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 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 2021, IDH launched its call to action to build a living wage economy to eradicate poverty.
- In 2022, the UN Global Compact partnered with IDH to launch the Think Lab on Living Wage.
- 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.