Incremental steps towards a Global Living Wage – How it would work
Although governments worldwide have committed to implementing minimum wages for years, many have yet to raise wages to a living wage rate and enforce them. The main reason for this is that it is very hard for single countries to do this, as they fear that corporations will move their production to other countries with cheaper production costs. To avoid this, we need a Global Living Wage Instrument so that countries can work together across regions and internationally to achieve a wage which allows people a decent life. Pivotal to this is that they are given a realistic timeline with incremental wage increases over multiple years.
Despite the right to a living wage being one of the founding principles of the International Labour Organisation (ILO), the ILO, in collaboration with unions, government agencies and employers, have yet to reach this goal. Although many countries have adapted a government-set minimum wage, they are often not enforced nor are they at a level high enough to be considered a living wage. According to one calculation, 50% of countries set their minimum wage below the global poverty level. This leaves millions of people struggling to make ends meet, often leaving them in a cycle of poverty.
The major hurdle is that it is near impossible for a single country to act alone to ensure living minimum wages. If a country enforces a living minimum wage, they run the risk of companies moving their production facilities to a country with lower production costs.
One of the many examples of this so-called race to the bottom is described in my book, ‘Living Wage’. Despite massive public support for an increase of minimum wage in the garment industry in Cambodia in 2013 and 2014, they were only increased after mass protests shut down the capital and numerous protestors were shot dead by the police.
No cheap garment is worth that cost. We shouldn’t wait for tragedies of this type. A peaceable solution which would see both developing and developed countries raise their minimum wage to a living wage, and to enforce them, would be the creation of a Global Living Wage Instrument with the aim to increase minimum wages across regions and internationally. One option is for an International Labour Organisation (ILO) convention negotiated by governments, employer organisations and trade unions, with the key objective of signatory nations to incrementally increase statutory living and minimum wages.
The implementation of the Global Living Wage Instrument could occur in two stages. The first stage would be for all countries to increase their minimum wage to a living wage rate. The convention would set a timeline for all countries to reach this goal, which they can meet over time by increasing the minimum wage annually over several years. Allowing for incremental increases is important as development does not happen overnight, and we cannot expect that the living wage can either. The key point is that the countries must work towards it and be able to demonstrate that they are making progress.
The living wage could be calculated based upon the cost of a nutritious diet, acceptable housing and essential needs such as education, transport and health care – also known as the Anker methodology. It is vital that the minimum wage would be applied to all workers, regardless of employment status, as this is the only way to improve the lives of the millions of informal workers worldwide.
The second stage of the implementation is for countries to move towards a global average minimum wage. This would be based upon purchasing power parity (PPP) - a key indicator to compare income levels in different countries. It is used to adjust exchange rates with the long-term goal of equalising the prices of food and service baskets in any two countries.
The objective of this second stage is to avoid the minimum wage stagnating at a living wage rate. 50 years from now, we want the poorest people in society to be doing better than just being able to pay for necessities – as far off as this seems now. A secondary objective is that it will reduce inequality both within countries, and between countries.
Our economy and our world are so heavily intertwined which has made it impossible to rely on single countries and voluntary measures to ensure that workers receive a fair wage for their toil. The time has come for a Global Living Wage Instrument to legally mandate a liveable minimum wage.
The next step is to ensure that this Instrument is being enforced. You can learn more about what this would look like in book ‘Living Wage: Regulatory Solutions to Informal and Precarious Work in Global Supply Chains’ which these blog posts are based upon.