Living wage should not be 'one-size-fits-all approach': ILO

Living wages should not be a "one-size-fits-all approach" and should reflect local and regional differences between nations, according to a new agreement endorsed by the International Labour Organisation (ILO).

The ILO Governing Body last week endorsed an agreement reached by experts on the issue of the living wage.

It defined the living wage as the "wage level that is necessary to afford a decent standard or living for workers and their families, taking into account the country circumstances and calculated for the work performed during the normal hours of work."

It should be calculated in accordance with the ILO's principles of estimating the living wage and achieved through the wage-setting process in line with ILO principles.

"The operationalization of living wages should not be a one-size-fits-all approach and should reflect local or regional differences within countries," the report read.

"Both tripartite and bipartite social dialogue, particularly collective bargaining, are crucial mechanisms to operationalize living wages."

‘Welcome’ development, says IOE

Employers welcome the central role of the ILO in developing a proper methodology for living wages and the assessment of economic factors, said an earlier statement from the International Organisation of Employers (IOE).

Moving forward, the group urged all international and national stakeholders involved in wage-setting processes to apply the ILO principles and methodologies jointly agreed upon by the constituents.  

“This outcome establishes the ILO and its tripartite governance as the reference institution on issues related to wage-setting processes. We urge all those involved in wage-setting to consult and implement the principles and methodology,” said Vice-Chair and Officer of the Employers’ Group of the ILO Governing Body Renate Hornung-Draus, who is also IOE Vice-President to the ILO.

Key principles of living wage

According to the ILO report, the living wage should also consider the following key principles of wage setting including:

• the needs of workers and their families and economic factors in wage-setting processes
• strengthening social dialogue and empowering wage-setting institutions, particularly collective bargaining
• promoting incremental progression from minimum wages to living wages
• ensuring national and/or local ownership
• ensuring gender equality and non-discrimination
• using robust and reliable data and statistics for an evidence-based approach
• taking into account the root causes and challenges of low pay, such as unfair distribution of value, low total factor productivity, informality, weak institutions and compliance systems
• recognizing the role of the State.

The recommendations in the report also include raising awareness on living wage, providing technical assistance to constituents on the methodology developed by the ILO to estimate the needs of workers and their families for the purpose of a living wage, among others.