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.
The Anker Methodology is fully aligned with these new ILO’s principles for living wage estimation, including:
· Evidenced-based and transparent approach
· Use of robust data and statistics
· Involvement of local stakeholders
· Consideration of socio-economic context
· Public availability of up-to-date estimates
Additionally, our living wage estimates are internationally comparable – we believe this is important to prevent unfair competition between sourcing origins in global supply chains based on low wages.
Alignment of Anker Methodology® Living Wage Benchmarks with ILO principles for living wage estimation
| ILO PRINCIPLES FOR ESTIMATION OF LIVING WAGE* | ANKER METHODOLOGY® BENCHMARKS | |
|---|---|---|
| 1 | Estimation of the needs of workers and their families through evidence-based methodologies. | Anker Methodology Benchmarks are based on scientific principles and international and national standards for decency. Conceptual foundations and methodological principles are described in 380-page open-access manual. |
| 2 | Consultation with representative employers’ and workers’ organizations on living wage estimates and involvement of social partners throughout their development, with a view to ensuring national and/or local ownership. | (i) Decisions on geographical area for living wage estimate and selection of locations for primary data collection are based in part on discussions with employers, workers and other stakeholders. (ii) Primary data collection involves (a) discussions with workers, employers and others to understand workers’ living costs and local norms for a basic but decent standard of living, and (b) systematic collection of local food prices, housing costs, education costs and health care costs. (iii) Study findings are presented to stakeholders to give stakeholders opportunity to query results and provide additional information prior to independent finalization and publication of living wage estimate. (iv) Benchmark studies are carried out by qualified national researchers with a view to ensuring national and local ownership. |
| 3 | Transparency, including details with regard to data sources and methods of processing, that are open to scrutiny, are comprehensive and replicable. | Extensive report (50-60 pages) is published with full details of how living wage was estimated including all data sources and calculations. |
| 4 | Robustness of the data in terms of representativeness and transparent data collection methods. | Living wage is estimated based on judicious mix of secondary data from reputable national surveys and primary data collected in study location. All data are scrutinized for reliability and relevance. Full details of data sources and collection methods are provided in public report. |
| 5 | Timely public availability of the estimates, data and methodologies. | Living wage estimates, data and methodology are published on completion of study. Estimates are updated annually for inflation. |
| 6 | Specification on whether estimates are gross or net, namely whether items such as social security contributions are included or not. | Both gross living wage and net living wage estimates are reported. Gross living wage includes applicable income tax as well as union dues and all mandatory payroll deductions such as social security contributions, pension contributions, etc. |
| 7 | Regular adjustments to consider changes in the cost of living and the patterns of consumption. | Estimates are updated annually for inflation and rebased every 7-10 years to account for changes due to national socio-economic development. |
| 8 | Quality control, including sound technical review, validation, as well as periodic review for continuous improvements. | Anker Methodology Benchmark studies are carried out by qualified national researchers with intensive training and support from Anker Research Institute. All estimates are subject to rigorous technical review by senior technical experts and public presentations to stakeholders to get feedback. |
| 9 | Promotion of gender equality and non-discrimination. | (i) Only one living wage estimate is produced for all workers in a location. This helps to prevent discrimination based on gender or migrant status or other characteristics of workers. (ii) A gender perspective is embedded in the Anker Methodology in numerous ways, including allowances for paid and unpaid care. Full details are provided in this ARI Working Paper below. |
| 10 | Consideration of the regional or local context and socio-economic and cultural realities. | Living costs are estimated based on local costs and norms and standards for a decent standard of living which also meet minimum international standards on nutrition, housing, healthcare and children’s education, and taking care not to replicate poverty. |
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* These principles are set out in the Conclusions of the Meeting of experts on wage policies, including living wages, Geneva, 19-23 February 2024, https://www.ilo.org/wcmsp5/groups/public/---ed_norm/---relconf/documents/meetingdocument/wcms_918126.pdf .
Alignment of Anker Methodology® Living Wage Benchmarks with ILO general considerations regarding living wage methodologies
| ILO GENERAL CONSIDERATIONS REGARDING LIVING WAGE METHODOLOGIES | ANKER METHODOLOGY® BENCHMARKS | |
|---|---|---|
| 1 | Methodologies to estimate living wages should be based on an identification and assessment of a basket of goods, using local prices of the costs of at least the following components: food, housing, health and education, and other necessary goods and services, in accordance with national circumstances. This basket should provide for a decent living standard of the worker and his/her family. For some elements in this basket, international standards are well-established and should be used. | (i) Anker Methodology Benchmarks are based on local costs for food, housing, healthcare, education, and all other needs. A small margin is added for unforeseen events. (ii) Cost of food is estimated based on local prices for a model diet consistent with international standards for nutrition and local food preferences.(iii) Cost of housing is estimated based on local costs for a healthy housing standard established according to international minimum standards and local norms. (iv) All other costs are estimated using reliable secondary data on expenditure patterns for non-poor households in the study location. This ensures the living wage does not replicate spending patterns for families living in poverty. A rapid assessment of local costs for healthcare and education is carried out to make sure that sufficient funds are included for these human rights regardless of what is indicated for these in the secondary data.(v) Anker Methodology Benchmarks purposely allow workers to have full agency on how they wish to spend their wages. Thus, the Anker Methodology does not use a fixed or limited basket of goods and services. |
| 2 | The family size and the number of wage earners used should be clear. | Anker Methodology Benchmarks are based on the typical family size and number of full-time workers per family in the location, as determined using secondary data for the location and country on (i) average household size, total fertility rate and child mortality rate, and (ii) labor market conditions based on labor force participation rates for men and women ages 25-59, unemployment rates and part-time employment rates. This is explained in the public report. |
| 3 | Living wage estimates should be disaggregated by components and presented in various wage units, including hourly, monthly, quarterly and annual figures, and should be the result of robust empirical analysis of the population, including surveys and censuses, at country or regional level. | (i) Anker Methodology Benchmarks are disaggregated in public reports into (a) food, (b) housing rent or rent equivalent of owned housing, (c) utilities, (d) all other costs (separately reported for 10 other expenditure groups) (e) additional amount for emergencies and sustainability, and (f) mandatory deductions from pay such as union dues, social security, pension contributions and income tax when required. (ii) Anker Methodology Benchmarks have only been presented as a monthly wage (gross and net). In future, estimates will be presented as monthly and annual figures (from which other wage units can be determined, as relevant for different sectors and industries). (iii) Anker Methodology Benchmarks are determined using robust empirical analysis of secondary data from reputable national surveys and new primary data collected in the study location. Data analysis is carried out by highly qualified national researchers supported by Anker Research Institute technical experts. |
Anker Methodology® Benchmark principles which are in addition to ILO principles
| ILO PRINCIPLES AND GENERAL CONSIDERATIONS FOR LIVING WAGE ESTIMATION | ANKER METHODOLOGY® BENCHMARKS | |
|---|---|---|
| 1 | No mention of the need for international comparability of living wage estimates. | Anker Methodology Benchmarks are internationally comparable by design being based on the same principles everywhere and quality control on the application of the methodology. National ownership of the living wage estimate is achieved through considerable information gathering and discussions with stakeholders. |
| 2 | No mention of the importance of avoiding offering employers and others a range of living wage estimates for a location to choose from thereby potentially creating a race to the bottom and non-comparability. | Only one living wage estimate for a location or region is reported to eliminate the opportunity for employers and others to choose the living wage they prefer. |
| 3 | No mention of the need for and importance of independent researchers determining the living wage estimate, although this is implied by the principle that living wage methodologies should be evidence-based and by the separation of living wage estimation from the operationalization of living wages. | Anker Methodology Benchmarks are determined by independent researchers. Great care is taken to safeguard this independence and to insulate researchers from political pressures or economic considerations of ability of employers to pay a living wage. This ensures living wage estimates accurately reflect costs for a basic but decent standard of living for workers and their families.Independently determined living wage estimates are an important input for wage-setting processes, notably social dialogue, collective bargaining and minimum wage setting, that also take economic factors into consideration. |
The Anker Research Institute and the GLWC commends the International Labour Organization's recognition of the importance of living wages and its efforts to advance discussion and action towards the provision of an adequate living wage for all workers. Decent wages are essential in reducing poverty and inequality, as well as in ensuring a decent and dignified life and in advancing social justice for all workers globally. Read our full statement
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