How to Ensure a Living Wage for All Employees

Working poverty is a reality worldwide. For many workers, a job does not provide a way out of poverty for them and their families. Companies have an important role to play to advance decent work and address working poverty in their operations and supply chains by improving and promoting living wages.

Join this webinar organized by the United Nations Global Compact, the world’s largest corporate sustainability initiative, together with regional Global Compact Local Networks, to learn how companies can protect low-paid workers and reduce wage inequalities. This webinar will be an opportunity to: 

• Understand the concept of a living wage as an essential aspect of decent work and its importance for responsible business;
• Highlight the incentives for companies to ensure their employees are paid a living wage, both as a business benefit and a contribution to the achievement of the SDGs;
• Inspire companies on what actions they can take to promote a living wage to the workers in their supply chains.

How to Ensure a Living Wage for All Employees

The Role of Business in Addressing Working Poverty and Advancing Decent Work: Understanding and Promoting Living Wage in Latin America (in Spanish with Portuguese translation)

Portuguese Translation

What we learned:

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

A living wage is not necessarily equivalent to the minimum wage. Minimum wages in principle establish a wage floor for all workers, to ensure that their basic needs and those of their families are met. The push for a living wage is a response to the fact that minimum wages — for different reasons —  often fail to meet workers’ needs. For instance, this will be the case when wage set does not take the basic needs of the workers and their families into account in the first place, typically because workers’ representatives were not consulted, the minimum wage is not fine-tuned through collective bargaining, it is not enforced or It is not adjusted frequently enough to keep up with inflation, leading to wage erosion.

Social dialogue and sound industrial relations are a crucial precondition and enabler to ensure the payment of a living wage. 

A living wage is an essential aspect of decent work to ensure workers, their families and communities can live in dignity. Addressing low wages is not only an economic imperative, but also a corporate responsibility as reflected in the UN Guiding Principles on Business and Human Rights (UNGPs). The corporate responsibility to respect human rights — including fundamental principles and rights at work — is not an afterthought. It is not charity. It is the foundation for successful, sustainable, responsible business. 

Both companies and suppliers can achieve business benefits by embedding a living wage policy in a broader sustainability and competitiveness strategy. Companies may benefit from reduced staff turnover and absenteeism, reduced training costs, output improvements in productivity and quality, and access to higher-value markets and improved reputation. Companies can drive quality supply and achieve more effective risk management as well as reputational gains by promoting living wages in their supply chains. For example, consolidating and shortening supply chains may be necessary to living wage efforts, but can also improve trading relationships and resilience of supply. 

UN Global Compact resources and other resources are available on our Living Wage webpage. 

Recommended resources: 

• UN Global Compact, Achieving the Living Wage Ambition: Reference Sheet and Implementation Guidance: The UN Global Compact SDG Ambition on Living Wage provides illustrative details regarding the steps to take to successfully implement a living wage programme in a company’s business system to ensure 100% of employees across the organization earn a living wage.
• UN Global Compact, Improving Wages to Advance Decent Work in Supply Chains: This interactive microsite 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.
• UN Global Compact, The Poverty Footprint — A People-Centred Approach to Assessing Business Impacts on Sustainable Development: An assessment tool that enables companies and civil society partners to understand corporate impacts on multidimensional poverty. As a tool to help implement the SDGs, the Poverty Footprint provides a comprehensive overview of factors that influence poverty, and it emphasizes stakeholder engagement and partnership between companies and civil society as a means for establishing pro-poor business strategies.
• ILO, Working Conditions Laws Database: This online database provides information on the regulatory environment for working conditions in over 1000 countries.
• ILO, Statistics on Wages: A collection of data on wages in different countries.
• IDH, The Sustainable Trade Initiative, Roadmap on Living Wages: A list of all living wage benchmarks as recognized by IDH.
• Ethical Trading Initiative, Living Wages in Global Supply Chains: A New Agenda for Business: Practical advice on assessing the impacts of living wages in the supply chain.
• CSR Risk Check: A tool aimed at companies that are importing from or have production facilities in foreign countries that allows checking which international CSR risks (including related to minimum and living wage) businesses are exposed to and what can be done to manage them. The tool was developed by MVO Nederland.
• ILO, A methodology to estimate the needs of workers and their families: This technical document provides a detailed description of a methodology that can be used by researchers to estimate the needs of workers and their families in different country circumstances.
• SME Compass: The Risk Assessment Tool provides practical guidance when rating and prioritizing risks after they have been identified.