Living Wage: Challenges & Opportunities Ahead

On January 30, 2012,the Sustainable Agriculture Network (SAN) and Rainforest Alliance hosted a Seminar on a Living Wage in Amsterdam. Over 60 labor standard experts and policy makers from state governments, NGOs in the international social accountability, sustainability and fair trade field, companies and academia, attended. Social Accountability International (SAI) Advisory Board member Dorianne Beyer, Esq., delivered the keynote address, focusing on the history of living wage, definitions, calculation, implementation and continuing issues.  

SAI Europe Representative Edwin Koster led a presentation on the role of living wage in the SA8000 Standard, and opportunities for its implementation via the UN Guiding Principles for Business and Human Rights, and the recent MoU agreement between SAI, Fairtrade International (FLO) and GoodWeave.  

"SAI was the first NGO to integrate the living wage concept in a standard - SA8000," said Mr. Koster. "There are various experiences, positive and negative out of our own 'kitchen' on the impact of implementing a living wage in the SA8000 Standard. For example, some facilities note that it has helped to set them apart from their competitors, or provide assurance to their clients who find good labor conditions more important. On the flipside, others also note that higher wages in many cases combined with reduced working hours substantially increases costs and therefore reduces profits, or this increase in costs results in the brands shifting their manufacturing to different countries where the cost is lower, as we've seen in the case of China."  

However, there are a lot of costs that can be saved by ensuring that your workers are paid a living wage, many of which are not always calculated. Mr. Koster noted, "taking care of workers can improve the bottom line. In many countries, personnel turnover can be 50 or 100% per year. This means such facilities start with a complete new workforce every 1 or 2 years. This means they have to hire and train a lot of people. Also, inexperienced workers frequently make mistakes and are less productive. As a result defect rates go up and quality and productivity go down. There are a lot of costs which do not apply when you keep your workers longer in your facility by taking care of them."

While SAI has received a lot feedback from the field on its experience with implementing a living wage, it remains a dynamic and challenging process, "due to the lack of a globally accepted definition which hinders mainstream adoption," said Mr. Koster. "There is also a lack of transparent data on calculations of living wages accessible by stakeholders willing to work and implement a living wage. Additionally, stakeholders have so far hardly been able to create sufficient insights in the differences and complementarity between living wages and national minimum wages and collective bargained wages. These three types of wages sometimes confuse stakeholders or even create 'conflicts' as a living wage concept is sometimes perceived as undermining other wages concepts. Understandable, but also a missed opportunity as living wages can and should positively influence national legal minimum wages and collectively bargained wages." 

As demonstrated through this event, there is a wider debate on living wages, of which SAI closely follows and contributes to. Two initiatives are of particular interest. The revised OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights have brought human rights - including the 'right to just and favorable remuneration' - high on the agenda of stakeholders. Mr. Koster co-authored the SAI - ICCO Handbook and is SAI's lead trainer on how business can implement the UN Guiding Principles on Business and Human Rights.  

The recent MoU agreement between SAI, FLO and GoodWeave is a partnership to forge a path towards the goal of developing an open source protocol for generating and storing living wage data based on a common approach and methodology. The proposed project is still in the design stage, however, we welcome input from interested parties who want to work with us going forward.