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Living Wage

Today, over a billion working people worldwide – one third of all workers – are estimated to earn less than they need to afford a decent standard of living.

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Definition & Legal Instruments

ILO and UN Conventions

There are no current international laws or conventions on living wage or living wage calculation. Conventions that exist on minimum wage are the following:

  • ILO Protection of Wages Convention, No. 95 (1949): The convention establishes that wages must be paid in legal tender at regular intervals and sets out other requirements for fair pay processes for workers.
  • ILO Minimum Wage Fixing Convention, No.131 (1970): The convention requires ratifying States to consider the needs of workers and families in establishing a minimum wage (Article 3).
  • ILO Minimum Wage-Fixing Machinery Convention, No. 26 (1928): The Convention itself does not refer to the needs of workers and their families, but the accompanying Recommendation R30 considers that “For the purpose of determining the minimum rates of wages to be fixed, the wage-fixing body should, in any case, take account of the necessity of enabling the workers concerned to maintain a suitable standard of living.”

Around half of all Member States have ratified ILO Convention No. 95 and over 50 have ratified ILO Convention No. 131. Countries that have ratified one or both of these conventions should have adequate legal instruments in place to implement them at the national level. This, however, does not ensure that legal protection for workers is of equal efficacy — or equally enforced — across all countries.

In addition to the ILO conventions, the International Covenant on Economic, Social and Cultural Rights (ICESCR) also incorporates State obligations that are relevant to living wages. Article 7 states that remuneration should provide workers with a “decent living for themselves and their families”, including a “fair wage”. In elaborating on State obligations under this provision, the ESCR Committee has stressed that the notion of a fair wage is not static, noting that “[f]or the clear majority of workers, fair wages are above the minimum wage.” Again, countries that have ratified ICESCR, should have measures in place to implement this international treaty at the national level.

In June 2022, the ILO adopted a resolution at the 110th Session of the International Labour Conference calling for strengthened cooperation on contributing to a better understanding of living wages and to provide assistance to Member States, upon request.

Living or Minimum Wage through ILO Lens?

Although there are no ILO conventions on living wage, it could be argued that living wage is a rebranding of the ILO conceptualization of the minimum wage. Specifically, ILO Convention No. 131 states: “minimum wages shall, so far as possible and appropriate in relation to national practice and conditions, include:

  • The needs of workers and their families, taking into account the general level of wages in the country, the cost of living, social security benefits, and the relative living standards of other social groups;
  • Economic factors, including the requirements of economic development, levels of productivity and the desirability of attaining and maintaining a high level of employment.”

Likewise, the Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (MNE Declaration) states that wages should: “provide the best possible wages, benefit and conditions of work. The elements to be taken into consideration should include:

  • The needs of workers and their families, taking into account the general level of wages in the country, the cost of living, social security benefits and the relative living standards of other social groups; and
  • Economic factors, including the requirements of economic development, levels of productivity and the desirability of attaining and maintaining a high level of employment.”

Also, the term “living wage” is found in the preamble to the ILO Constitution adopted in 1919:

“And whereas conditions of labour exist involving such injustice, hardship and privation to large numbers of people as to produce unrest so great that the peace and harmony of the world are imperiled; and an improvement of those conditions is urgently required; as, for example, by the regulation of the hours of work, including the establishment of a maximum working day and week, the regulation of the labour supply, the prevention of unemployment, the provision of an adequate living wage, the protection of the worker against sickness, disease and injury arising out of his employment, the protection of children, young persons and women, provision for old age and injury, protection of the interests of workers when employed in countries other than their own, recognition of the principle of equal remuneration for work of equal value, recognition of the principle of freedom of association, the organization of vocational and technical education and other measures.”

This quote also highlights the important issue of contextualizing living wage in the broader context of conditions of work and social protection. What constitutes a living wage in the absence of social protections and a higher risk of injury, unemployment, loss of income, hours required to attain a living wage, etc., will look very different depending on each of these variables.

Other Legal Instruments

The UN Guiding Principles on Business and Human Rights (UNGPs) set the global standard regarding the responsibility of business to respect human rights in their operations and across their value chains. The Guiding Principles call upon States to consider a smart mix of measures — national and international, mandatory and voluntary — to foster business respect for human rights.

Regional and Domestic Legislation

Companies are increasingly subject to non-financial reporting and due diligence obligations in the jurisdictions in which they operate, which often include disclosures on their performance. There are several high-profile examples of national legislation that specifically mandate human rights-related reporting and other positive legal duties, including the United Kingdom Modern Slavery Act 2015Australian Modern Slavery Act 2018, the California Transparency in Supply Chains Act 2010, the French Corporate Duty of Vigilance Law 2017German Act on Corporate Due Diligence Obligations in Supply Chains 2021 and the Norwegian Transparency Act 2022.

Also, in 2021 the Netherlands submitted a Bill for Responsible and Sustainable International Business Conduct, and the European Commission announced its Corporate Sustainability Due Diligence Directive (CSDDD). This Directive is likely to come into force between 2025 and 2027 and will make human rights and environmental due diligence mandatory for larger companies. Crucially, the draft EU CSDDD Directive positions the explicit safeguarding of “adequate living wages,” stating that companies must ensure an adequate living wage, including in their supply chains. In May 2022, a collective of 64 companies, investors, and initiatives published an advocacy letter in support of this provision, calling on the EU and Member States to ensure that living wages and living income are included as a human right in the final Directive.

These mandatory disclosure and due diligence laws require companies to publicly communicate their efforts to address actual and potential human rights impacts, including the withholding of an adequate living wage. Failure to comply with these obligations leads to real legal risk for companies.