Contextual Risk Factors

Many risk factors contribute to very low wage levels for workers, including but not limited to:

• Lack of minimum wage laws and attempts by some Governments to keep wages low so they are competitive for international business means that low wages are the norm for many workers. Legislations related to minimum wages and remuneration do not guarantee the provision of living wages.
• Weak legal enforcement of labour laws, such as those on wages, compensation and working hours, can lead to overall wages being inadequate.
• High levels of unemployment weaken workers’ negotiating power and can lead workers to take jobs that do not have adequate wages for themselves or their families in order to have any income at all.
• High levels of informality whereby if companies either operate in the informal economy or are legally registered but hire workers informally, their workers are at a much higher risk of being paid very low wages and in most cases not being paid a living wage.
• Widespread poverty in a country or region can contribute to low wages, as companies can take advantage of the low level of income in the area and pay workers less.
• Lack of social security and non-cash benefits, such as a lack of access to affordable child-care or healthcare, increases the expenditure of workers thus reducing the proportion of their wages that can be spent on other items such as food, housing, education, transportation or leisure activities.
• High levels of inequality within a region can contribute to low or unstable wages as average wages may seem adequate, but those at the low end of the wage spectrum are disadvantaged.
• Asymmetries of power and information in global supply chains mean that suppliers typically have fewer options and less decision-making flexibility than their buyers. Over the past four decades, a relatively rapid transition to global sourcing has seen supply chains rely on a business model that benefits from maintaining low wages and inadequate regulation and enforcement.
• Complex, disparate supply networks with multiple intermediaries and multiple companies purchasing from a single supplier require a high degree of buyer coordination to address wages. There is also the concern on whether such coordination violates antitrust laws. The complexity of such networks reflects the potential challenges of ensuring a living wage.
• Social dialogue, including collective bargaining, is not used effectively everywhere, meaning that workers lose an important way of increasing wages. Social dialogue is central to ensuring that pay is calibrated to the needs of both workers and supplier enterprises. Social dialogue is also vital for keeping wages current with inflation and changes in economic circumstances.