Ethical principles for Living Wages Implementation
How to get from a sound dataset for internal use to a guidance dataset for the outside world, which can be used for implementation of Living Wages?
Introduction
Since 2014, the WageIndicator Foundation has been actively engaged in collecting prices of essential items required for calculating the cost of living. In 2017, a dedicated WageIndicator Cost of Living database was established to incorporate the collected price data, which is consistently subjected to testing and cleaning procedures to identify and remove outliers. The calculated Living Wages are regularly published on a quarterly and yearly basis for various countries and regions. As of 2023, WageIndicator has estimated Living Wages for 164 countries.
These WageIndicator Living Wages estimates are the result of a thorough check on the data and on the calculations. The estimates are compared with Minimum Wages, adapted for inflation (for previous year’s prices) and benchmarked with other external datasets.
The aggregate estimates and their components (such as food, housing, transport, health care, education, and phone cost) are more thoroughly explained whenever the numbers go up or down by more than 5 % quarter-on-quarter.
The internal procedures and data collection methods of WageIndicator are explained in the Living Wages Worldwide report updated and published at least once a year. The process itself has been assured by an external audit company - Control Union - in 2022 and 2023.
Spikes & Cost of Living data
After performing data cleaning, WageIndicator always does a comprehensive initial data check and engages in discussions with data collectors to address any data-related issues, making corrections when necessary. The final Living Wages are consistently compared with those of previous quarters and cross-checked against the latest IMF figures to ensure proper inflation correction. If a discrepancy is identified, and a clear and valid explanation for the variation is available, this explanation is documented alongside the data in the dataset. If an explanation is not readily apparent, another review of the raw data is conducted and any necessary correction is made. Nonetheless, it's important to note that even a dataset adhering to rigorous data collection, cleaning, and calculation protocols cannot entirely eliminate occasional anomalies or spikes. These anomalies can potentially exert a significant influence on budgets. Thus, there must be, especially from a business perspective, a careful balance struck between the aspiration to ‘do the right thing’ and the practical need to ensure financial viability, particularly within the constraints of the budget cycle.
To assist companies and organisations in their ambition to implement living wages we have established guiding principles on how to address this inherent statistical volatility.
Original quarterly datasets & Guidance dataset
WageIndicator Foundation develops, next to the original quarterly datasets and the yearly average dataset (distributed every year in October), a Guidance dataset which will be used to present the estimates to the public and to companies. The principles and the methodology behind the Guidance dataset are explained in the next chapter.
This implies that WageIndicator will share to the outside world - companies, NGOs - one datasheet with:
- Quarterly updates,
- Yearly Average October,
- Living Wage Guidance.
The public at large will see only the Living Wage Guidance from October 2023 onwards.
By controlling and balancing the spikes between years, the Guidance dataset will make implementation of Living Wages more feasible.
Principles
- The Yearly Average dataset (at country and regional level) is compared with the Yearly Average dataset of the year before, which serves as a basis for the adjustments for the Living Wage Guidance dataset.
- In case the Yearly Average Living Wage is less than 3% lower than the Yearly Average Living Wage of the year before, the Living Wage presented is the current Yearly Average Living Wage.
- In case the Yearly Average Living Wage is more than 3% lower than the Yearly Average Living Wage of the year before, a 3% lower Living Wage Guidance is presented.
- In case the Yearly Average Living Wage is higher than the IMF inflation rate of the previous year plus 5% than the Yearly Average in the previous year, the Living Wage Guidance presented will be capped at IMF inflation plus 5%. (Note: in case of countries with big economic issues or economical changes, these will be reflected by the inflation rate, so the Living Wage Guidance reflects them as well. If no IMF inflation rate is available, publicly available estimates for inflation are being used).
- When there is a lack of data for regional calculations, ratios are used to adjust the current year averages in line with other regional ratios for the country or the country level adjustment, in that order.
These principles will be included in the Living Wages Worldwide Report, October 2023.
WageIndicator will present the Living Wage Guidance in October 2023.
WageIndicator works on a historical dataset back to 2019. However the Ethical Principles for the Living Wage Guidance principles will not be applied to the Yearly Averages October 2022, 2021.
The Living Wage Guidance will be used for publication in the national websites of WageIndicator. WageIndicator clients will get the Quarterly updates, Yearly Average October, plus the Living Wage Guidance.
Experience::
Minimum Wage Policy Guide:(20160816)
Amsterdam, 20230915