Step 1 Build understanding

STEP 1 - Objectives:

1.1. Understand the basic concept of living wages and living income.

1.2. Discover the intrinsic benefits of paying living wages and living income.

1.1 What are living wages and living income?

The concepts of living wage and living income share a goal of achieving a decent standard of living for households. Living wage refers specifically to the context of hired workers (in factories, on farms, etc.), whereas living income refers to any self-employed income earner, such as farmers.

  • Living wage
  • Living income

What is the concept of Living Wage?

Living wage is about a remuneration received by a worker sufficient for the worker and her or his family to afford a decent standard of living.

What does ‘affording a decent standard of living’ entail?

The remuneration received for a standard work week by a worker is sufficient to cover the cost of a decent standard of living for the worker and her or his family.

What does decency mean in this context?

Elements of a decent standard of living include access to food, water, housing, education, healthcare, transport, clothing, and other essential needs including unexpected events.

A living wage refers to the take home pay or net pay received for a standard work week, excluding overtime, that covers basic subsistence needs of the worker and his or her family. Living wages for workers in global value chains can contribute to lifting entire families and communities out of poverty. Currently, more than 340 million workers and their families live on less than US$1.90 per person per day.[1] Human rights to freedom of association, collective bargaining and non-discrimination are key drivers in supporting the provision of a living wage. A living wage is a key driver in fuelling the social and economic development needed to reach the United Nation’s Sustainable Development Goals.

Footnotes
  1. ^ Shift, retrieved October 2019. https://www.shiftproject.org/sdgs/living-wages/

International organisations leading the work on living wages

Global Living Wage Coalition

Provinding living wage benchmarks.

Ethical Trading Initiative

Creating guidance to implement living wages in global supply chains.

Asia Floor Wage

Realising living wages for garment workers across Asia.

Fair Labor Association

Protecting workers right’s and conditions worldwide.

WageIndicator Foundation

Sharing information on wages, labour law & careers worldwide.

Fair Wear Foundation

Pushing for living wages in global garment supply chains.

Living Wage Lab

Experimenting with innovative ways to realize living wages in the agri-food sector.

IDH - The Sustainable Trade Initiative

Supporting companies to close the living wage and income gap in their supply chains.

Fairtrade International

Contributing to a living wage for plantation workers.

What is the concept of Living Income?

Living income is about households having the ability to afford a decent standard of living.

What does ‘affording a decent standard of living’ entail?

The net annual income of a household is sufficient to cover the cost of a decent standard of living for a typical household in a particular place.

What does decency mean in this context?

Elements of a decent standard of living include access to food, water, housing, education, healthcare, transport, clothing, and other essential needs including unexpected events.

A living income enables farmers to consistently sustain their families, invest in their farms and make farming a possible vocation for the next generation. The income that a household earns can come from multiple sources, e.g. through the sales of farm-grown products, as well off-farm business (seasonal labour). A living income refers to the – often diversified – household income that would be needed for the household to at least afford a minimum decent standard of living. A living income benchmark is derived from calculating the cost of a decent standard of living in a particular place.

Source: ‘The Living Income Concept’ Living Income Community of Practice, retrieved October 2019.

International organisations leading the work on living income

Living Income Community of Practice

Working towards a decent standard of living for smallholder farmers.

Fairtrade International

Working to make living income for farmers a reality.

World Fair Trade Organization

Global community of social enterprises that practice fair trade.

InfoBridge Foundation

Advancing living income and fair price knowledge.

1.2 The business case

The way resources are used and the extent to which the benefits reach the marginalised millions at the far end of global supply chains is greatly influenced by companies and businesses. Paying a living wage or living income requires commitment and investment, but it can also result in tremendous benefits for a company. In addition, to ensuring compliance with international regulations on human rights and due diligence, implementing a living wage and living income strategy can help protect and build brand reputation. Adequately compensating workers and suppliers can also reduce long-term costs and help improve productivity and quality.

The topics of living wage and living income have exploded into the public consciousness. They are rooted in an aspiration to look beyond existing poverty lines and acknowledge the growing responsibility of governments, businesses and consumers in the agri-food sector. There are 3 principal lines of reasoning to consider incorporating living wages and living incomes into your supply chain sustainability and human rights approach.

Adapted from: Living Income Toolkit (2019). By: Sustainable Food Lab and Löning. Prepared for the Living Income Community of Practice.

Human Rights argument

Farmers and workers in producing countries are increasingly considered part of a company’s sphere of responsibility. This framing puts the focus on the company’s commitment to ensure that human rights are respected throughout their supply chain and in practice. This includes compliance with national human rights legislation or other international agreements, such as the United Nation’s Sustainable Development Goals.

The OECD Due Diligence Guidance for Responsible Business Conduct promotes a common understanding among governments and stakeholders on due diligence for responsible business conduct. The UN Guiding Principles on Business and Human Rights as well as the ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy also contain due diligence recommendations.

Reputation argument

As companies increasingly gain visibility in their supply chains, consumers and supply chain partners expect greater transparency and fair treatment of producer partners. Moreover, they are holding companies responsible for the problems occurring in their supply chains.

Civil society actors are increasingly building consumer movements to push for better treatment of workers and farmers. The Behind the Brands Scorecard from Oxfam assesses the agricultural sourcing policies of the world's 10 largest food and beverage companies.

Supply Security Argument

A living wage can lead to more satisfied and loyal workers. Adequate wages result in lower staff turnover and hiring costs. In addition, experienced workers can lead to improved productivity, reduction of defect rates and other quality improvements. Paying a living wage does not only translate to improved livelihoods, but also an improved business.

In the case of living income, it has become clear that farmers must be economically viable and that they need sufficient income to continually invest in and improve their farms. Not only in light of the effects of climate change, but low income represents a serious threat to both the quantity and quality of supply. Volatile and low prices are pushing farmers to leave their profession and few from the next generation are willing to continue farming.

 

Example of living wage and income strategies of companies

Marks & Spencer

Human Rights Approach & Policy

Mars Inc.

Sustainable in a Generation Plan

Unilever

Enhancing Livelihoods goal

Jumbo

Human Rights Policy

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