Frequently Asked Questions about the Minimum Wage, Living Wage, Actual Wage

What is the WageIndicator approach?

This FAQ has been updated December 5, 2019

The data visual How to calculate a Living Wages, is here

WageIndicator has three  wage indicators : Minimum Wage, Living Wage, Actual Wage. All wage indicators are presented in context. Why does WageIndicator present its wage data in context?

Wages in Context provides a range of income figures, including the national Poverty Line, World Bank Poverty Line, the national statutory Minimum Wage, the estimated Living Wages and Actual Wages in low-, medium-, and high-skilled occupations. In this way Wages in Context enables assessing the income situation of working individuals and their families. It stands to reason that updated and reliable income information will support stakeholders and policy makers in their aim to guarantee - at least - such income levels that workers and their families may lead decent lives.

The WageIndicator motto is to 'share and compare information about wages and living conditions’. WageIndicator maintains several databases with information about wages, i.e. Minimum Wages, Living Wages and Actual Wages. The development of WageIndicator wage databases began in 2000. These databases have been shaped in interaction with web visitors who consult the data and respond to surveys. In addition data is collected through desk research and by conducting face-to-face interviews. WageIndicator continuously improves the quantity and quality of its wage indicators and shares the results online. 

Check the latest date in legend of Wages in Context.

 

1. Statutory or legal Minimum Wages

2.  Estimated Living Wages

3.  Actual wages &  Salary Check

What is the WageIndicator approach?

The three wage indicators of WageIndicator:

  1. Minimum Wage
  2. Living Wage
  3. Actual Wage

All wage indicators are presented in context. Why does WageIndicator present its wage data in context?

Wages in Context provides a range of income figures, including the national Poverty Line, World Bank Poverty Line, the national statutory Minimum Wage, the estimated Living Wages and Actual Wages in low-, medium-, and high-skilled occupations. In this way Wages in Context enables assessing the income situation of working individuals and their families. It stands to reason that updated and reliable income information will support stakeholders and policy makers in their aim to guarantee - at least - such income levels that workers and their families may lead decent lives.

The WageIndicator motto is to 'share and compare information about wages and living conditions’. WageIndicator maintains several databases with information about wages, i.e. Minimum Wages, Living Wages and Actual Wages. The development of WageIndicator wage databases began in 2000. These databases have been shaped in interaction with web visitors who consult the data and respond to surveys. In addition data is collected through desk research and by conducting face-to-face interviews. WageIndicator continuously improves the quantity and quality of its wage indicators and shares the results online. 

Check the latest date in legend of Wages in Context.

1. Statutory or legal Minimum Wages

1.1  Why do you collect and publish Minimum Wages?

The WageIndicator Minimum Wages database was introduced in 2006 (and improved by 2019)  as a response to the worldwide lack of knowledge concerning Minimum Wages and the need to comply with these wages. 

1.2  What is a national Poverty Line?

A National Poverty Line is the minimum income level on which an individual is supposed to be able to survive. These National Poverty Lines are set by governments. National definitions of poverty and their practical implementation vary widely across countries. In some countries the National Poverty Line is calculated based on actual prices and revised regularly. In other countries the figure attached to the poverty line is only irregularly updated. The Poverty Line is usually set for an individual. Only few countries define a poverty level for a family. Richer countries deploy more generous living standards to define poverty than poorer countries. Some countries do not define a national Poverty Line at all. Therefore, national indications of Poverty Lines are not directly comparable across countries. To assess whether a national Poverty Line indicates an adequate income, WageIndicator compares to a Living Wage based on real prices of goods collected through the WageIndicator Cost of Living-survey.

1.3  What is the World Bank Poverty Line?

The World Bank defines a poor individual as a person who lives on less than US$2 (PPP) per day. PPP stands for Purchasing Power Parity, a specific form of price indexation that is widely used for making international comparisons of real incomes. PPP rates are calculated based on the price surveys undertaken by the International Comparison Program (ICP) organized by the World Bank. Using these PPP rates, the World Bank Poverty Line is calculated as the monthly (i.e. 30 days) income assuming the spending of US$2 (PPP) per person per day. Figures calculated in the national currency are converted to the EURO at the actual exchange rate to allow for global comparison.

1.4  What is a statutory Minimum Wage?

The statutory or legal Minimum Wages are set and published by governments, sometimes after consultation with the social partners. A number of countries has one Minimum Wage; in most cases it applies to the entire workforce. Other countries apply multiple Minimum Wages for particular categories of workers defined by industry, firm size, occupational group, skill level, educational level, geographical characteristics, age, or years of service. In most countries the level(s) of the national Minimum Wage(s) are considerably above the level of the National Poverty Line. The Wages in Context application presents the applicable Minimum Wage(s) jointly with the National Poverty Line and the Living Wages.

1.5  Some countries do not update Minimum Wages annually. How does WageIndicator deal with this?

WageIndicator presents the latest available Minimum Wages are presented. Minimum Wages which have not been revised for many years may be inadequate. Their levels may drop down close to the Poverty Line.

2.Estimated Living Wages

Since 2014 WageIndicator publishes the estimates of Living Wage as indicators of incomes that allow decent living standards to workers and their families throughout the world. These Living Wage estimates are based on a special Cost of Living-survey. This survey is specifically designed to gather the prices of items necessary to calculate Living Wages in countries and regions within. 

Prefer the data  visual How to calculate a Living Wage?

2.1 What is the difference between Living Wage and Minimum Wage?

The statutory Minimum Wages are laid down in laws or government regulations and therefore constitutes both a worker's rights and an employer's obligation. By contrast Living Wages are not prescribed by law and can therefore not be legally enforced. Instead, Living Wages provide a benchmark for employers who voluntarily commit to pay wages according to the local living standards. Living Wages can be family-, region- and time-specific and therefore may be pretty accurate. Clearly, legally prescribed Minimum Wages and voluntarily paid Living Wages are different in nature. The common goal of the many Living Wage campaigns currently taking place all over the world is to raise Minimum Wage levels to those of the Living Wages. Wages in Context presents Minimum Wages jointly with Living Wages, aiming to increase awareness concerning the remaining gaps between these two levels. Check comparison between Minimum Wages and Living Wages here.

2.2  Why pay a Living Wage?

Allowing people to lead a decent life is not only a moral obligation. It also encourages consumption by increasing a country’s purchasing power and by keeping employment rates up. Employers paying Living Wages benefit from lower turnover of employees and higher productivity gains. Despite the general agreement on the ethical and economic contributions a Living Wage would make, no common framework for calculating Living Wages exists. Most organizations develop their own regional or national Living Wage models. 

2.3  What is the WageIndicator Living Wage?

WageIndicator Foundation calculates Living Wages, following the same principles everywhere. The methodology is versatile and can be applied in all national and regional settings. It starts with a living costs calculation, accounting food expenses (taking national food preferences into account), housing expenses (assessing the quality of housing), travel expenses, education and healthcare expenses, as well as employment rates and family characteristics in the local context. WageIndicator Living Wages are estimated for 3 family types: a 1-person household, a standard family and a typical family.

2.4  How do you obtain your information to calculate Living Wages?

The Cost of Living-application, introduced in 2014 by WageIndicator, has been specifically designed to gather the prices of items necessary to calculate the cost of living, on which the Living Wage is based. This app facilitates data collection through laptop, tablet, and smartphone. It is internet-based. Therefore it reaches out to large numbers of people, facilitates data collection on a global scale, and ensures that the data is up-to-date since data is collected continuously. Web visitors are invited to complete the price survey for a selection of items or for the entire list of items. Respondents also identify their region and city to allow for regionally adapted Living Wages. The multilingual survey is promoted on national WageIndicator websites, occasionally on radio and television, and regularly through Facebook pages. 

Next to that, this Cost of Living-app is operated offline to collect prices in areas with no or low internet coverage. WageIndicator organizes offline field surveys by trained interviewers or by random shoppers who report the prices for a set of commodities in their neighborhood. 

The collection of prices has been very successful: since its introduction in 2014 until the end of 2019, more than two million prices were gathered in all countries combined. The collected prices are always tested and cleaned for outliers. The Living Wage calculation is based on  prices collected during the last 36 months in order to eliminate uncharacteristic or short-lived extraordinary fluctuations. This reference period is adjusted when and where necessary, like in countries with high inflation.

2.5  How can I contribute to the Living Wage data collection?

WageIndicator makes available a Cost of Living-app for interviewers/observers to conduct face-to-face surveys and to observe - the cheaper - prices in shops and markets. Any individual who wants to contribute to the data collection is invited to do so, using the Cost of Living-survey banner on the homepage of their national WageIndicator website or by downloading the Cost of Living-app https://costofliving.wageindicator.org/#/survey . Instructions in English and French, here.

2.6  Which main barriers you face in doing your calculations?

The main limiting factor is the speed of data collection. WageIndicator needs sufficient data to make reliable calculations.

2.7  What assumptions underlie the Living Wage estimates?

Assumptions are:

  • Living Wage reflects the local living standards and needs of workers and their families.
  • Living Wage is calculated as a reference income of a full-time worker in gross terms.
  • Living Wage is calculated for adults who are of economically active age and competent to manage their family budget efficiently.
  • Individuals without children rent a one-bedroom home and households with children live in a rented two-bedroom home, not centrally located or up-market. 
  • Individuals and families for whom the Living Wage estimates are most relevant cannot afford to own a motorbike or car and therefore need to rely on other means of transportation, usually public transport; children of such families commuting to schools can travel for free or with a substantial discount.  
  • All family members are in good health.
  • Meals are prepared at home and ingredients are purchased from supermarkets or at markets in the lower price range.
  • People do not buy clothes regularly but incidentally.
  • Overtime pay bonus is not accounted for, the Living Wage should be earned during normal hours. The ILO Convention 1 (1919) states a maximum number of 48 working hours per week in all countries (ILO, 2008).
  • When workers receive in-kind bonuses such as food, housing or travel allowances, these could be treated as an addition to the (living) wage received in cash; the Living Wage is the monetary equivalent of all regular income, including any regular in-kind provisions.
  • Bonuses are not included in the calculation as these are irregular and their amount is uncertain.
  • Living Wage is based on the assumption that monthly expenses should be covered by regular monthly income from labor; irregular or incidental income is assumed to be used for extraordinary expenses.
  • Living Wages are estimated for employers who (should) pay the local Living Wage voluntarily, unless contracts are made with workers groups, trade unions and / or buyers.

2.8  People live in households of varying size and composition. How do you deal with this fact of life?

Living Wage is family/household-type specific. The Living Wage concept is a systematic attempt to reflect the diversity in the life-work situations and cost of living found around the globe. Obviously, living standards within and between countries vary, but all Living Wage campaigns aim to ensure a decent remuneration for work in support of workers and their families. WageIndicator defined three types of families:  a 1-person household, a standard family and a typical family. It applies those in all countries alike. In short: Living Wages reflect the cost of living for the three household/family types in any country.

Living Wage for an individual: The Living Wage is always calculated as the wage of one adult working according to the full-time standard working week in that country. The individual Living Wage thus indicates the money needed to support a household with a single adult without children who is employed full-time. It is assumed that a 1-person household rents a 1-bedroom apartment and needs a minimum calorie intake of 2100 calories per day, to stay healthy, as proposed by the World Bank.  

Living Wage for a standard family: The standard family consists of a family of two adults and two children. One adult is working according to the full-time standard working week in that country. The other adult is working 80% of the standard full-time working week. It is assumed that a standard family rents a 2-bedroom apartment and needs a calorie intake of 8400 calories, being 4x the nutritional requirement of the minimum of 2100 calories per person per day proposed by the World Bank.  

The Living Wage may be calculated for other alternatives of family working schedules: e.g. 1) the family employment rate is 1.8, which means one adult is a full-time worker and the second adult has a working week of 80%; 2) both adults are full-time workers (i.e. the family employment rate is 2.0);  3) one adult is a full-time worker and the other works half-time (i.e. the family employment rate is 1.5); 4) one adult works full-time while the other has no paid job (i.e. the family employment rate is 1.0). These calculations can be made on demand.

Living Wage for a typical family: A typical family accounts for the variation in the household composition and employment conditions in a given country. In this definition a typical family includes two adults, whereas the number of children is derived from the national fertility rate, as calculated by the United Nations. In a typical family one adult is assumed to work according to the full-time standard working week and the other adult is working according to the employment rate, derived from the national statistics. The Living Wage is set at the level that the total income earned by both adults is equal to the calculated living costs. When each adult is paid a Living Wage, or in case of part-time work a corresponding proportion of that Living Wage, the total income earned by both adults must be sufficient to meet a decent standard of living. This implies that the individual Living Wage is lower per working adult when the family income is earned by both adults working full-time, relative to the other alternatives.

2.9  Why is a Living Wage presented for a one-person household?

The Living Wage estimate for a working adult permits a direct comparison with the prevailing statutory Minimum Wage and with actual wages. WageIndicator defines these wages also at the individual level.

2.10  What is a standard family Living Wage?

The standard family Living Wage assumes a family of two adults and two children. The Living Wage may be calculated for four alternatives of family working schedules: 1) the family employment rate is 1.8, which means one adult is a full-time worker and the second adult has a working week of 80% (4 days a week); 2) both adults are full-time workers (i.e. the family employment rate is 2.0);  3) one adult is a full-time worker and the other works half-time (i.e. the family employment rate is 1.5); 4) one adult works full-time while the other is a non-wage-earning adult (i.e. the family employment rate is 1.0).

The Living Wage is always calculated as the full-time wage of a working adult. When each adult is paid the Living Wage, or in case of a part-time job a corresponding proportion of that Living Wage, the total income earned by both adults must be sufficient to meet a decent standard of living. This implies that the individual Living Wage is lower when the family income is earned by both adults working full-time relative to the other alternatives. 

2.11  What is a typical family Living Wage?

The Typical Family is ‘typical’ for a country. The typical family Living Wage accounts for the variation in the household composition and employment conditions in a given country. In this definition a typical family includes two adults, whereas the number of children is derived from the national fertility rate. Moreover, in a typical family one adult is assumed to work full-time and the employment rate of the other adult is derived from the national employment rate. The Living Wage is set at such a level that the total income earned by both adults is equal to the calculated living costs. When both parents are paid a Living Wage the family income is sufficient to meet a decent standard of living. 

An example to illustrate the importance of family characteristics in the calculation of Living Wage. Let’s assume the Living Wage for a Standard Family (2+2 family, 1.8 working) is EUR 244. When changing the family composition to 2+3 and keeping the family work intensity constant, the Living Wage increases to EUR 263 because a higher income is required to support a larger family. Assuming the same 2+3 family, but now with a lower working intensity of 1.6 (one adult works 100%, the other works 60%), the Living Wage increases to EUR 296. A Typical Family Living Wages is more burden for an employer.

2.12  When the employer decides to pay the Living Wage, what Living Wage should they choose?

The Living Wage-concept is based on the common sense notion that work should provide for at least a modest, yet decent standard of living for a family. The calculation of Living Wages for different family or household characteristics reflects the diversity in the life-work situations found around the globe.

When it comes to choosing the most adequate version of Living Wage, the employer should at least pay the individual Living Wage. However the standard family Living Wage is more adequate since it mirrors the household/family type that is most common, which is the case in many countries. Therefore it is most fitting where an employer operates in more than just one country. When the employer operates in just one country a typical family Living Wage might be the preferred choice. 

2.13  Why does WageIndicator promote the standard family Living Wage?

Promoting the use of the standard family Living Wage as a benchmark has several advantages. First, it keeps the family composition constant. This allows for a global comparison of price variations/changes in the cost of living. Second, this approach is adopted by several Living Wage campaigns (e.g. Clean Clothes Campaign, and the campaigns in New Zealand and Vancouver in Canada) which allows for comparability of calculated results between all campaigns. Third, the assumption of a family with two children keeps the population at the same level over time (population replacement). Fourth, the feminist approach. When women work they improve their chances to be independent. And as a rule working women prefer small families, i.e. the standard family used by WageIndicator as its benchmark.

2.14  How many wage earners does a family include?

WageIndicator presents Living Wages for different family characteristics which reflect the diversity in the life-work situations found around the globe. In a typical family one adult is assumed to work full-time and the employment rate of the other adult is derived from the national employment rate. In a standard family the Living Wage may be calculated for four alternatives of family working schedules: 1) the family employment rate is 1.8, which means one adult is a full-time worker and the second adult has a working week of 80%;  2) both adults are full-time workers (i.e. the family employment rate is 2.0); 3) one adult is a full-time worker and the other works half-time (i.e. the family employment rate is 1.5); 4 one adult works full-time while the other has no paying job (i.e. the family employment rate is 1.0). The individual Living Wage represents the money needed to support a household of a single adult without children, who is employed full-time.

2.15  Is the WageIndicator Living Wage gross or net?

The Living Wage is presented as the gross monthly wage of a full-time worker. Therefore it is directly comparable to the gross monthly wage or national Minimum Wage. The gross Living Wage is obtained by correcting the net Living Wage for the mandatory deductions which apply to low-earning workers in the country. The WageIndicator wage survey asks respondents about their gross and net earnings. The ratio of gross/net income thus obtained is used to calculate the share of earnings spent on taxes and mandatory deductions of low-earning workers. 

2.16  Why is the Living Wage presented in ranges? What is lower and upper bound? 

WageIndicator presents its Living Wages as a range with a lower- and upper-bound.  The lower bound of Living Wage is measured, using prices taken at the 25th percentile. The 25th percentile is the value for which 75% of respondents report higher values. This is a conservative scenario, which assumes a cost-optimizing household seeking cheaper-than-average housing, food and some other indispensable goods or services. The upper bound of a Living Wage is measured, using prices taken at the 50th percentile. The 50th percentile (median) represents the value in the middle of the distribution. The range between upper and lower bound is pretty accurate, as it reflects the variation of prices and consumer preferences at the lower end of the income scale in a particular country or region. One single figure, in contrast, might suggest that prices of the same item and consumer choices do not vary.

2.17  Why not present Living Wage as one figure?

WageIndicator presents its Living Wages as a range to reflect the variation of prices and consumer preferences. One single figure instead of a range might suggest the Living Wage is cast in concrete: it is not and it cannot be. Living Wages reflect the actual price levels of goods and services consumed by households. These price levels change over (even short periods of) time and also between regions in a country.

2.18  You use ‘percentiles’ in the presentation of your Living Wage ranges. What does a percentile mean or stand for?

WageIndicator presents its Living Wages as a range with a lower- and upper-bound. The lower bound of Living Wage is measured using prices taken at the 25th percentile. The 25th percentile is the value for which 75% of respondents report higher values. It is a conservative scenario, which assumes a cost-optimizing household seeking cheaper-than-average housing, food and some other indispensable goods or services. The upper bound of a living wage is measured using prices taken at the 50th percentile. The 50th percentile (median) represents the value in the middle of the distribution.

2.19  In some high-income countries the Living Wage is below the Minimum Wage. Is this method applicable in all countries?

The calculation of Living Wages is very much on the conservative side. It only includes basic expenses. So, yes it is applicable for all countries. 

2.20  Why do you think your ranges adequately reflect the cost of living for developed countries too?

The concept of a minimum income standard and Living Wages has fired intellectual debates about the working poor in Europe. The ongoing effort of the European Reference Budgets and WageIndicator Living Wage projects aim to develop more sophisticated indicators of a minimum income standard. These are crucial to define household income levels sufficient to make ends meet. The WageIndicator Living Wage range is arbitrary, but realistic. The European Reference Budgets platform develops a more sophisticated method to estimate living costs (that Living Wages are based on). Thus far it is adopted by just a few EU-countries. WageIndicator is in discussion with the Reference Budgets network.   

2.21  What about data bias through the impact of foreign travelers submitting the high prices paid during their stay?

The reliability of Living Wages depends on the quality of data. The Living Wage calculation follows the published methodology and is transparent. There is no manipulation of figures other than standard data cleaning for obvious outliers. WageIndicator ensures that all data used in the calculation is corrected for issues that could potentially bias the results. 

The Cost of Living-application collects prices continuously. Price surveys are in general less demanding as compared to surveys relying on individual data. Respondents in price surveys do not report personal characteristics and therefore the individual bias is minimized. Moreover, the prices of goods and services are always cross checked for outliers. Misreported figures, or prices reported in any other than the local currency, are not used in the calculation. These procedures combined minimize the risk of a potential bias due to foreign travelers.

2.22  I’d like to know more about your methodology for health and education expenses.

Many countries provide at least basic public health care services. Yet, additional expenses are often required on medication not available from public facilities or on private health care in emergency situations. In addition, if people temporarily lose income due to health-related absence from work, they still need to be able to cover their basic living expenses. The Cost of Living-survey asks respondents about the minimal monthly expenses on health care for a family of two adults and two children, i.e. the standard family. Based on this information, the monthly expenditure on health is included in the Living Wage calculation. Health expenses are proportionally adjusted for family size. Thus, health expenses for an individual are assumed to be one quarter of the expenses reported for a standard family with two adults and two children.

Education in public schools is provided at relatively low cost, but additional costs are related to supplementary materials and fees. The Cost of Living-survey asks respondents about the minimal monthly expenses on education (assuming that children attend public schools) for a standard family of two adults and two children. Based on this information, the monthly expenditure on education is included in the Living Wage calculation. The cost of education for adults is not budgeted. The concept of a Living Wage defines the basic needs for a family, but does not budget for families to participate in advanced education, entertainment or recreational activities.

2.23  Do you use World Bank data on household expenditure?

WageIndicator has access to household surveys collected and made available through World Bank archives. These datasets often include the composition and amounts of household expenditure that could be used to improve the Living Wage calculation in the future.

2.24  Do your estimates for housing costs meet UN Habitat standards of decency?

Housing costs are the most peculiar kind of family expenses, because homes differ and local prices show substantial variation. Housing costs are almost always the largest family expenditure paid regularly. The standards of adequate housing depend on local conditions and therefore WageIndicator takes the cost of privately rented housing as the most realistic available option that is also acceptable in terms of decency. Individuals without children are assumed to rent a one-bedroom home and households with children are assumed to live in a rented two-bedroom home.

Participants in the Cost of Living-survey report the rent, the number of bedrooms and location of their apartments (inside or outside the city center). The rent equation is estimated separately for each country if there are at least 70 observations (rents reported) per country. The estimated rent for a family (and/or individual household) refers to a typical rent for a two-bedroom apartment (one-bedroom apartment) in an average urban area, outside the city center and not centrally located or up-market. Respondents also identify whether electricity, water, garbage collection, internet, and taxes on housing are paid with the rent. Based on these characteristics the reference rent is estimated, using state-of-the-art econometric tools.

The rent equation also captures regional differences in a country. The advantage of this approach is that it can compare the cost of rented housing for a large number of countries and for regions within countries as well.

2.25  Why is the size of the housing not linked to family size? So, if a typical family has 7 children, would it be possible to adjust for a larger house?

Currently there are only a handful of countries with a fertility rate above 4. The family with 2-3 children is becoming a standard also in developing countries.

2.26  If the region is extremely rural would you adjust for appropriate housing?

WageIndicator calculates housing costs for a country or for a region based on the reported housing costs in the Cost of Living-survey. So, if the housing costs in the region consists of predominantly rural dwellings, the Living Wage housing costs reflect the average cost of these dwellings. If the region consists of predominantly urban high-rise apartments, the Living Wage housing costs reflect the prices of these apartments. Hence, WageIndicator does not differentiate its Living Wages for urban and for rural housing respectively.

2.27  For family size in some cases the child-mortality rate has a heavy influence. Do you take this into account?

WageIndicator adjusts the fertility rate for the child-mortality rate in countries where it is significant.

2.28  Do you collect data on in-kind benefits per sector?

WageIndicator collects data about some in-kind benefits, and – if desired – these can be broken down by sector, region, occupation, or other characteristics. However, these non-monetary benefits are not reported in the wages, because their monetary value is difficult to estimate. 

2.29  On your Living Wage map some countries show ‘not available’ and others are missing. Why?

When price data is not sufficient or reliable WageIndicator does not publish Living Wage estimates. As a rule of thumb approximately 2000 prices are necessary to calculate Living Wages. 

The number of collected prices is growing steadily, but not equally fast in all countries. Countries with insufficient data (marked as ‘not available’) are certainly on the WageIndicator wish list, but due to time and money constraints are not covered yet. In some countries WageIndicator recruits observers/interviewers to roam shops and market places and complete price surveys and help fill blind spots on the WageIndicator world map. 

As of 2019 October WageIndicator presents Living Wages estimates for 76 countries, half of them low and middle income countries in Africa, Asia and Latin America. The number of countries covered, as well as regions within, is increasing continuously.

In this map we present for all relevant countries in the tool tips comparison with the GlobalLivingWage and Asian Floor wage: https://wageindicator.org/salary/wages-in-context

2.30  How is the Cost of Living data collected, face-to-face,  online or both?

The Cost of Living-application, introduced in 2014, has been specifically designed to collect the prices of items needed to calculate Living Wages. This survey app facilitates data collection through laptop, tablet, and smartphone, approaching respondents face-to-face. Moreover, it is internet-based (which makes for easy uploading of data collected through the app). The internet reaches out to large numbers of people which visit and consult WageIndicator websites, who - while online - are asked to fill in price data of their daily needs. This system facilitates collection of comparable data on a global scale. Moreover it ensures that the data is up-to-date, as data is collected continuously.

Thus, respondents in shops and at market places, as well as web visitors are invited to complete the price survey for a selection of items or for the entire list of items. Respondents also identify their region and city, which makes mapping regional Living Wages possible. The survey app allows to collect prices even in remote regions with no or low internet coverage. WageIndicator in addition organizes offline field surveys by trained interviewers or by random shoppers reporting the prices for a set of commodities in their neighborhood. 

2.31  Why are Living Wages updated each quarter?

WageIndicator updates Living Wages each quarter to keep up with changing price levels. 

In addition, Living Wages are checked for consistency over time. In case structural discrepancies are detected, WageIndicator consults national experts to analyse and correct the source(s) of bias. Feedback on methodological questions and the quality of Living Wages is also obtained through discussions involving academics, the general public and social partners in a country. 

The Living Wage calculation is based on prices collected during the last 36 months in order to avoid uncharacteristic or short-lived extraordinary fluctuations. This reference period is adjusted when and where necessary, like in countries with high inflation.

2.32  How many items are needed for the calculation of the Living Wage?

The WageIndicator Cost of Living-survey collects prices on more than 100 goods and services, which are necessary to cover basic needs. Some items are grouped together (e.g. similar food products) and several items relate to housing characteristics. The survey collects many prices on food items which are used to develop a model diet that reflects the varying food consumption patterns and habits of each country.

  • 2000 prices are needed to calculate food per country; 2000 prices for a region
  • 20 prices are needed to calculate transport, per country;  20 prices per region
  • 70 prices are needed to calculate housing, per country;  20 prices per region
  • 10 prices are needed to calculate health and education

2.33  How are transportation costs determined?

Family members often commute for work or travel for their daily activities (e.g. shopping). Accounting for travel expenses in the cost of living is therefore important. Low-income families are assumed not to own a motorbike or car and therefore need to rely on other means of transportation instead. As public transport service is commonly available in most urban places, the price of a regular monthly travel card for public transport is taken as the transport cost for an adult. The average price of such a monthly travel card is used as a meaningful approximation of transport costs also for families in areas where no local public transport is available. The Cost of Living-survey collects the price of a monthly travel card for public transportation for an adult. The travel costs for a family is calculated as the price of two monthly travel cards. In many places, children commuting to schools can travel for free or with a substantial discount, which is why these are not budgeted. 

2.34  How are housing costs determined?

Housing costs are the most peculiar kind of family expenses because homes differ and local prices show substantial variation. Housing costs are almost always the largest family expenditure paid regularly. The standards of adequate housing vary with local conditions and therefore WageIndicator takes the cost of privately rented housing as the realistic minimum acceptable available option. Individuals without children are assumed to rent a one-bedroom home and households with children are assumed to live in a rented two-bedroom home. 

Participants in the Cost of Living-survey report the rent, the number of bedrooms and location of their apartments (inside or outside the city center). The rent equation is estimated separately for each country if there are at least 70 observations (rents reported) per country. The estimated rent for a family (and/or individual household) refers to a typical rent for a two-bedroom apartment (one-bedroom apartment) in an average urban area, outside the city center and not centrally located or up-market.  Respondents also identify whether electricity, water, garbage collection, internet, and taxes on housing are paid with the rent. Based on these characteristics the reference rent is estimated, using state-of-the-art econometric tools.

2.35  Why is clothing not specifically included in the calculation of the Living Wage?

The cost of clothing is included in the provision for unexpected expenses. First, because there are no internationally agreed criteria for what is adequate clothing. Second, people do not buy clothes regularly but incidentally.

2.36  Why is the 5 % margin for unexpected expenses included?

The calculation of Living Wage accounts for the most relevant family expenses on food, housing, travel, health and education. National Living Wage campaigns typically rely on data from national household income and expenditure surveys to estimate expenditure beyond these basic categories. However, household surveys are not readily available for a large set of countries on the regular basis that is required for frequent updating. Moreover, the bundle of non-food and non-housing commodities varies across countries as these reflect habits and cultures, as well as changes over time. For these reasons it is difficult to arrive at a universal basket of goods and services catering for such additional personal demand in all countries in like manner. Here WageIndicator follows the usual practice by adding a 5% margin to the final estimate of the cost of living. The lower margin of 5% is more appropriate when the calculation of the cost of living is more comprehensive, while it does not increase the resulting Living Wage unreasonably.

2.37  How do your Living Wages relate to those presented by the Global Living Wage Coalition?

The WageIndicator estimation of Living Wages is consistent with the methodology used by the Global Living Wage Coalition. WageIndicator includes the same expenses and also adds 5% on top in its Living Wage formula. WageIndicator aims to stay in tune with Anker’s* manual for calculation of Living Wages.  

*Anker, Richard and Anker, Martha (2017). Living Wages Around the World: Manual for Measurement. Cheltenham: Edward Elgar Publishing

2.38  Can regional Living Wage estimates be calculated as well?

The Living Wage is most likely to be diverse throughout a country. The cost of living may vary considerably across regions, in particular due to housing. WageIndicator estimates Living Wages for different regions classified according to the population of the largest settlement in that region. That leads to four types of regions: 1) metropolitan; 2) large city; 3) small city; 4) rural area. The Living Wages are only estimated for regions in case of sufficient data. These regional Living Wages are not available for the public for free. Please apply by sending a message.

2.39  What is the critical data needed to make regional benchmarks and are there any regions where this data is currently available?

WageIndicator calculates regional Living Wages when price data for that region is sufficient. At the regional level also, at least 20 observations per food item on the Cost of Living-survey are required. For a proper housing cost estimate at least 70 observations are needed. In 80 countries WageIndicator already could estimate regional Living Wages.

2.40  Do you also collect regional data on family size, and number of incomes per family?

If statistical bureaus do collect such data WageIndicator may use these. It doesn’t collect that info. If there is a demand for such a specific Living Wage estimate WageIndicator could obtain family size from national household surveys where it has access. Household size is typically available in the surveys, the income question though differs a lot between countries. WageIndicator experience is that many surveys in developing countries ask only workers with an employment contract about their income, but not farmers nor informal workers.

2.41  What next? Regional or national benchmarks?

WageIndicator aims to include more and more national and regional benchmarks.

2.42  How reliable is the data when it is based on contributions to voluntary surveys?

There are a few good reasons why WageIndicator Cost of Living-data is reliable. First, scattered individuals from regions wide apart and from diverse cultures do not make up information on practical matters such as prices in a systematic way. Second, individuals buying food, renting a dwelling and using public transport may be considered experts. They know exactly how much they spend on each item, especially when they have limited means. Jointly many such individuals create collective, yet anonymous, expertise. Third, standard practice is to benchmark the survey data collected with relevant data from other sources if such data is available, e.g. from national statistical agencies.

2.43  How many observations are needed to estimate a Living Wage properly?

  • 2000 prices are needed to calculate food per country; 2000 prices for a region
  • 20 prices are needed to calculate transport, per country;  20 prices per region
  • 70 prices are needed to calculate housing, per country;  20 prices per region
  • 10 prices are needed to calculate health and education

WageIndicator relies on its huge public outreach (40 million visitors annually) and is experienced in adopting sound statistical methods. The incoming data is always tested and cleaned for outliers. On top: WageIndicator in many countries also uses the face-to-face surveying method.

2.44  Is the minimum amount of calories for an adult the same in every country?

Poverty lines are typically related to nutritional requirements, and these tend to be similar for people in poorer and richer countries. A nutritional requirement for good health proposed by the World Bank equals 2,100 calories per person per day*. The composition of the food basket per country is taken from the national food balance sheets published by the UN Food and Agriculture Organization (FAO). Although the composition of the food baskets varies across countries, the calories of the various baskets are calculated as to end up at 2,100. For a family of 2 + 2 we assume 8400 kcal per day. 

* Haughton, Jonathan Henry, and Khandker, Shahidur R. (2009) Handbook on poverty and inequality. New York: World Bank Publications.

2.45  How do you calculate the cost of food?

The food costs are calculated using the specified amounts of the food categories needed for one person for a month. The information comes from two sources. The first is the WageIndicator Cost of Living-survey which collects the actual prices of all items necessary to calculate the Living Wage. The second is the UN Food and Agriculture Organization (FAO) database, which expresses the national food consumption patterns in per capita units, distinguished for about 100 food groups. For the Living Wage calculation the composition of the food basket represents the actual food consumption in a country. The value of the food basket is estimated using the current food prices generated by the WageIndicator Cost of Living-survey (https://costofliving.wageindicator.org). The calculation of food costs assumes that all foods are prepared at home and that ingredients are purchased from supermarkets or at markets in the lower price range.

2.46  How does WageIndicator deal with differences in food preferences across countries?

The UN Food and Agriculture Organization (FAO) database includes the national food consumption patterns in per capita units which reflect the food preferences in a country. The data provides the per capita food supply, its dietary energy value and fat content in about 100 food groups. For instance, according to the data, Spain and Portugal consume the largest amount of rice in the EU (more than 100 grams per person per day), while rice consumption in Serbia or Poland is only 10 grams per capita per day. The calculation of Living Wages takes these differences in food consumption patterns into account. The food patterns for children and adults are assumed to be identical.

2.47  Is the skin of a banana seen as food or as waste?

The calculation of Living Wages is confronted with these not-so-trivial issues. However, it is not just this one issue of whether a banana is peeled or not-peeled. Other issues must be tackled too. For instance, pre-packed food items do not always come in standardized volumes like 1 kilogram or 1 litre. Moreover, standard measurements may differ: bananas may be sold per piece, per bunch or in a stalk. The WageIndicator Cost of Living survey asks respondents to indicate the quantities precisely. Next, prices are standardized before calculation. To return to the banana issue: the skin is generally not consumed and therefore not counted as food for calorie-intake.

3. Actual wages &  Salary Check

The actual wage data is used to develop the Salary Check tool, providing precise and updated salary information for different occupations. The quality of the Salary Check increases with the growing popularity of the WageIndicator websites and the number of submitted surveys.

3.1  How are the actual wages of low-, medium-, high-skilled workers arrived at?

The application Wages in Context contrasts the assessment of the income situation of working individuals and to the cost of living of their families. Reported monthly earnings of workers in low-, medium-, and high-skilled occupations are obtained from the WageIndicator voluntary web surveys from the last five years. The definition of groups follows the one-digit ISCO-classification of occupations from 2008, where ISCO 1-3 are clustered into high-skilled, ISCO 4-8 into medium-skilled and ISCO 9 into low-skilled groups. The minimum and maximum values represent a typical wage range per occupation given by a variety of characteristics which influence the wage of workers.

3.2  How do you collect the data for the actual salary indications?

WageIndicator collects data by means of a voluntary web-based survey available at national WageIndicator sites. The WageIndicator questionnaire is offered (in 2019) in 47 languages and is operational in 125 countries. The survey questionnaire is similar to those used by statistical agencies for standard labor force surveys, it is user-friendly and consists of multiple-choice questions only. The collected data is anonymized and subject to strict security measures, safeguarding the privacy of the participating individual. In 30 countries with less strong internet WageIndicator also collects salary data on the basis of face-to-face surveys. This data is used for salary indications as well.

3.3  Is the wage information reliable?

The wage information used for the calculation of Salary Checks and as presented in Wages in Context is based on voluntarily submitted data. Therefore 100% accuracy cannot and will not be guaranteed. WageIndicator encourages its respondents to provide accurate and precise information about their personal and employment characteristics, pointing out that they provide their professional peers with an improving Salary Check-tool,  which they themselves profit from as well. And all along WageIndicator guarantees their anonymity. The Salary Check is updated twice a year. Wages in Context is updated four times a year. Through increasing participation in the Salary Surveys results improve so that they provide the most timely, accurate and actual wage information. In addition, before calculation the dataset is cleaned and compared to other relevant datasets applying universally accepted statistical methods. In this way WageIndicator eliminates from its datasets most non-trustworthy cases, such as for example extremely high or low hourly wages, and highly unlikely combinations such as starters boasting of astronomical earnings etc.

3.4  What is an occupation? And what is an occupational group?

WageIndicator recognizes more than 1700 different occupations. Its classification of occupations is based on the International Standard Classification of Occupations (ISCO) provided by the International Labour Organization (ILO). WageIndicator follows the latest classification ISCO-08 released in March 2008, amending it whenever a more detailed classification is necessary. ISCO-08 classification is a tool for organizing jobs into a clearly defined set of groups according to the tasks and duties undertaken on the job. ILO classifies occupations into smaller and larger occupation groups (either 4-digit, 3-digit, 2-digit or 1-digit ISCO code). The smallest occupation groups are referenced with a 4-digit ISCO-08 code. At the top level occupations are clustered into 10 major occupation groups described by the 1-digit ISCO-08 code. For example the occupation group Professionals includes the occupations: Biotechnologist, Aircraft engineer, Translator, University professor in social sciences, etc. Each of these occupations is then broken down into more narrowly defined ones, e.g. University professor in social sciences, into sociologist, politicologist, and the like. In addition to these ILO-defined groups WageIndicator defines exact occupations with 13-digit ISCO-08 codes, in such a way that the first 1,2,3 or 4 digits of the 13-digit ISCO-08 occupation code exactly match the ILO-defined occupation groups under which a certain occupation falls.

3.5  How many observations suffice for a reliable wage estimate?

On the country level experience suggests that a minimum of 2000 observations is necessary to get reliable estimates to base the first Salary Checks on for a limited number of occupation groups. Observations must be reliable and wage records must comply with the definition of minimum wage. WageIndicator uses modern statistical methods to test whether the estimates are statistically meaningful, realistic and sufficient to base the wage profiles in a particular country on. This practice means there should be enough reliable observations - 20 minimum - for each of the 1700 exact (13-digit ISCO-08 code) occupations. However, if there are already some but not yet 20 observations for a particular occupation, it may be grouped on a higher level of aggregation in accordance with the ISCO-system: i.e. from the 4-digit up to the 1-digit ISCO-08 code, to the level with the minimum 20 observations. However, one should keep in mind that even though statistically tested, all salary indications are estimates and therefore include an element of uncertainty.

3.6  How does data in a Salary Check differ from official national data?

From the experience gathered since the year 2000 it appears that WageIndicator data are comparable in quality with those from other surveys. However, they offer the additional advantage of becoming available more timely. WageIndicator data are on a half year basis used to calculate and update the online Salary Checks which reflect actual earnings in hundreds of occupations in all countries where WageIndicator has operations. The survey itself is versatile and detailed. Its results can be used to monitor and address significant developments in the labour market as they emerge. However, the survey is not based on a representative sample of the labour force, and therefore no conclusions can be drawn regarding the working population as a whole. In some countries groups in certain wage brackets, or of a certain age, may not visit the Internet as frequently as other groups. This accounts especially for those with very high pay and equally for those who are paid very low. * In developed countries the web survey participants are also younger, and they are more often full-timers and persons working in non-manual occupations.  **Yet, WageIndicator data is proven to be highly apt for research into the income situation of specific occupational groups in the labor market.

* Tijdens KG, Steinmetz S (2015) Is the Web a promising Tool for Data Collection in Developing Countries? Comparing Data from ten Web and Face-to-face Surveys from Africa, Asia and South America, International Journal of Social Research Methodology, DOI:10.1080/13645579.2015.1035875

** Steinmetz S, Raess D, Tijdens KG, De Pedraza P (2013) Measuring wages worldwide – exploring the potentials and constraints of volunteer web surveys. In Sappleton N: Advancing Research Methods with New Media Technologies, p 100-119, IGI Global, Hershey PA

3.7  How often are the Salary Check and Wages in Context updated?

Salary Checks are updated twice a year for all countries. The information in the Wages in Context application is updated four times a year.

3.8  What happens with outdated data?

WageIndicator securely stores the data that have been collected. The outcomes shown are always the latest, replacing the older ones, based either on fresh data or on indexing data if no or not enough new data is available. The calculation of the national Salary Check is based on uninterrupted series of data collected over the last five years.

3.9  Is the wage information in the Salary Check and Wages in Context controlled for inflation?

The calculation of the Salary Check is based on data collected over the last five years. In countries with low data intake earlier wage information may be adjusted by official data, if available by data on wage increases and if not by the official annual inflation rate. In some countries Statutory Minimum Wages or national poverty lines are updated very irregularly. These figures are enforced by law and hence adjusting for inflation would be pointless. The Wages in Context application always presents the latest Minimum Wages or national poverty lines. The estimates of Living Wages are based on data collected over the last 36 months. The adjustment for inflation is applied only exceptionally for countries with a very high inflation rate or after the currency redenomination.

3.10  Which period do the data for the Salary Check cover?

The calculation of the Salary Check tool is based on data collected over the last five years.

3.11  Are overtime and bonuses included?

WageIndicator adjusts calculations for hours worked. Bonuses are not included in the calculation of wages.

3.12  What about the difference between gross and net wages?

The calculations in the Salary Check represent gross hourly wages. The number of hours worked determines the gross monthly wage. Some respondents report only their net earnings and others report gross earnings, while some workers report both. Given such a variety of wage information WageIndicator applies the statistical techniques needed to impute gross earnings for every worker.

3.13  Why are questions on personal characteristics included in the salary survey?

Personal characteristics significantly affect the wages individuals earn. Therefore, knowing these characteristics is essential to apply the statistical rules that assign wages to any occupation and worker’s profile.

3.14  Why is gender important for wages?

WageIndicator outcomes show that men and women earn different wages, also when their occupations look similar. Even if men and women seem to carry out work of equal value, gender wage gaps show up that are mostly detrimental for women. If measured by weekly or monthly wages, these gaps may be caused by differences in hours worked. Yet differences often continue to exist to some extent when wages are measured in hourly wages. Such remaining differences may be due to differences in individual characteristics such as years of experience, educational attainment or skills. Other gender wage differences may be caused by differences in paid allowances and bonuses, or may be rooted in job classification and job evaluation systems. In the latter cases elements of discrimination of women may be assumed. Disentangling the various personal characteristics and wage elements available in the WageIndicator dataset may contribute to proof whether such assumptions are justified. Thus, by providing reliable information about empirically observed gender pay differences WageIndicator contributes to a more transparent and equitable labour market.

3.15  Why is education important for wages?

The wage profiles in the WageIndicator dataset are among other things influenced by the level of education of the respondents. In general, the level of education is an important factor influencing the productivity of an individual. More educated individuals may be assigned more complex tasks, more responsibility, or simply use their working time more efficiently. Differences in educational attainment give rise to wage differentials even within the same occupation and for individuals sharing other characteristics. Therefore controlling for education is crucial for the reliability of WageIndicator data.

3.16  Why are years of experience important for wages?

In general, more productive workers earn higher wages, and more experienced workers tend to be more productive. With years of experience workers learn how to perform their tasks more efficiently. In particular in the early years of one’s career this will translate into higher wages though this effect diminishes over time. Therefore controlling for years of experience and taking these effects into account is crucial for the reliability of WageIndicator data.

3.17  Why is it important for wages whether the employee has a supervisory position?

In general, a supervisory job comes along with more responsibility which translates into higher wages for workers in such positions.. Also, the most productive workers (next to other personal characteristics) tend to be selected for supervisory positions. Therefore controlling whether workers have supervisory positions is crucial for the reliability of WageIndicator data.

3.18  What is the meaning of minimum and maximum wages in the Salary Check?

The minimum and maximum wages indicated in the Salary Check illustrate how the earned wage varies for a given occupation and with years of experience. The maximum wage is the upper bound of earned wages reported in the Salary Check for a given occupation. Statistical methods are used to construct occupation-specific wage profiles.

3.19  Is the physical attractiveness of a person reflected in the Salary Check?

Researchers explored whether one’s physical appearance matters in occupations where attractiveness can be economically important. In most cases the impact on wages of physical attractiveness seems to be overestimated and personal characteristics such as self-confidence, diligence or creativity may well be of greater importance. In the Salary Check one’s physical appearance is not reflected in the wage information.

3.20  Why does the Salary Check indicate a far higher/lower salary than my actual one?

The Salary Check predicts one’s wage for a given profile of individual characteristics. It answers the question how much an individual of given characteristics can expect to earn. Clearly, the quality of the prediction depends on the accuracy of information entered into the Salary Check. First of all, it is very important that respondents correctly report their occupation. WageIndicator has a database containing 1,700 occupations. Although some occupational titles are almost similar, they may differ substantially in the tasks and duties performed. If the wage information in the Salary Check does not match one's current salary, it is possible that one has not chosen the proper occupation. WageIndicator tries to capture the most important determinants of wages, but discrepancies between one's actual and predicted wages may remain due to factors not covered by the Salary Check. If one's salary is higher than that reported by the Salary Check, the person in question may have specific characteristics or talents that have been rewarded in the labour market and have remained outside the scope of the WageIndicator. Conversely, if one's salary is lower than that predicted, this may point to underpayment and be an impetus to look for another job. Alternatively, it may be that the respondent’s employer offers benefits that compensate for the lower pay such as free child care or other secondary benefits.

3.21  Why does the Salary Check not mention my profession?

If the Salary Check does not mention one’s profession, the respondent may try to refine the occupation search. Currently WageIndicator recognizes some 1,700 different occupations and is busy scaling up to 4,000 occupations, making the occupation search engine a truly encompassing tool. That said, the fact may remain that one's profession is very specialized and unique, and therefore may not yet have been defined in the WageIndicator. In that case, please get in touch with the WageIndicator office to have such an occupation included in the Salary Check Mail: office@wageindicator.org .

3.22  Can the outcome of the Salary Check be used for a pay rise?

The aim of the Salary Check is to provide the most accurate information about the expected wage for a worker in a specific occupation with a given set of individual characteristics. However, the calculation of wage information in the Salary Check does not include performance aspects such as effort, creativity, work attitude, and the like. These characteristics are part of an individual’s human capital and may also determine one's pay. Against this backdrop it may be clear that wage predictions from the Salary Check have great informative value but that they can only be part of an individual’s input in wage negotiations with an employer. However, it is definitely worthwhile trying to convince the employer that a pay rise is justified, referring to the wage of one's occupational peer group is paid. 

3.23  How is the median wage calculated?

The median wage is the wage value in the middle where a number of observed wages is sorted into ascending order. Nearly everywhere more people earn low wages than wages above average: in statistical terms, such a wage distribution is skewed. In countries with high income inequality the wage distribution is highly skewed and the median wage ends up substantially lower than the average wage.

More?


Loading...