FAQ - Adequate Wages

Q: What is a Minimum Wage?

Statutory or legal Minimum Wages are usually determined by the government or by social dialogue, and they fix the minimum amount of compensation for labour that employers must pay an employee, regardless of the type of work or the size of the company (Eyraud & Saget, 2005; ILO, 2014). Many countries have one Minimum Wage rate and in most cases it applies to the entire workforce. Other countries apply multiple Minimum Wages for categories of workers defined by sector, industry, firm size, occupational group, skill level, educational level, geographical characteristics, age, or years of service. Approximately half of the countries in WageIndicator's Minimum Wage database that covers 208 countries and territories have multiple rates. The first Statutory Minimum Wage laws that were adopted in the late 19th century aimed to guarantee decent living standards for workers in industrial sectors where market forces failed to do so (Belser & Rani, 2015; Besamusca, 2019; Eyraud & Saget, 2005, 2008; Gautié, 2018; ILO, 2014). More recently, Statutory Minimum Wages have gained some popularity as a pre-distributive policy to ensure that work pays and to curb inequalities (Besamusca, 2019; Dube, 2019; Moore & Tailby, 2015; Vaughan-Whitehead, 2010). This is reflected in the popularity of the so-called Kaitz index, which measures the level of the Statutory Minimum Wage as a share of the median wage in a given country.WageIndicator keeps track of the relation between the lowest applicable Minimum Wages at country and regional level, and WageIndicator's Living Wage estimates. Currently, 26 countries have a Minimum Wage that is higher than the Living Wage. For a detailed comparison, see our Minimum Wage Living Wage Gap Map.

Q: Is the recommendation different for countries with high or low income inequality?

In countries with higher levels of inequality, WageIndicator would recommend to rely on Living Wages estimates (cost of living approach). This is because in high inequality contexts, 60% of the median wage and 50% of the average wage is less representative of the population because lower, middle, and upper class households effectively live and work in different labour markets. In a Living Wage (cost of living) approach, prices can be gathered in working and middle class neighborhoods, while the Adequate Minimum Wage threshold has difficulties to adjust for such variation. In contexts with low income inequality, WageIndicator recommends checking both the Living Wage estimates and the Adequate Minimum Wages threshold because the Adequate Wage threshold may sometimes not be enough to cover basic needs, for example when overall wages in the country are very low.

Q: In case the Minimum Wage is higher than the Living Wage, would you recommend referring to the Minimum Wage or to the Adequate Minimum Wage?

The Statutory Minimum Wage is the basic threshold and is the law. In light of the EU Directive on Adequate Minimum Wages, an upward pressure on Statutory Minimum Wages across the EU can be expected, as trade unions will aim to negotiate wage floors above the Minimum Wage and in line with the Adequate Minimum Wage threshold. In view of the Directive, the gap between the Statutory Minimum Wage and the Adequate Minimum Wages is expected to close in the upcoming years. If this gap is currently large, the recommendation is to make long term strategic decisions on the basis of Adequate Minimum Wage levels as well as WageIndicator's Living Wage estimates to ensure the wage policy is in line with the minimum adequacy as well as ensuring workers and their families can afford basic goods and services.

Find clear answers about Adequate Wages and how they relate to Minimum Wages and Living Wages. This FAQ explains key concepts, differences, and their relevance for reporting frameworks.

What is an Adequate Minimum Wage?

What is a Minimum Wage?

What is a Living Wage?

What is the difference between Adequate Minimum Wage, Minimum Wage, and Living Wage?

What is the relationship between Adequate Wages in the EU CSRD Reporting requirements and Adequate Minimum-, Minimum- and Living Wages?

What would WageIndicator recommend to use as a threshold, for example when it comes to reporting on CSRD requirements?

Is the recommendation different for countries with high or low income inequality?

In case the Minimum Wage is higher than the Living Wage, would you recommend referring to the Minimum Wage or to the Adequate Minimum Wage?