent work for all workers.
  • For more guidance, please visit the Improving Wages to Advance Decent Work in Supply Chains microsite which highlights lessons learned and best practices from companies and organizations on tackling low pay in supply chains and provides guidelines on concrete steps companies and their suppliers can take to improve wages globally.
3.  Secure living wages in supply chains through IDH Roadmap on living wage.
4. Sign up to the Forward Faster Initiative to accelerate progress across all 17 Sustainable Development Goals and collectively make the biggest, fastest impact by 2030. 
  • The Forward Faster living wage targets include: 1) 100 per cent of employees across the organization earn a living wage by 2030. 2) Establish a joint action plan(s) with contractors, supply chain partners and other key stakeholders to work towards achieving living wages and/or living incomes with measurable and time-bound milestones.

Improving wages starts by identifying which levers are within the control of the business and making initial efforts on these. This will include:

  • Ensuring a strong mandate from senior leadership
  • Collecting data to assess the gap between current basic pay and living wage currently provided
  • Developing an implementation plan with clear objectives
  • Consulting and collaborating with internal stakeholders (including buyers, legal, accounts, quality control) and external stakeholders, including workers’ representative organizations
  • Engaging and supporting suppliers
  • Adjusting purchasing practices and unit prices paid to enable payment of fair wages by suppliers
  • Measuring and monitoring progress using a mix of quantitative and progress achievement metrics

Ensuring a living wage is an accelerator for achieving the SDGs

A living wage directly advances several of the Sustainable Development Goals (SDGs), in particular, Goal 1: No Poverty and Goal 8: Decent Work and Economic Growth, as well as Goal 5: Gender Equality and Goal 10: Reduced Inequalities. It also contributes materially to the achievement of several other Goals. Wages are among the most important conditions of work and a major subject of collective bargaining



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