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Living Wage


A living wage refers to the minimum income necessary for a worker to meet their basic needs, including food, housing, and healthcare, without requiring financial assistance. It is based on the cost of living in a specific location, and it may be higher than the statutory minimum wage. The goal of a living wage is to allow individuals to enjoy a decent standard of living and avoid poverty.


The phonetic pronunciation of “Living Wage” is: “ˈlɪvɪŋ weɪdʒ”

Key Takeaways

<ol><li>Living wage is the minimum income necessary for a worker to meet his or her basic needs, including housing, food, healthcare, and other essential needs, without relying on public assistance. It varies according to the cost of living in a specific location.</li><li>The living wage concept is often used to advocate for higher wages for low-paid workers, arguing that they should be able to afford a basic but decent standard of living from their earnings. It promotes social economic justice and decreases income inequality.</li><li>Not all companies and governments support the implementation of a living wage, oftentimes citing increased operational costs and potential job losses as reasons. However, proponents argue that higher wage can increase productivity, reduce employee turnover and stimulate economic growth as workers have more disposable income.</li></ol>


The term “Living Wage” is important in business and finance as it refers to the minimum income necessary for a worker to meet their basic needs, including housing, food, health care, and other essentials. It’s about providing not just minimum wage to survive, but a wage that maintains a decent quality of life. Employers who pay a living wage are often seen as socially responsible, and it can lead to improved employee productivity and job satisfaction. It also plays a significant role in mitigating income inequality and poverty in society, making it a crucial aspect of sustainable and ethical economic practices. The living wage concept fosters discussions about fair compensation and the value of work, impacting both the business world and labor market at large.


The purpose of a living wage is to establish a fair income standard that covers the cost of living in a specific area. Unlike minimum wage, which is a legally stipulated wage floor set by the government, the living wage represents an income level that allows a person or family to afford the essentials of modern life: housing, food, healthcare, education, utilities, transportation, and a certain amount of discretionary income. In essence, a living wage is what’s needed for a worker to cover their basic needs without public or private assistance.A living wage is used to address poverty and income inequality by providing a benchmark for fair pay. Its calculation is typically based on the local cost of living, and takes into account the varying costs across different regions. While it is not legally binding for private companies, many entities voluntarily commit to paying their employees a living wage to improve their quality of life and also enhance their corporate social responsibility profile. Consequently, living wage ordinances and agreements not only serve an economic purpose, but also pursue social justice by addressing wage disparities in the workforce.


1. Example 1 – Seattle, US: In 2014, Seattle’s city council passed legislation that would gradually increase the minimum wage to $15 per hour by 2021. This was driven by the cost of living in the city, which was rapidly increasing due to factors such as high housing costs and taxes. This move aimed to provide Seattle workers with a living wage, or a wage sufficient to cover their basic needs and maintain a safe, decent standard of living within the community.2. Example 2 – London, UK: Since 2005, the London Living Wage, calculated by the Living Wage Foundation, has been implemented by many employers. As of 2021, the London Living Wage is £11.05 per hour, which is more than the statutory minimum wage in the UK. This living wage takes into account the higher cost of living in London compared to the rest of the UK, and it ensures that workers have enough to live on.3. Example 3 – Ontario, Canada: In 2019, the Ontario Living Wage Network calculated the living wage for various communities across Ontario. For instance, in the city of Toronto, the living wage was calculated at C$22.08 per hour. This living wage accounts for the costs associated with living in Toronto, including housing, food, transportation, and childcare. It aims to ensure that workers earn a wage that meets their basic needs and allows them to participate fully in their community.

Frequently Asked Questions(FAQ)

What is a Living Wage?

A living wage is the minimum income necessary for a worker to meet their basic needs, including food, housing, and other essential needs like clothing and healthcare, without needing to rely on public assistance.

Is Living Wage and Minimum Wage the same thing?

No, they are not the same. The minimum wage is the legal minimum set by the government that employers must pay their employees. The living wage, however, is often higher than the minimum wage and is designed to reflect the actual costs of living in a specific area.

Who calculates the Living Wage?

Various non-governmental organizations, labor unions, and other communities calculate the living wage, often based on a regularly updated basket of goods and services needed for a basic standard of living.

Can the living wage differ from region to region?

Yes, the living wage can vary greatly from region to region due to differences in the cost of living. In general, the cost of living is higher in urban or metropolitan areas, so the living wage tends to be higher in these areas.

How does a living wage benefit employees?

A living wage allows employees to cover their basic needs without resorting to public assistance or working multiple jobs. This can lead to better health and wellbeing, improved job performance, and increased job satisfaction.

What are the implications for businesses choosing to pay the Living Wage?

Companies might experience higher labor costs when choosing to pay a living wage. However, they also tend to experience lower employee turnover, increased productivity, and potentially greater customer satisfaction due to the ethical considerations of paying a living wage.

How frequently is the Living Wage updated?

To keep up with inflation and cost-of-living adjustments, the living wage rates are typically updated once a year.

What is the difference between a living wage and a fair wage?

While a living wage covers basic needs, a fair wage captures these basics and also allows for discretionary income – the income left over after paying for all the basic necessities.

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