In poor countries Minimum Wages too low, only in richer countries income of the medium skilled worker is in line with living wage - January 2015

Wageindicator.org - Patterns in Living Wages around the World - In poor countries Minimum Wages are too low, only in richer countries income of the medium skilled worker is in line with living wage. January 2015

In poor countries Minimum Wages are too low, only in richer countries income of the medium skilled worker is in line with living wage.


The living wage is based on the amount an individual needs to earn to cover the basic costs of living. In 2014 WageIndicator initiated the Cost of Living Survey specifically designed to collect the actual prices of items necessary to calculate the cost of living. WageIndicator calculates the living wage as the amount of money sufficient to cover food expenses, accommodation costs, transportation expenses and other expenses together with a provision for unexpected events. The living wage is currently calculated for almost 50 countries (of which half are low and middle income countries in Africa, Asia and Latin America). Because food and housing costs may differ between regions within a country WageIndicator provides for regionally differentiated living wages within countries. There is a consensus that a living wage earned by a worker should be sufficient to support a family. WageIndicator calculates the cost of living also for a typical family so that the total household income earned by two parents receiving living wage should always be sufficient to cover the family expenses. WageIndicator keeps all estimates of living wage up-to-date and figures are published online at LivingWageIndicator.org


The living wage is always calculated for an equivalent of a full-time worker and therefore it is directly comparable to other income indicators.


WageIndicator presents living wage in context together with minimum wages, actual wages, and national poverty thresholds. The comparison reveals several interesting findings about income adequacy in the countries at different level of development.

1. In low income countries the National poverty lines (NPL) are defined relatively high compare to the statutory minimum wages. It also means that a worker earning the minimum wage is considered poor by national standards.

The comparison reveals that low-skill workers earn approximately two times the amount defined by the World bank poverty threshold of US$2 PPP per day.On average the living wage (accounting for a typical family) in these countries is at least 2 to 6 times higher than minimum wage. Wages earned by low- and middle- skilled workers are likely not sufficient to cover necessary living costs in a typical family and neither of an individual. Only the earnings of workers in high-skilled occupations are considered sufficient by living wage benchmark in low income countries. 

Countries: Ghana, Honduras, India, Kenya, Madagascar, Mozambique, Nicaragua, Niger, Pakistan, Rwanda, Senegal, Vietnam, Zambia.

2. In middle income countries the amounts defined by the NPL are sufficient to cover food costs for an individual but below the total necessary living costs. Many countries in this group operate the minimum wage that is equal to the living wage however in few countries (e.g. Angola, Azerbaijan, South Africa) living wage is more than two times higher relative to minimum wage.

Comparison with real wages reveals that workers in low-skill occupations do not earn living wage to support their family in any country in this group. Wages earned in medium- and high-skilled occupations are decent and above living wage in most countries.

Countries: Angola, Azerbaijan, Brazil, Colombia, Costa Rica, Egypt, El Salvador, Guatemala, Indonesia, Paraguay, Peru, South Africa, Sri Lanka, Ukraine.

3. In high income countries the Minimum wages and real wages are on average above the estimated living wage. Yet in few countries the minimum wage is not sufficient to support a typical family (e.g. Belarus, Bulgaria, Kazakhstan, Mexico and Russia).

Likewise, the comparison of living wage with real wages reveals that low-skilled workers in Belarus, Bulgaria, Kazakhstan, Mexico, Russia may not be able to provide decent living to their families. Wages earned in medium-skilled occupation are above or not much different from living wages.

Countries: Argentina, Australia, Belgium, Brazil, Bulgaria, Belarus, Chile, Czech Rep., Finland, France, Hungary, Italy, Kazakhstan, Mexico, Netherlands, Portugal, Russian, Federation, Slovakia, Spain, Sweden, United Kingdom, United States.


All figures in EUR
per
MONTH
WB poverty thres
-hold individ.
National poverty line individ.
Living wage individ.
Living wage family
Min. wage
Gross wage low skill worker
Gross wage med. skill worker
Gross wage high skill worker
Total fertility rate
Income Country Group
Low income
19
86
101
164
49
40
63
168
4,38
Middle income: 
22
120
159
259
144
145
198
370
2,69
High income
39
340
498
551
569
754
1001
1427
1,72
Terminology:
High income group includes countries with GDP per capita PPP above US$13,000. Middle income countries have GDP between US$13,000 and US$4,000 and low income countries below US$4,000.
World Bank 2$ PPP Family = 2 USD in PPP per person/day is the measurement of poverty used by the World Bank. WageIndicator assumes family size of 2 + national fertility rate and each household member (including children) requires 2 USD in PPP per day.
The national poverty line is a threshold set by most states to define the minimum level of net income necessary for an individual in order to survive in that country.
Living wage is the amount of money to support a typical family with children in a given country. The number of children is approximated from the national fertility rate. The living wage is estimated for an equivalent of a full-time worker.
A national minimum wage is the lowest gross wage for a full-time worker defined by national law and legally binding.
Low-skilled workers are with occupations classified in ISCO 9; medium-skilled workers in ISCO 3-8 group; and high-skilled workers in ISCO 1-2.



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