Before start to write any word on living wages, we must know about the terminology of all types of wages. There are;
- Country Minimum Wage: This is set by national law.
- Prevailing wage: prevailing wage in the region for type of sector/work, typically higher than the minimum wage.
- Industrial wage: The wage structure set by national authority for any specific industry sector like Minimum Wage for ready made garment, cotton industries, paper mills etc.
- Living Wage (LW): Living wage is often referred to as a “fair wage, basic needs wage or survival wage”. The remuneration received for a standard work week by a worker in a particular place sufficient to afford a decent standard of living for the worker and her or his family.
Now we can go in depth on living wage:
What is living wage?
A living wage is the minimum income necessary for a worker to meet their basic needs. This is not the same as subsistence which refers to a biological minimum. Needs are defined to include food, housing, and other essential needs such as clothing. Elements of a decent standard of living include: food, water, housing, education, health care, transport, clothing, and other essential needs including provision for unexpected events.
The goal of a living wage is to allow a worker to afford a basic but decent standard of living. Due to the flexible nature of the term ‘needs’, there is not one universally accepted measure of what a living wage is and as such it varies by location and household type. The living wage is also known as Basic Need Wage (BNW).
Calculation of living wages:
There are several methods for calculating the living wage or BNW. New methodology developed by Martha and Richard Anker – adopted by the Global Living Wage Coalition (FSC, GoodWeave, Rainforest Alliance, SAN, UTZ, Fairtrade, SAI, ISEAL Alliance)
Worlds’ renowned organization Social Accountability International (SAI) has recommended to consider the below steps for Living Wage Calculation;
- Determine cost of the basic food basket needed for an adequate diet in the community under review (minimum 2,400 calorie per day per adult)
- Determine what percentage of household expenditure is spent on food
- Determine the appropriate number of household members
- Determine the percent multiplier to provide for some discretionary income (recommended 10% or 1.1)
- Insert the defined numbers into the following formula
[Basic food basket x (1 / % of avg. household expenditure spent on food) x (0.5 x avg. household size) x 1.1]
There is a very common misunderstanding regarding living wage that, people always trying to include their overtime payment amount whenever they claim that they are paying the living wage to their workforces. Actually, overtime payment should not be included in living wage. But all other benefits like bonus, earn leave encashment, production bonus etc. will be included.
Challenges for calculation;
There is huge argument about the minimum as some human needs to survive—we know how much important the water, food, and shelter are for keeping body and soul together. But to ensure a certain level of comfort, above that has always been considered necessary for a “decent” standard of living. The main challenge is to determine the “DECENT”. How you will determine the decent living condition? As this is completely depends on locality, culture, food nature etc.
For an example, in almost 70% cases, workers are living in a small room with other colleagues. The room having the electricity, gas line, sanitary facility etc. which is much better than their village home. Because, at their village they may don’t have any electricity, no sanitary facility, no supply water etc. As a result, the workers become much happy with their present accommodation. In a sense, anybody can tell, workers are living in decent living condition. But if you compare to other country or other location, may be that country’s socio-economic structure is better, so their decent living condition should be different than exampled area.
In the same way, food habit is different from one country to another, one location to another which must be reflected on living wages. But at least we can calculate the calorie based on country’s census which is minimum 2,400 calorie per day per adult person.
For the above reasons, the result for living wage calculation is coming differently from different people. Even lots of groups are using the calculation as per their own purpose. Therefore to make the calculation effective, the team is involved must stay neutral, non-bias towards the workers and organization. Unfortunately, it is very common scenario if we look at the current calculations have being made for Bangladeshi workforces.
Opportunity for Bangladesh;
This is very common practices that concern people always first ask for the minimum wage of specific industry category. For an example, in every seminar, meeting, and workshop….we are facing same criticism that Bangladeshi garment industries are paying only USD 65 per month, which is lowest in the world. This is always reflecting the negative impression towards our highest revenue earning RMG sector. But question is what percentage of workers is getting only USD 65; of course it is not more than 10%. But this 10% is representing whole impression to us. Nobody is calculating the other benefits of workers.
The only way for us to calculate a common living wage formula for whole country is to split it in separate locations. In this concern, government can play a vital role to prepare and declare the area specific living wage rather than preparing it on sector based. Of course, the living wage calculation should not be biased. It must serve the workers’ demand and ensure actual decent living condition of our workforce. If all industries follow or implement the government calculated living wage then nobody can sale their wrong messages against us. For sure it will create a positive impression for Bangladesh, as well will reflect our export.
Therefore living wage is the core demand of the workers’ all over the world. We are not demanding a lot because living wage is our right. We must honor our workers’ right. If we really want to achieve our sustainable goal of USD 50 Billion, we must make our workers happy and can only do this by providing the living wages. Ensuring living wage could be our main strength to reach at goal. If we can ensure it May can play a big role on branding “Made in Bangladesh “in the world. By the same way we may become the best!
Writer: Managing Director, Global Sustainable Certification Services Ltd.