Wednesday, November 17, 2010
ILO Concept on Living Wage
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Living wage rate estimates in this paper implicitly assume that a poor person’s only source of income is from work. Although obviously an oversimplification, this assumption should not cause major problems for calculating cross-nationally comparable living wage rates. First of all, the poor rarely have substantial income earning assets on which to rely. Indeed, the opposite is often true, as the poor often have debt and must pay interest to debt collectors. Second, the fact that many poor families receive transfers which help them out of poverty - - from relatives and friends (particularly in developing countries) and/or from the state (particularly in higher income countries) - is not especially relevant for estimating living wage rates, since one is interested in how much a full-time worker needs to earn in order to support a small size family at an adequate minimum living standard. The basic premise of a living wage is that full-time workers should receive sufficient compensation from their work to be able to support a small family at least at a minimum acceptable living standard. Living wage rate represents the hourly pay rate a full-time worker needs to earn to be able to support a small family at the poverty line.
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