“From October 2024, WageIndicator will include childcare and vehicle costs as add-ons to its Living Wage estimates. In this way WageIndicator acknowledges that for many areas and families in the world these items can be essential to lead a decent life. However these two items will not be part of the basic basket of goods,’” says Daniela Ceccon, director of Data at WageIndicator Foundation.
WageIndicator recently spoke with Daniela Ceccon, Nii Ashia Amanquarnor (Data Analyst), and Intan Citra Phonskaningtyas (Data Analyst) to gain insights into the latest Guidance Numbers and unpack the new Living Wage add-ons, namely childcare and vehicle costs.
How do the Guidance Numbers differ from the quarterly Living Wage estimates that WageIndicator presents to clients?
Quarterly numbers reflect the cost of living data we collect on a quarter by quarter basis. However, these figures can experience temporary fluctuations due to seasonal changes, such as price spikes caused by scarcity or excess. As a result, the Living Wage estimate can vary over the four quarters. To address this, we calculate a year average in October, which smooths out these fluctuations by averaging prices across the four quarters.
In addition to this, we provide a Guidance Number. This figure is what companies use when implementing Living Wages. We cap the year-on-year changes in a way that ensures a gradual transition between numbers, preventing the increase from becoming so steep that it’s difficult for companies to follow through on their Living Wage policies. This approach helps companies and organisations stay committed to implementing Living Wages sustainably. Check the visual to understand how it works.
At what level are the annual average numbers presented—country or regional? And do they reflect a typical family size? How do you approach this?
For the Guidance, we calculate both at the national and regional levels within a country, and for each family type that WageIndicator offers (Standard, Typical and Single Income Earner). Whatever we present in the quarterly and annual averages is also reflected in the Guidance.
Can you share any general trends or insights you've noticed in the Living Wage Guidance Numbers from last year to now?
There are various ways to analyse the Living Wage Guidance, including comparing the 2023-24 Guidance with inflation to see which regions had the Guidance rise faster than inflation. In most countries, Living Wage estimate increases are primarily driven by price increases, though some countries saw slight decreases. An increase in the Living Wage estimate is not necessarily a bad thing, as year-on-year price increases are expected. For example, in Argentina, the Living Wage estimate rose by 153%, but this increase is still lower than the inflation rate, so it’s not a negative indicator.
Can you explain how the Guidance numbers take into account inflation/deflation?
The calculation of the Guidance numbers is based on the Guidance from the year before (2023 in this case), but is capped at inflation plus 5%. From our simulations, we know that, over time, the Guidance will converge with the year average. Some have raised concerns that capping doesn’t reflect the true situation, but eventually, the figures will align, making it easier for companies to keep pace year after year. The Guidance ensures a smoother transition to the year average.
What makes the Living Wages estimates published by WageIndicator different?
WageIndicator numbers accurately reflect what's happening in the countries. While inflation calculations include a broad basket of goods and services, our Living Wage estimates are focused solely on cost-of-living elements. This makes our estimates more relevant for ordinary people, and companies. We provide numbers - and insight in the price of components like food, or transport - that are a true reflection of current conditions, as we collect fresh prices every quarter and give more weight to the most up-to-date data.
Inflation is an easy number to look at, but, for the average person, it’s hard to understand what a 15% inflation rate really means for their daily life. People want to know how much essentials, like food, will cost them right now. That’s where we come in. Our Guidance provides a clear picture of the current food budget for the year, making it easy to understand how much a person or family will need to cover their basic living costs each month.
Could you tell us about the recent add ons such as childcare and car costs?
Starting in October 2024, WageIndicator began incorporating childcare and private vehicle expenses as optional additions to its Living Wage estimates, aligning more closely with other data providers and current discussions on Living Wages. As WageIndicator, we currently consider these as supplementary costs, and not part of the core basket of basic goods and services. Our basic estimates still focus on ten essential components, while acknowledging that for many areas and families in the world these items can be essential to lead a decent life while maintaining our core methodology for regions where they may not be considered ‘basic necessities’. Childcare costs assume a caregiver earns a Living Wage while looking after six children over a 12-year period. The private vehicle cost, excluding fuel and insurance, is also calculated gradually over five years.
What advice would you give companies as they are reviewing these numbers?
Companies should compare the Guidance Number to the basic wage they are paying their employees. We have criteria for what qualifies as a comparable wage—it should be the basic wage, and the non-cash component of the wages shouldn’t exceed 25%. This ensures employees have the freedom to choose what to eat, where to live, and the type of housing they prefer, rather than being tied to specific provisions.
If a company falls short of the Guidance Number, it's important to implement measures to raise it to at least that level. Keep in mind that WageIndicator Living Wage estimates cover only the basic cost of living and do not account for luxuries. If a company doesn't meet this estimate, it’s likely that the employees are struggling to cover even basic needs.
It’s smart to make this comparison, especially since the WageIndicator Guidance figures for 2024 are now public. Employers can refer to these estimates, and ensure they meet the Living Wage standard. Earlier this year WageIndicator also released the Living Wage estimates publicly for 2,700 regions across 173 countries, so that workers and trade unions can look at the numbers and negotiate for better wages.
For countries like Venezuela, Turkey, and Egypt with extremely high inflation rates, should companies rely on the Guidance numbers or the October Living Wage Estimate?
The October numbers might present a more realistic picture than the Guidance numbers for countries experiencing hyperinflation. In such cases, it's better to rely on the latest available data, which WageIndicator can provide upon request, as it reflects the current situation more accurately. While the Guidance Numbers are released later in the year, the latest figures capture the fast-moving price changes more effectively.