The Anker Methodology®
Estimating Living Wages and Living Incomes around the World
The Anker Methodology®, developed by Richard and Martha Anker, is considered the gold standard for estimating living wage and living income, to cover the costs associated with a basic, but decent life.
Since the first living wage study in 2013, the Anker Methodology® has been used to estimate living wages and living incomes in more than 200 geographical locations in over 50 countries, with strong uptake and interest among both local and international stakeholders.
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Definition of a Living Wage
“Remuneration received for a standard work week by a worker in a particular place sufficient to afford a decent standard of living for the worker and her or his family. Elements of a decent standard of living include food, water, housing, education, health care, transport, clothing, and other essential needs, including provision for unexpected events.”
Methodology for Measuring Living Wage
The Anker Methodology® represents a rigorous and groundbreaking approach to estimating a living wage, or living income:
The Anker Methodology is designed to estimate the cost of a basic but decent lifestyle for a worker and his/her family in a particular place. This includes the cost of food, based on a healthy locally accepted diet; the cost of healthy housing, compliant with local and international standards of decency; and the cost of all other goods and services, including healthcare, education, transport, clothing, communications, etc.
To calculate the living wage, the cost of a basic but decent life for a typical family is then divided by the number of workers per family.
Alignment of the Anker Methodology® with ILO principles for living wage estimation
On 19-23 February 2024, the International Labour Organization (ILO) held a ‘Meeting of Experts’ involving representatives from Governments, Employers and Workers to discuss wage policies including living wages. Conclusions reached during the meeting were endorsed by the ILO’s Governing Body on 13 March 2024. This included agreement on a set of principles that should guide the estimation of a living wage.
Click below to read more on how the Anker Methodology is fully aligned with these new ILO’s principles for living wage estimation.
Estimating the Cost of a Basic but Decent life for Workers and Families
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The Anker Methodology determines the reference family size to be supported by a living wage or income, which are family concepts. Our methodology allows reference family size to vary by country and location depending on average household size, total fertility rate and child mortality in the location.
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Food is almost always the largest expense in developing countries for a worker and his/her family. The Anker Methodology develops an appropriate, nutritious, low-cost model diet that is in keeping with local food preferences. Then, local food prices are collected and analyzed to determine the cost of this model diet.
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Housing costs is usually the second largest expense for a worker and family in developing countries. Unlike most other living wage and poverty line methodologies, the Anker methodology estimates housing costs separately. A local standard for healthy housing is set based on international and local standards. Then, through field visits, local data is collected to estimate the cost of acceptable housing.
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For practical reasons, the Anker methodology relies on secondary data from household expenditure surveys to estimate the cost of all other goods and services implied in decency. This includes everything except food and housing, which are calculated separately based on normative standards. Think of: healthcare, education, communication, transport, childcare, clothing, household appliances etc.
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Healthcare and education are considered human rights around the world. For this reason, they are given special attention in the Anker methodology to make sure sufficient amounts are included in the living wage and income estimates, increasing their normative basis. For this, we carry out extensive fieldwork on the local costs of acceptable education and healthcare, and provide a rigorous comparison with the amounts included for them based on the secondary data.
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A small margin is added to the cost of food, housing and other goods and services, to allow for unforeseen events. This small margin is included in the Anker methodology to ensure that people earning a living wage or income are not easily plunged into poverty by an unforeseen event such as accident or illness.
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To estimate the living wage, the total cost of a basic but decent life is divided by the number of workers in a typical family. Unlike other approaches, in the Anker methodology this number is somewhere between 1 and 2 to be more realistic, and may vary by country and location, based on labor force participation rates, unemployment rates and part-time employment rates.
Principles behind the Anker Methodology
The Anker Methodology emphasizes participation of local people and organisations to increase its credibility and acceptance by stakeholders.
The Anker Methodology estimates living wage and income based on normative standards for nutritious food, healthy housing, adequate health care, and education of children through secondary school.
It emphasizes participation of local people and organizations in order to increase its credibility and acceptance by stakeholders.
The Anker Methodology calls for separate living wage and income estimates for different geographical locations, regions or countries, to make them place-specific, and for regular updates and/or rebase studies, to make them time-specific.
The Methodology requires transparency and detailed documentation and analysis to ensure that the living wage estimate is solid and credible. This includes critical appraisal of available secondary data and adjustments to these data when required.
A judicious combination of local fieldwork data collection and available secondary data is used to make the Methodology simultaneously practical and credible. Thus, local food prices and housing costs are collected as are education, and health care costs to make sure that workers are paid enough to afford these necessities.
The estimation of living wage is explicitly separated from the determination of whether particular workers receive a living wage or particular employers pay a living wage. The evaluation of wage levels by certification bodies and others, requires considering not only gross cash payment, but also deductions from pay, overtime pay, bonuses, and in-kind benefits.
The process of estimating a living wage for a particular location involves consultation with and the participation of local stakeholders, including trade unions and employer organisations when present. The goal of the estimation process is to obtain a credible living wage estimate that stakeholders are likely to view as legitimate and reasonable regardless of whether or not local employers feel they can pay this living wage. Local stakeholders are closely involved in the collection of local food and housing costs, based on visits to workers’ homes and places where workers shop for food; workers provide information on local preferences and living conditions; employers and workers provide information on in-kind benefits, bonuses, and deductions from pay; and, before final conclusions are taken, stakeholders are asked to provide feedback and suggestions on preliminary living wage estimates.
Involvement of Local Stakeholders
“Anker and Anker have delivered a substantial, practically-minded resource for helping to establish living wage standards in nations and regions across the world, and which should be of vital interest to all those interested and engaged in this battle as it continues to advance.”
Testimonials
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The manual could serve as the basis for an applied Master’s course in development economics. It belongs on the shelf of every development practitioner, where it would sit confidently alongside classics like Gittinger’s (1982) Economic Analysis of Agricultural Projects.
– African Journal of Agricultural and Resource Economics
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This book is a substantial achievement, and evidence of a research project with the potential to make a real difference to the world.
– Citizen’s Income Newsletter
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Overall, Living Wages around the World: Manual for Measurement looks set to become a well-thumbed reference guide for researchers, governments/policy analysts, international organisations, NGOs, and community groups interested in a deeper understanding of living wage standards and policies. This book is likely to stoke a developing and important dialogue over what constitutes equitable, meaningful, and relevant pay around the globe.”
Labour & Industry