Richard Anker

Living Wages Around the World

This manual describes a new methodology to measure a decent but basic standard of living in different countries and how much workers need to earn to afford this, making it possible for researchers to estimate comparable living wages around the world and determine gaps between living wages and prevailing wages, even in countries with limited secondary data.

Take home pay required and taking statutory deductions into account

Up to this point, this manual has been concerned with the income that workers need to be able to afford a basic but decent life for themselves and their family. Thus, so far, this manual has been concerned with determining take home pay required. However, statutory deductions from pay (such as income taxes, social security taxes, and union fees) reduce take home pay and money available for daytoday expenses. This means that two living wage estimates are needed – net living wage, which is the take home pay/disposable income required for decency, and the gross living wage, which is the gross pay required to ensure sufficient net take home pay for decency. This is shown in Figure 14.1. The difference between net and gross living wages is statutory payroll deductions and possibly income taxes. Statutory deductions from pay are different from voluntary deductions. Voluntary deductions (such as for personal savings accounts, Christmas fund, or voluntary provident fund contribution) are similar in a sense to household expenditures. Statutory deductions are different, because they reduce disposable income available to workers to support a basic but decent life style without reducing expenses in any way. This chapter discusses how to take statutory deductions from pay into consideration to estimate a gross living wage.

Overview of the Anker living wage methodology

This manual describes how to estimate a living wage using the Anker methodology. There are many new aspects to this methodology. The current chapter provides a brief description of the methodology, and what is new and different about it compared with other common methodologies for developing countries. Table 2A.1 in Appendix 2.1 provides a summary of the primary and secondary data needed to estimate a living wage using this methodology. Some key features of the methodology that make it practical, realistic, and an improvement on other methodologies for developing countries include the following (see Anker, 2011 for a review of other living wage methodologies).