EstimatingLiving Wage

GloballyMartin Guzi

Masaryk University

NISPAcee, Bratislava, 2014

What is living wage?• Human right (since 1919 defined by ILO)

“ultimate objective is to ensure to workers a minimum wage that willprovide a satisfactory standard of living to them and their families”

• However there is no accepted definition of whata living wage is and no agreed methodologyon how to measure it.

• Instead there are many definitions anddifferent methodologies.

Global Living WageWe propose a global living wage that can beestimated for a large number of countries with thesecharacteristics:1. Normatively based2. Estimates sensitive to national conditions3. Based on transparent principles and assumptions4. Easy to update regularly5. Estimates published online at

CalculationLiving wage =

cost of food +housing cost +transportation cost +20% margin

• Estimation for a single individual on a monthly basis.• The universal principle is applied to provide

living wage estimates in all countries.

Database of pricesThe prices are taken from Numbeo.com data base• Prices are provided by web visitors at city level• Period: Jan, 2012 – Nov, 2013• Sample of 100 countries

(at least 50 responses in each country)• Prices on food items, rents, transportation pass• Median prices are used for estimation• Prices taken at 25th and 75th percentiles are used to

obtain living wage interval (see Living Wage map)

• The Cost of Living Survey initiated by WageIndicator willimprove the calculations in the near future

Food expenses

Source: Canada’s food guide

The food guide developed by Katamay et al (2007) for theGovernment of Canada is followed. The guide divides all food intofour groups and prescribes number of servings that should be eatenfrom each food group in order to meet nutrient standards.

Simple diet modelWageIndicator proposes a diet model that delivers the daily calorieintake per person of 2,830 kcal (world average suggested byFAOSTAT, 2009) and complies with the total number of servings perday recommended by the Canada’s food guide.

Food item Food One serving Food calorie Diet model Diet modelin Numbeo group in kg per serving in servings in kcal

(1) (2) (3) (4) (5) (6)Bread Grain 0.035 76.7 5.7 437Rice Grain 0.125 448.8 2.3 1032Eggs (1pc=53g) Meat 0.106 160.1 1.5 240Chicken breast Meat 0.125 221.3 1.5 332Milk Milk 0.250 165.0 1 165Cheese Milk 0.050 205.5 1 206Apples Vegetable 0.125 58.8 2 118Oranges Vegetable 0.125 46.3 2 93Tomato Vegetable 0.125 21.3 2 43Potato Vegetable 0.125 98.8 1 99Lettuce Vegetable 0.250 65.0 1 65Total 2828

The cost of livingSeveral observations:1. The cost of food necessary for 1 month differs

across countries but not substantially.2. Housing cost (rent of 1-room apartment) remains

the major determinant of living wage.3. Transportation cost (monthly pass) is larger in

high-income places.

The components of living wage (min-max cost in EUR)Country by income Food Housing Transportation Living wageHigh-income 90-300 130-1180 10-100 310-1710Upper-middle income 60-170 40-330 5-60 180-590Lower-middle income 60-140 25-280 5-50 120-520

Living wage estimates in Europe

Note: Figures are stated in EUR on the monthly basis. Income poverty threshold is set at60 % of the national median equalized disposable income as of 2012 published byEurostat. Statutory minimum wage for 2013 is published by Eurostat.

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Living wage in the country Capital city Minimum wage Poverty line

Many workers incountries of EasternEurope do not receive aliving wage

London living wage £8.80/h ~ 1700 EUR

Country Living wage Min Wage Country Living wage Min Wage Country Living wage Min WageAustralia 1530 2095 Canada 1060 1430 Armenia 220 84Cambodia 310 0 United States 880 960 Belarus 410 130China 460 155 Argentina 510 593 Bosnia&Herz. 270 158Fiji 270 0 Brazil 480 283 Georgia 280 41Hong Kong 1020 505 Chile 500 325 Kazakhstan 520 94Indonesia 410 68 Colombia 390 247 Kyrgyzstan 250 13Japan 1090 1087 Dominican R. 390 58 Macedonia 270 172Malaysia 450 195 Ecuador 550 239 Moldova 250 56Mongolia 460 106 Guatemala 510 188 Montenegro 370 186New Caledonia 1080 0 Honduras 280 154 Russia 520 127New Zealand 910 1460 Mexico 310 91 Serbia 290 170Philippines 260 95 Peru 250 214 Turkey 420 405Singapore 1710 0 Puerto Rico 540 0 Ukraine 360 112South Korea 820 563 Uruguay 700 293 Egypt 210 0Taiwan 480 484 Venezuela 660 431 Emirates 960 0Thailand 400 189 Ethiopia 260 0 Iran 410 301Vietnam 320 38 Kenya 520 43 Israel 680 841Bangladesh 160 13 Namibia 590 0 Libya 430 269India 170 43 South Africa 530 0 Morocco 300 143Nepal 120 70 Tanzania 510 19 Oman 730 644Pakistan 150 80 Uganda 500 0 Qatar 1070 0Sri Lanka 270 38 Zimbabwe 510 0 Saudi Arabia 390 603

Living wage estimates (EUR,monthly)

Note: Figures are stated in EUR. Statutory minimum wage is taken from WageIndicatorand Wikipedia websites. In countries with several minimum wages the lowest figure ischosen.

Current campaigns:Asian Floor Wage $540 ppp ~ 430 EUR (family 2+2)US Living Wage 1000-1400 EUR (single)Vancouver Living wage ~2000 EUR (family 2+2)New Zealand Living wage $18.4/h ~ 1800 EUR (2+2)

Conclusions• WageIndicator Foundation developed a concept

that provides global estimates of living wage forthe large number of countries.

• The emphasis is given on international comparison.• Living wage could serve as an indicator of

economic adequacy and a practical basis to setminimum wages.

• Findings show that many workers in countries ofEastern Europe and in the middle-income countriesdo not receive a living wage.

WageIndicator Living Wage• Current estimates are available online in the map

www.livingwageindicator.org

Comments are welcome:Martin.Guzi@econ.muni.cz