Living Wages as a moving target in times of hyper inflation

Paulien Osse, co founder, global lead Living Wages in conversation with Daniela Ceccon, director data of WageIndicator, Nii Ashia- data analyst WageIndicator, Guide Erisha Manhando, regional manager WageIndicator southern Africa and prof Martin Kahanec, Central European University

Paulien: Inflation — and especially hyperinflation — is a hot topic for anyone trying to pay a Living Wage year on year. Daniela Ceccon, how would you deal with it in practice? Is the Living Wages Guidance solution we created three years ago THE solution… or do we need something else on top?

Dani: “Yeah, inflation is exactly where you feel that a Living Wage is a moving target, because the ‘target’ is basically the cost of living, and that can shift fast. I would also add that people who are paid below the Living Wage level are usually the most affected by inflation, because inflation is usually higher on basic items than on more high-level ones. That said, I think I’d deal with it on two levels.

First, you need a stable Living Wage reference point for the year, otherwise companies get stuck in constant recalculation. That’s honestly why the Living Wage Guidance is useful: it gives you one annual figure that’s intentionally less sensitive to short-term volatility than, say, a single quarter spike. In our approach, the Guidance is derived from the yearly average and includes some guardrails so you don’t overreact to noise, like not letting the Guidance drop by more than 3% year-on-year, and capping extreme increases.

But second, hyperinflation is not normal inflation. In hyperinflation, waiting for an annual update can be too slow for workers’ real purchasing power. So in those contexts, I’d say the Guidance is the baseline, but you add a trigger system on top. For example, in those hyperinflation countries you can review more frequently, using the most recent Living Wage estimates, which come out quarterly. WageIndicator’s quarterly estimates can really be of help in fast-changing contexts.

Third, another thing you could do is be very practical about payroll, for example, by making temporary ‘cost-of-living top-ups’ that can be revised quickly, instead of rewriting base pay every month. This works for those places where hyperinflation is there for a limited amount of time.

So… if you ask me is the Guidance solution THE solution? I’d say it still is, especially for companies that need one number per year. But in high inflation or hyperinflation, the honest answer is: you need the yearly number, plus a rapid-response process."

More about Guidance? Check: https://wageindicator.org/work/living-wages/faq

Paulien: Do we advise companies to use the Guidance unless inflation is too high? Why is that? And looking at the latest release — in which countries would you say inflation is ‘too high’? What does this mean in practice for Türkiye or Venezuela?

Dani: “I’d frame it as: Guidance is the default when you need one stable annual number, and then in very high inflation you add a faster adjustment mechanism on top. The reason we recommend Guidance is pretty practical: it’s designed to be less jumpy than quarter-to-quarter movements. It’s built from the yearly average, and it has guardrails: it won’t drop by more than 3%, and it also caps extreme year-on-year increases at IMF inflation + 5% to avoid spikes that can make implementation impossible.

Countries with high inflation are not only Türkiye and Venezuela (which is at the moment the one with by far the highest inflation), but also other countries like Sudan and Iran at the moment are facing hyperinflation. Türkiye was very high in the past, and it's still high, but it has decreased. In all those cases, it's smarter not to rely on only the annual Guidance, but to use the quarterly Living Wage updates as an operational tool to try to catch up if possible. If that is not possible, you can still think about making a plan to get to 80% of the Living Wage for example, and try to get closer to the target the year after."

Paulien: Nii, How many countries do have an inflation above 20 %, 15%, 10%, and which countries are we talking about?

Nii: “The country with by far the highest inflation rate is Venezuela, which has a 2026 predicted inflation of almost 700%. Right after that, there are Sudan and Iran, which have a very high inflation rate (more than 40%) followed by Myanmar, Burundi, Haiti, Türkiye, Malawi and Nigeria., which have an inflation rate between 20 and 30%. After those, eight countries have an inflation rate between 10 and 20% and thirteen countries have an inflation rate between 7 and 10%. All other countries are below 7% (although there are a few countries for which there is no data available). I would consider hyper-inflation countries Venezuela of course, and Sudan and Iran.”

Paulien: We talk about inflation, but also about higher Living Wages, what is the difference in percentages if you would follow WageIndicator or the Guidance number, or just inflation? Share some groups of countries.

Dani: “In general our Living Wages reflect inflation quite well. Actually, in some cases, they may show a higher increase, for the reason that inflation is higher than average for basic items and lower than average for more expensive / luxurious items. The inflation by the IMF (which is by the way a prediction) is based on a mix of items, not just on basic items. That said, we normally catch inflation when it happens, and this happens with Guidance as well, because the Guidance caps the increase at 5% + inflation, so if inflation is high, the Guidance still shows it. This is why, for hyper-inflation countries, Guidance is not helpful, and other strategies have to be put in place, starting from a quarterly monitoring of the estimates. The advantage of WageIndicator prices is that they are collected constantly and they are super fresh, so they are a very good indicator of the upcoming increases.”

Paulien: Guide you live in Zimbabwe, work in the region with many data collectors. How do you deal with Living Wage and inflation?

Guide: “A Living Wage can still be helpful in a country affected by hyperinflation, but only as a flexible reference point, not a fixed salary. In hyperinflationary contexts, rapidly rising prices quickly erode the value of wages, making standard monthly Living Wages ineffective. However, experiences from Zimbabwe show that Living Wage benchmarks remain useful when they are indexed to basic needs (such as food baskets), adjusted frequently, or linked to stable reference currencies like the US dollar. In these cases, Living Wages helped guide employer pay adjustments, humanitarian cash transfers, and policy responses. Overall, while hyperinflation undermines wage stability, the Living Wage concept remains valuable for protecting minimum living standards when adapted to economic volatility.”

Paulien: Martin Kahanec, you studied Living Wages for a long time? What would you say to companies who prefer to pay a Living Wage, but not when it is going up too much?

Martin: “Paying a Living Wage is not a marketing choice or a one-off benchmark; it is a commitment to improving productivity and sharing gains and cost pressures fairly. If companies accept the principle only when it is cheap, they are not truly committing to strengthening productivity, resilience, and sustainability, but merely to meeting a reputational minimum. The real question is not whether the Living Wage rises 'too much', but how firms adapt their business models, prices, productivity, and internal wage structures so that decent pay remains sustainable over time. Living Wages work best when they are treated as a long-term anchor for social trust and workforce stability. This is a process, a pathway toward resilient and sustainable business, not a charity.”