The Living Wage: Core principles and global perspectives About ACCA ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants. It offers business relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.

ACCA supports its 188,000 members and 480,000 students in 178 countries, helping them to develop successful careers in This report presents accounting and business, with the skills required by employers. ACCA works through a network of 100 offices and centres and current thinking around more than 7,110 Approved Employers worldwide, who provide high standards of employee learning and development. Through the world related to the its public interest remit, ACCA promotes appropriate regulation of accounting and conducts relevant research to ensure setting and application accountancy continues to grow in reputation and influence. of a Living Wage. Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. It believes that accountants bring value to economies in all stages of development and seek to develop capacity in the profession and encourage the adoption of global standards. ACCA’s core values are aligned to the needs of employers in all sectors and it ensures that, through its range of qualifications, it prepares accountants for business. ACCA seeks to open up the profession to people of all backgrounds and remove artificial barriers, innovating its qualifications and delivery to meet the diverse needs of trainee professionals and their employers. In June 2016 ACCA formed a strategic alliance with Chartered Accountants Australia and New Zealand (CA ANZ). The alliance represents the voice of 788,000 members and future professional accountants around the world, who share the commitment to uphold the highest ethical, professional and technical standards.

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About the Living Wage Foundation The Living Wage Foundation is the organisation at the heart of the UK’s independent movement of businesses, organisations and people that campaign for the simple idea that a hard day’s work deserves a fair day’s pay. Established in 2011, the Living Wage Foundation celebrates and recognises the leadership of responsible employers who choose to go further than the minimum wage by offering accreditation to employers that pay the real Living Wage by awarding the Living Wage Employer Mark. The real Living Wage rates are based on the cost of living and are independently calculated every year based on the best available evidence about living standards in London and the UK. The Living Wage rates are currently £8.45 per hour in the UK and £9.75 per hour in London. To become accredited all employers must pay all directly employed staff the independently-calculated Living Wage and have a plan in place for all contracted staff. There are nearly 3000 organisations signed up with the Living Wage Foundation as accredited Living Wage Employers and it has lifted the pay of at least 120,000 employees. Every year, the Living Wage Foundation announces the Living Wage rates in November during Living Wage Week, a UK-wide celebration of the Living Wage movement. It also provides advice and support to employers and service providers implementing the Living Wage rates. This includes best practice guides, case studies from leading employers, model procurement frameworks and access to specialist legal and HR advice. The Living Wage Foundation is an initiative of Citizens UK and it receives guidance and advice from the Living Wage Foundation Advisory Council.

© The Association of Chartered Certified Accountants March 2017 Contents

Foreword...... 4 by Helen Brand OBE, Chief executive, ACCA

Foreword...... 5 by Katherine Chapman, Director, Living Wage Foundation

Introduction...... 6

A reader’s guide...... 7

Living Wage principles...... 8

1. The differences between a Living Wage and Minimum Wage...... 9

2. The components of a Living Wage...... 11

3. Applying the Living Wage...... 13

4. Engaging stakeholders and defining their role...... 15

5. Measuring the impact to employers of a Living Wage...... 18

6. The risks and benefits of a Living Wage on the supply chain...... 21

7. Additional Living Wage key issues...... 24

Appendix...... 28

Acknowledgements...... 29 Foreword 4

In today’s world, corporate success and As a global organisation, ACCA is well brand values are increasingly dependent placed to encourage international on intangible assets. For some businesses, discussion on the Living Wage, bringing intellectual capital may underpin future together interested parties around the revenues. For most, their corporate world to share their views. Open discussion reputation is a vital asset – one that has is important, not least because this is a become particularly vulnerable in an era complex area. The Living Wage in any when bad news stories can spread around country needs to reflect the local society the world in seconds. and local expectations. Global brands may have limited ability to control wages further At the same time, interest in social equity down their supply chains. Employers, is growing. Ethical investors, consumers particularly smaller ones that may feel most and other stakeholders are becoming more vulnerable to rising costs, need to identify critical of organisations that break or even the benefits of implementing a Living Wage. bend the rules. Businesses are expected to pay their fair share of taxes, treat the ACCA is keen to play a part in encouraging environment with care and respect the debate. The general principles set out in rights and needs of their employees. this report stem from a global consultation The last includes paying a decent wage. process. They are designed to enable maximum support and to be used when ACCA considers the Living Wage to be policymakers, employers and other an important ethical and business issue. stakeholders are discussing how to That’s why, in the UK, we are accredited establish and set a Living Wage for their as a Living Wage employer. Established jurisdiction. They aim to provide a firm and developing economies are all affected foundation on which to build consensus by the issue. International businesses with about what constitutes a level of pay long supply chains are deeply embedded sufficient to enable a decent life and full in multiple economies, and the wages participation in society to support the they and their suppliers pay have a huge growth of stronger economies and impact on many lives. healthier societies.

Helen Brand OBE Chief executive ACCA Foreword 5

The concept of a ‘Living Wage’ - that differing contexts and types of economy. people should earn enough to maintain We hope that the principles developed a dignified standard of living – has gained here will provide a robust basis for increasing prominence around the world discussion on how to develop Living as a way to tackle the growing problem Wages around the world. of in-work poverty. This is one of two reports produced by To contribute to this debate, ACCA and ACCA and the Living Wage Foundation the Living Wage Foundation undertook to understand global perspectives on a major consultation exercise with the Living Wage. There is huge scope for participants from civil society, business further research to better understand the and governments around the world to economic and social impacts of the Living explore the concept of a Living Wage. Wage. For example, what are the views of investors towards companies that pay We are grateful to all roundtable a Living Wage to their employees and participants who gave up their time and throughout their supply chains? What is expressed their views so openly. The the impact of paying a Living Wage on support of major companies in organising local and global economies? How does the events around the world was the Living Wage affect different employees particularly valuable. This helped ensure in different contexts? that the views of, and challenges faced by employers were freely shared. We hope that these papers will stimulate debate and action and ultimately There are inevitably challenges in encourage more employers around developing consensus on what constitutes the world to embrace the Living Wage. a Living Wage and how it should be The more momentum can be generated, applied, but the results of the roundtable the more individuals and their families discussions show that many areas of around the world will be able to live common thinking do exist, despite decent and fulfilling lives.

Katherine Chapman Director Living Wage Foundation Introduction 6

The concept of a Living Wage is now In developing these principles, ACCA and The concept of a Living Wage established around the world. Campaign the Living Wage Foundation took account is now established around groups, governments and others are of some basic ‘ground rules’. For example, increasingly interested in its ability to the principles are formulated so as to be: the world. address in-work poverty and help lower • able to attract support in all countries, paid workers – wherever they may be – to cultures and economies, as far as is lead decent lives and participate fully in possible, and their communities. • reasonably practical in their application. Recognising not only this growing interest but also the many challenges involved in ACCEPTING LIMITATIONS developing common thinking around a Living Wage, ACCA and the Living Wage In considering these principles, it is Foundation came together to conduct a important to accept the limitations of the global piece of research. This resulted in Living Wage and what its adoption can the report Living Wage: A global overview potentially achieve. In particular, as came of initiatives and regulations, giving an through strongly during the roundtable overview of Living Wage developments events, a Living Wage can only tackle globally, and identifying legal frameworks in-work poverty: it is not a mechanism for that have evolved to support the Living addressing poverty among those out of Wage lobby. work, although their needs should be considered in the context of any impact This report presents a snapshot of current that a Living Wage may have on thinking around the world, and is based employment levels. A Living Wage is also on discussions during seven roundtable only one of the many requirements for events (in Brussels, Hong Kong, Kampala, helping workers lead decent lives: London, New York, Shanghai and uncertain working hours and ‘zero hours Johannesburg) held between February and contracts’ can also create financial and August 2015. Participants in the roundtables emotional instability. represented a broad spectrum of business and society, including employers, worker DEBATE ENCOURAGED representatives, academics, campaign As would be expected, alongside the many groups and other parties interested in the areas of agreement, a wide variety of Living Wage concept. They were posed opinions were also expressed by roundtable eight common questions, designed to participants. This report summarises these elicit their views on a range of issues common themes and differing viewpoints, related to the setting and application of aiming to give a flavour of the discussions a Living Wage around the world. around the world. ACCA and the Living Wage Foundation hope it will stimulate PRINCIPLES PROPOSED debate and the sharing of experiences, On the basis of the views expressed in these help raise awareness of the Living Wage discussions, and in the light of the themes concept, encourage its support among highlighted in Living Wage: A global society at large, and help employers build a overview of initiatives and regulations, this compelling business case for its application. report proposes a set of broad principles that can be used both globally and locally ACCA and the Living Wage Foundation when entering into multi-party discussions would like to thank all those who took on the Living Wage. They are consistent part in the roundtable discussions in Africa, with the recommendations outlined in the Asia, Europe and the US. ‘Action Plan on Living Wages’ resulting from the 2013 European Conference on Living Wages. A reader’s guide 7

This report begins by setting out the broad views expressed in response to the eight This report begins by setting out principles that can be used both globally questions posed at each event, such as the broad principles that can be and locally when entering into multi-party how the global principles might be applied discussions on the Living Wage. These on a regional or national basis and how to used both globally and locally principles were drafted in the light of views consider cultural factors. when entering into multi-party expressed around the world during the discussions on the Living Wage. roundtables organised by ACCA and the The roundtables were held under Chatham Living Wage Foundation. They represent House rules. Therefore, all quotes included the core, high-level output from this latest are unattributed. Many opinions were research project. expressed during the discussions, so the comments of individual participants do not In order to help readers understand the necessarily represent the views of all debates underpinning the principles, the participants in any country. They are report provides an overview of the included to give a sense of the range and roundtable discussions. It then summarises strength of opinions held. Living Wage principles 8

These broad principles are intended for In addition to the principles framed These broad principles are use both globally and locally when above, the following two aspects were designed to help develop entering into multi-party discussions on the also considered by the participants to be Living Wage. They are designed to help critical to the success of implementing a common approaches and develop common approaches, as far as is Living Wage. While not specifically support take-up of the Living possible, and support take-up of the Living principles, in that they apply to the Wage around the world. Wage around the world and throughout application of the Living Wage and relate global supply chains. to scope and transparency, they have been included below because they featured in • A Living Wage should be calculated by all the roundtable discussions. reference to the income an individual needs to earn in order to live a decent • The application of Living Wage Principles life (where basic standards of living are is a change-management process that will met) and to participate fully in society. take time and is generally undertaken in stages, working through different classes • The Living Wage for any country, of employees and involving the active location should be set by reference to engagement of employees and their local living standards and needs. trade unions and other representative • The Living Wage should be set in a bodies where possible. Employers should transparent way, independent of control take the opportunity, where possible, to or manipulation by government, use reasonable endeavours to encourage employers or other parties. the payment of a locally relevant Living Wage throughout their supply chain, • A Living Wage should be sufficient to recognising that their ability to do so pay for a locally agreed basket of will be affected by their supply chain goods, which is likely to include food, position and purchasing power. housing, utilities, transport, a degree of leisure and potentially education, health • Employers are encouraged to share insurance, childcare, servicing debt and their findings and experience with savings. A Living Wage is likely to others to increase the overall knowledge include support for family members as base about the outcomes of paying a defined in the local context. Living Wage. This could take the form of public reporting of the impacts on • A Living Wage should be paid to all their human capital and performance, employees (male and female) over a eg the impact on productivity, staff locally agreed minimum working age. retention and turnover, employee • A Living Wage should be paid satisfaction, employee motivation and voluntarily by employers. corporate reputation. 1. The differences between a 9 Living Wage and Minimum Wage

During 2015, in order to help develop their London, Johannesburg, Shanghai). There In order to help develop their Living Wage Principles, ACCA and the Living was some concern (eg in Brussels) that the Living Wage Principles, ACCA Wage Foundation held seven roundtables setting of a Living Wage should not around the world (in Brussels, Hong Kong, weaken workers’ ability to negotiate the and the Living Wage Foundation Kampala, London, New York, Shanghai and wages they believe they need. In Brussels held seven roundtables around Johannesburg). These brought together there was some discussion of the corporate the world (in Brussels, Hong employers, academics, campaign groups, social responsibility (CSR) aspect of the Kong, Kampala, London, think tanks, employee representatives and Living Wage, in that some employers may New York, Shanghai and other interested parties to share their aim to pay a Living Wage so that they can Johannesburg). thoughts on the Living Wage concept. make a positive impact on the communities in which they operate. An NMW is set by The questions posed to these participants statute, whereas a Living Wage is paid generated lively debates, with many areas voluntarily by employers. Employers should of agreement but also many differing be able to ‘opt out’ of paying an NMW by views, often related to local economic and paying a higher Living Wage. social conditions. The key themes are summarised here. ‘A crucial question is “should we Q1. What is your understanding of the allow employers to pay a wage difference between a Living Wage and a on which you cannot live?” The national minimum wage? answer... is no’. Roundtable participants identified a number Brussels participant of differences between a Living Wage and a national minimum wage (NMW). ‘The national minimum wage is an An NMW is generally thought to be set absolute wage floor – statutorily by government (often on the advice of and legally binding – an absolute social partners or other data-based minimum based on what is needed sources), whereas a Living Wage is based to survive...The minimum wage on the cost of living and might be deals with need, whereas the established in other ways: by focus groups, Living Wage is negotiated and it is independent commissions or through linked to productivity and to a good negotiation between workers and lifestyle beyond basic needs – to employers. Participants in most enable full participation in society’. roundtables recognised the need for Johannesburg participant NMWs and Living Wages to recognise local, national (or regional) conditions. It was noted that in Canada the minimum wage is linked to worker productivity, and ‘The Living Wage should be so tied to growth as opposed to a calculated according to needs, desirable living standard, the latter being not rights, but these are different the goal of the Living Wage. A New York around the world’. roundtable participant asked: ‘Do we London participant establish a wage floor designed to deliver a certain standard of living or one which reflects the economy and the distribution An NMW is considered to be set at of what is being achieved?’. relatively low levels – a basic ‘floor’ (eg as in Brussels, New York, Johannesburg) that Set at the same level? provides a safety net for employees. This is Some participants in some locations (eg in partly because governments do not want Brussels, Hong Kong, Johannesburg) to affect labour markets or incur opposition thought the NMW and a Living Wage from employers. A Living Wage is generally should be the same, and recent political expected to be higher (but not always), movement in the US towards a $15 NMW reflecting the higher aspirations associated was seen as a convergence between an with it. A Living Wage is associated with NMW and a Living Wage. As one the concept of dignity, enabling individuals participant in Johannesburg said: ‘The to become more self-sufficient and play a minimum wage should be the Living Wage full part in society as opposed to merely and if we don’t pay this, we are denying subsisting (the view in eg New York, people the opportunity to live with dignity’. The Living Wage: 1. The differences between a Living Wage and Minimum Wage 10 Core principles and global perspectives

In Shanghai there was a view that the a challenge for the average person to ‘The minimum wage Living Wage should not be higher than the understand [what a Living Wage should be]’. should support you to NMW, certainly as a starting wage, but that survive, the Living Wage the Living Wage should follow the Accepting limitations should be higher and give changing needs of the worker through life. The limitations of the Living Wage’s you more opportunity to potential to address poverty, even when paid to all workers, were also highlighted. support your development ‘A minimum wage should be the In Johannesburg, the fact that a Living and enjoy your life’. same as the Living Wage, as a Wage cannot address poverty among Shanghai participant decent wage level should not only those out of work (a particular issue in cover the cost of living but also economies with high unemployment) was family support services’. forcefully made: ‘One must be very careful Hong Kong participant not to see the Living Wage as principally a poverty fighting mechanism, especially in a society where up to a third are unemployed and the poorest have no earners... We can Potential barriers Several roundtables, when discussing the address the working poor, but these are at differences between an NMW and a Living a higher level than the destitute’. Wage, queried whether smaller businesses (SMEs) would always be able to pay a Living ‘In Uganda, the minimum wage is Wage (this was raised, eg in Brussels, Hong totally unrelated to a Living Wage Kong). There was also awareness of other in government and elsewhere. potential barriers to the introduction of a Apart from well-paid executives, Living Wage (at least a mandatory one), no one gets enough money to meet including fears over distorting competition their needs’. or driving employers to lower-wage locations (a view expressed in Brussels and Kampala participant Shanghai). A Living Wage was also seen (eg in Brussels, New York) as reflecting the In New York, it was noted that childcare higher living costs of cities, and could be costs could easily wipe out the income of too high for farmers to pay (Johannesburg). ‘the second earner’ in a family, and For these and other reasons, gaining part-time workers and those with agreement on what a Living Wage should ‘precarious work hours’ would still not be was seen as challenging. One necessarily earn enough to live a decent participant in Shanghai suggested that ‘the life. In Kampala, one participant average citizen will assume that a minimum emphasised that, ‘the formal employment wage is what is required to survive’ whereas sector is very small – the way most people ‘we all have different ideas of ‘living’ so it’s earn a living is not related to wage labour’. 2. The components of a Living Wage 11

Q2. Some stakeholders describe the employees to be able to ‘save a little for a ‘The Living Wage is to do Living Wage as providing a ‘basic but rainy day, otherwise you live from hand to with enough food, shelter, decent’ standard of living. What is your mouth’. The need for workers to be able to clothing, basic needs, with understanding of the components of a pay for some entertainment was also widely Living Wage? dignity, and if an individual accepted. They needed to have some ‘discretionary pay’ (Kampala participant). manages their budget they Some broad components of a Living Wage are universally accepted. These include can break free from the basic requirements for living, such as food, Specific details agreed locally cycle of poverty’. accommodation, clothing, heating and The specific nature or content of each broad Johannesburg participant power (and general utilities), transport component, such as housing, needs to be (particularly given that the poor often live determined by reference to local condition on the edge of cities or in remote areas) and needs. As was noted in the New York and medicine. roundtable, ‘Housing in the Dominican Republic has to withstand hurricanes, and so Some participants (eg New York) discussed the need is very different to areas not facing the importance of ‘technical necessities’ the same challenges’. In Kampala, one such as cell phones or internet access – participant accepted the idea that agreeing seen as ‘essential for employment’, but on a basket of goods was a ‘scientific’ which are sometimes left out of Living approach, but thought ‘it has to be tailored Wage calculations. for local conditions because a market in Dokolo is different to one in Kampala’. The Other possible components identified problem of vastly differing food prices include insurance (Kampala) and child according to season was also noted. care (New York, London). As one London participant noted, ‘If a wage takes unpaid Many roundtables expressed the idea that care into account, then this must be different employee groups would need a reflected in the Living Wage.’ different Living Wage. In Johannesburg, one participant commented, ‘The basket of goods for a farm worker is very different ‘The minimum standard of living from someone living in a town, so there is a is not just based on food and debate about what is needed for nutrition.’ shelter, but also includes opportunities to interact with How should employer-provided benefits society; there is lots of consensus be addressed? on what this should include, such It was thought that employer-provided as modest forms of leisure but also benefits such as health insurance, food, factors such as money for savings, staff discounts for retail workers, should be servicing debts, etc.’ identified and taken into account when establishing the Living Wage. However, London participant although some employers (eg mining companies or farms) may provide accommodation and food, this kind of There was some discussion about the provision could be a ‘trap’ for workers. One importance of education for helping poor participant in New York said, ‘Rather than families improve their prospects. Education giving the worker the money to purchase may be provided by the state or by these things for themselves, it keeps them employers (eg for farm workers’ children) in a job they may not want...so we need to but this may not be high quality. As one look at the Living Wage in a holistic way.’ participant in Kampala said, ‘Education is free in theory in Uganda but public schools are so Employer responsibility poor that parents want to put their kids into The Johannesburg discussion highlighted private schools. Therefore, education costs the fact that agricultural workers often had are not [in theory] needed in a Living Wage to travel long distances to access good basket, but in reality they should be there.’ quality health care, with mobile clinics Similarly, in Johannesburg it was noted that often being poorly equipped, and a ‘farm school’ might be available, but ‘the responsibility for provision of the service quality delivered is far below that needed unclear. Here, as in other discussions, there to break the cycle of poverty’. was some concern that employers should not have to bear the burden of making up The need for a Living Wage to enable for failures in service provision that should employees to save was also discussed. In be the responsibility of the state. Kampala it was thought important for The Living Wage: 2. The components of a Living Wage 12 Core principles and global perspectives

On the other hand, employers should not ‘In China, very few migrant be given an incentive to pay low wages: ‘In Canada we have a universal workers over 50 have ‘Responsibility to provide the Living Wage methodology for the Living Wage, retirement income so lies with the employer and there should be which is about [not only] meeting depend entirely on their no incentive for the employer to provide basic needs such as rent, food and utilities, but also transport and children. Also, many of lower wages because they know the state will top them up to a decent level. The Living childcare. And it goes beyond that to the children left behind Wage calculation should include no incentive enabling community participation, by migrant workers need to shift responsibility’ (Brussels participant). allowing children to take part in a lot of support and so the sports, for example, or a modest “once burden for a Chinese worker Average wage, average family? a month” family night out, to allow opportunity for civic participation is much heavier than in It was often mentioned that the Living Wage would need to be calculated as some sort and inclusion. Our Living Wage is very other countries’. of average to meet the needs of a typical much about social engagement’. Shanghai participant family. In London it was stressed that ‘what New York participant you cannot do is have a Living Wage that varies according to everyone’s individual circumstances – it doesn’t work – it has to One complexity when setting an ‘average’ have a huge level of simplification’. What Living Wage stems from the different access this will be will vary by region or country. It that different members of society may have to might be a family of four including two free or subsidised services. The roundtable in children, or be designed to support more Hong Kong highlighted that accommodation children as well as elderly parents or even was the most significant cost of living and additional extended family members. that, ‘People’s eligibility for housing is not Migrant workers, for example, are also necessarily based on need but on family supporting many family members in their size; the Living Wage for a single person home country. There was some questioning has to cover private market costs, unlike about how a Living Wage should take someone with a family whose Living Wage account of this (eg New York, Shanghai). is lower as they can access public housing.’ One participant in Shanghai noted, ‘Many migrant workers live in dormitories with Wide consensus required food provided so you have to think perhaps Whatever the specific components of the not about immediate spending, but about Living Wage, the need for society to support saving for life goals such as looking after its basis was highlighted in the London parents, schooling, health care costs’. roundtable: ‘It should be something that the general population or a particular society can agree on and has a wider consensus.’ 3. Applying the Living Wage 13

Q3. To whom should a Living Wage for lower wages as they often have fewer ‘All the workers in a apply? financial commitments.’ It was also thought that some young office workers would lose business should benefit, not In many roundtables (eg London, Brussels, their jobs if their employers had to pay just direct employees – it Hong Kong, Shanghai, New York) there was a them a Living Wage. should extend to outsourced tendency to say that the Living Wage should employees. The Living Wage apply to everyone in work – though a range of challenges and issues were identified. In London it was noted that the Living should be a standard set by Wage in the UK was originally devised for those over 21, but now applies from the society and good employers In Hong Kong, while there was a desire for age of 18 (although the recently will pay at that level’. the Living Wage to apply to all workers, it announced new UK ‘National Living Wage’ Hong Kong participant was noted that there are currently different will be paid only to the over 25s). It was minimum wage regimes for different noted that employers do not necessarily workers (eg for foreign domestic workers). appreciate the complexity of varying age There was also some concern that smaller thresholds, and it has become less businesses might struggle to pay it. contentious for younger people to receive the same pay as those over 21. ‘SMEs will not support the Living In New York, too, challenges were raised Wage as they do not have the about younger workers or ‘beginner financial resources needed’. workers’ – who can legally be paid a Hong Kong participant lower rate. Students working in the summer were often paid this rate ‘which is unfortunate, as those students need In Brussels there was general agreement the money’. The problem of unpaid that the Living Wage should apply to all interns was also highlighted: ‘It’s widely employees in all sectors. The union understood that student interns come representatives emphasised their aim of from families able to afford to put them ‘bringing up wages for everyone’, but had in places where they won’t be paid, which some concerns that employers might use has economic consequences for those the Living Wage to their own advantage, families who can’t afford it’. because ‘using the Living Wage for competitive advantage doesn’t help other employees working for other employers, ‘We’ve often talked about the especially as in a supply chain the direct Living Wage being for everyone employer is not involved’. It was also in the workforce, but one of the argued that ‘wages should not be used as challenges is about how students competition (through gaining credit for are treated under a Living Wage CSR) but should be the same cost for all, policy and if there is a break point, and competition should be on skills and for students above or under 18 productivity’. During the discussion it was and these discussions are still on also noted that employers in sectors with going. For the most part, our values higher productivity were more likely to be are to move all workers up to the able to pay a Living Wage. Living Wage in order to end in-work poverty; the Living Wage is one of In Shanghai the need for the Living Wage the tools for this but not the only to apply to ‘low paid and easily replaced one, and we look at precarious work workers’ was emphasised. There was also hours, or extended health benefits, discussion of the extent to which retailers and the many components of the should seek to spread the Living Wage precarious work challenge’. down their supply chain – an issue discussed in more detail in Question 6 New York participant (page 24).

In London there was some debate about Younger workers The point was made that some younger whether other factors might affect eligibility. workers often resorted to low-paid work For example, a single person with no that would not be available if they had to dependants might be able to survive on the be paid a Living Wage: ‘It’s the same in NMW, whereas an employee supporting a China, where the young are happy to work family would require a Living Wage. The Living Wage: 3. Applying the Living Wage 14 Core principles and global perspectives

Defining the family The need for a Living Wage to support ‘Business has the In Kampala, roundtable participants extended family members was also responsibility to support focused their discussion mainly on the size discussed in the Johannesburg roundtable, workers of an average of the family that the Living Wage should where it was noted that, because of high family size and at an be able to support. Overall there was most unemployment, individuals in work are average level – wages support for taking account of the ‘nuclear often supporting many family members. family’, though some debate about how Nonetheless, the potential power of the cannot be set according many children that would include. It was Living Wage to help the working poor was to where you live or your noted, however, that individuals often acknowledged: ‘People have had jobs in family size, so we need to support extended family members. the mining industry for over 100 years and provide averages’. Additional complexity arose from the their families are still in extreme poverty... Hong Kong participant impact of rural migration ‘where a wage The Living Wage is not the only tool we earner travels but provides for a family in can use, but we should use it to address an area where living costs are very different extreme inequality – not creating more to urban costs’. Overall it was accepted jobs but a society in which everything is that some average family group would shared more equally’. need to be agreed and used as the basis for calculating a Living Wage. ‘In South Africa, unemployment and inequalities are high and therefore ‘The Living Wage should apply to a worker is supporting their own individuals and a nuclear family or and extended family, and so when it won’t have a limit’. we say we must consider the family, Kampala participant we must consider the number of dependants based on unemployment rates, inequalities and mode of production in a particular country’. Johannesburg participant 4. Engaging stakeholders 15 and defining their role

Q4. Which stakeholders should be In Shanghai, in order to reflect the ‘basic ‘Living Wage ideas are involved in setting the level of a Living tension between capital and labour’, it was technically determined, Wage and what should be their role? argued that stakeholders should represent but also socially determined In many roundtables (eg Brussels, Kampala, both these elements: ‘Discussions should so it’s very important to have Shanghai, London) participants argued that include some workers’ representatives, many stakeholders need to be involved in plus capital, and government should the buy-in of all facilitate’. Challenges identified in China, sectors of society’. setting a Living Wage. One view in Brussels was that, ‘All stakeholders, social partners, however, were the lack of unions and the Johannesburg participant employer and employee representatives weakness of business associations. There should be involved.’ was also a belief that ‘effective and functioning worker representative In Kampala, as in Brussels, there was committees could talk with management support for a multi-stakeholder approach and if they can agree on a Living Wage to setting the Living Wage. For example, it then it will be acceptable by an enterprise, was thought there should be a tripartite which is easier than being set by arrangement including workers government, as the Living Wage will affect (represented by unions), employers and different enterprises differently’. government: ‘So employers and workers can agree on an issue and persuade the government to implement. No one will feel ‘Lots of groups should be cut out of cheated and all will come out with a result’. the process (employers should be Some participants suggested that more minimally involved) and instead stakeholders should be involved: ‘Tripartite it should be the employees, union arrangements bring together people with representatives, academics, those similar interests – we need additional who can figure out what it takes to players to moderate different interests and live in Hong Kong, and then other cover social elements, such as civil society, groups can come in and figure out human rights’. It was also suggested that how to pay it’. women’s groups, disability and youth Hong Kong participant groups should also be represented. Getting the media involved was also thought helpful for bringing the issue to the public’s The possibility of adding shareholders to attention. One contrasting view expressed the list of stakeholders who could concern that if too many people were participate in Living Wage discussions was involved, this could be counter-productive, raised in the New York roundtable: ‘There bringing ‘bad people into the discussion is the question of where the money is who will not contribute to the negotiations’. coming from to pay the Living Wage – out of profit margins, salaries or do companies change their operating structure? Also, ‘There is no trust in government, shareholder expectations have to be employers or trade unions – we addressed – it’s all very well to say “we’ll need to build a Living Wage cut profit margins”, but it’s more complex Foundation that does some quality when discussing with shareholders and so control, as there is very little trust perhaps they should be added to the among different parties, and have stakeholder list. In all aspects of discussions in a different setting’. sustainability, shareholders are often seen Kampala participant as a barrier as they see change as a cost’. The Living Wage: 4. Engaging stakeholders and defining their role 16 Core principles and global perspectives

In London it was suggested that the migrant workers, the unemployed and ‘We all struggle to balance stakeholders to be involved in setting the women should be included in any the accuracy of a calculation Living Wage would be affected by whether stakeholder group involved in setting a about what people really its status was mandatory or voluntary. In a Living Wage. need with the political voluntary system, there was support for reality of what we can get. multi-stakeholder involvement – ‘the In the Kampala roundtable, there were workers, civil society among whom the some reservations about the relevance of Lots of times, people have workers live, and employers, as they have academic input for Uganda. One looked at the figure and to pay’. The unions have a seat at the table participant said: ‘Academics will make it said ‘that’s not enough’, because they negotiate pay for 6 million more theoretical than practical – yes, but we have to have a people, although they do not speak for economists can provide advice but we figure we can build a broad the majority of UK employees. The role must also use representative groups that of third-party labour providers was also can speak for different communities.’ consensus around’. highlighted in the London roundtable New York participant discussion, with third-party worker In the Hong Kong roundtable, it was provision causing the biggest concern in suggested that the Hong Kong Minimum relation to the NMW and Living Wage: Wage Commission, which contains ‘We should work on how to bring these representatives from the business sector, providers back into the discussion’. academia and the government, was not sufficiently independent from government. The role of independent think tanks, It was important to hear ‘more from the commissions and academics worker’ about what they needed to live on. In Brussels, involving an ‘independent In addition, employer participation was commission’ in the process of setting the said to be vital because ‘they are the ones Living Wage was thought helpful as this eventually writing the cheques’. could ‘include academics and use expert or consensus-based mechanisms to arrive at baskets of commodities’. The value of ‘For the stakeholders, there involving think tanks to access technical are different types of critical information was similarly identified in discussions. The first is about the Johannesburg. One participant ethical and moral part of the Living commented, ‘When calculating this [Living Wage and that is for business to talk Wage], perhaps it’s not workers, employers about. Grassroots can contribute or government that should be involved, but will not have an impact. When but a think tank to look at, say, housing a Living Wage is established, then needs using the UN Habitat rules, or using the poor are the experts and should the WHO Food Bank, and these technical contribute towards setting the rate. issues shouldn’t be bargained around the Thirdly, a consensus is required table as you’ll never get an agreement. But between business, government and say you had a trusted group, a university trade unions to push the Living body not tied to another body – employers Wage into the minimum wage, and could ask it to work it out.’ at this stage different organisations should also be involved’. Another participant in Johannesburg Hong Kong participant disagreed: ‘I take the complete opposite view regarding mistrust and different interests. You risk everything falling apart if Worker involvement workers, poverty groups and employers are In New York, the importance of the workers not involved in the process. I would in setting the Living Wage was advocate for an independent group to start emphasised: ‘Workers know best what they the process so it is not completely a need and the trade-offs they are willing to free-for-all, or coming in strategically to make. The Living Wage is all about avoid stakeholders entering the discussion empowering the workers with the in bad faith – employers having an interest confidence and power to set the wages in specifying lower wages, for example. they need.’ It was also thought important There must be some sort of open and to involve other stakeholders – such as transparent technical process to challenge not-for profit organisations, governments arbitrariness...we must avoid suspicion and companies at factory level and at among stakeholders...where any group international brand level – not necessarily excluded points fingers at the other in setting the Living Wage but to raise their participants.’ It was also suggested that understanding of it in order to enable The Living Wage: 4. Engaging stakeholders and defining their role 17 Core principles and global perspectives

Living Wage implementation. It was also The role of employers ‘If it [the Living Wage] is noted that although wage boards were no The difference between what workers need citizen-led and voluntary longer generally used in the US, they do and what employers can pay was with a comparison with the exist in other countries and can be a useful highlighted in London: ‘If we are talking minimum wage and what way of bringing employers, trade unions, about setting the Living Wage by the market can stand, then labour representatives, academics and understanding what workers need to live citizens together to set wages by local on, this is separate to whether employers the Living Wage should be industry. They could also ‘build the can pay. Employers are not here for the based on rigorous research institutional [as opposed to the ad hoc] discussion on what it [the Living Wage] is, that determines what aspect of the conversation’ which is but involved in the discussion regarding people in a society need’. important because ‘if discussions are not how it can be paid.’ The need for a London participant formal and transparent, then it comes down practical ‘benchmark with a relationship to to who has most power at any given time’. living standards but which can’t be negotiated each year’ was also highlighted. Collective bargaining tension The potential tension between setting One complexity around involving wages through collective bargaining and employers in Living Wage debates was some form of independent model (possibly highlighted in the New York roundtable. basket-based approach) was highlighted in Sustainability directors would be likely to Brussels. National models for industrial have a different view from procurement relations were thought relevant. For directors, for example, who would ask how example, the Brussels roundtable heard the Living Wage would be paid for. So it is how the Nordic regions’ strong sectoral important not to ‘understate the collective bargaining has resulted in higher complexity of the stakeholder group in a wage levels: ‘It would be very difficult to given corporation or the breadth of introduce another system not based on viewpoints represented’. collective bargaining into these countries. The basket model is very complex and Consumer support required cannot be implemented without expert and The importance of consumer support scientific help and you would then need a for the Living Wage came through in a tripartite commission with trade unions, number of roundtables. For example, employers and independent researchers.’ one participant in New York said: ‘The Civil society would also need to be involved consumer buying a product can decide not but the roundtable participants also heard to buy if the price goes up, so you can set a that, ‘in the UK, trade unions have found it great wage, but not if a product is no longer very useful to have something independent bought. So everyone should be involved and scientific to use as a reference in their and willing to pay for the Living Wage.’ own collective bargaining approach, and so it’s a partnership approach’.

GAINING CONSENSUS IN THE UK The UK approach to setting the London and UK Living Wage involves multiple stakeholders, aiming to build consensus for the wage calculation.

The calculation for setting the London and UK Living Wage rates is built on research with members of the public to determine a basket of goods that represents a decent and dignified standard of living. The hourly Living Wage rates are then calculated by taking a weighted average of the earnings required (accounting for tax and benefits) for a range of family types (with and without children) working full-time to reach a level of income that provides that decent standard of living.

The process is overseen by an independent Living Wage Commission drawn from leading Living Wage accredited employers, trade unions, academia, anti-poverty experts and civil society leaders.

The Commission provides a transparent decision-making forum to resolve how to incorporate policy changes and new sources of data into the calculation and advise on how to manage extreme year-to-year variations from general rises in living costs. 5. Measuring the impact to 18 employers of a Living Wage

Q5. How do employers measure the training. It was also suggested that job ‘Labour is always seen as a impact of the introduction of a Living satisfaction could improve, leading to cost, but should it be seen Wage on their human capital? And how increased production output. Nonetheless, more as capital and linked would you recommend it should be another participant cautioned that measured? to investment...should it increased productivity following salary increases could be short-lived (three be seen more as capital to Advocates of the Living Wage argue that employers will benefit from increased months) and that employee loyalty improve your staff?’ productivity as a result of various factors: depended on more than pay – ‘most Johannesburg participant increased staff retention, decreased companies pay way above what would be training and recruitment cost, increased considered a Living Wage but people still staff motivation and productivity. leave, so there are other factors at play’. Roundtable participants considered this suggestion and how employers currently – Employee turnover and satisfaction or could in future – measure the impact of Employee turnover is generally a key Living Wage adoption. measure used to assess the impact of the Living Wage, as highlighted in the London Roundtable participants in Kampala and New York discussions. One participant generally did recognise some merit in the in New York asked: ‘How long do workers productivity argument. One commented: stay when their wages go up and how ‘A Living Wage would mean less need to much money does that save employers change [my] job if I was getting similar because turnover goes down? This is a wages, and as an employee I might make a concrete measure you can put a dollar better contribution and concentrate better. value against by adding up training and We spend a lot of time trying to work out recruitment costs and so on. This is a how much more we could earn elsewhere’. standard way of measuring impact’. Another participant thought that paying a Higher wages can also support improved Living Wage would help to attract employee morale as well as skills – and the competent employees, who would be resulting increased productivity has been retained more easily and so employers found to ‘offset costs of having fewer and would benefit from their investment in better-paid employees’. The Living Wage: 5. Measuring the impact to employers of a Living Wage 19 Core principles and global perspectives

Not all employers are planning to look for understand this? Why don’t I experiment ‘Even if in South Africa and measure productivity gains specifically and try this? Employers are the best people productivity is not the following from the introduction of a Living to judge this... You won’t get far by saying primary motivating force, Wage. In the Shanghai roundtable, one the Living Wage can generate productivity we still need to think about employer expected to focus on ‘grievances, if employers haven’t recognised this...The efficiency and productivity; turnover, etc. to see how loyalty increases’. Living Wage is more of a moral and reputational persuasion issue – making it and in South Africa we In the Hong Kong roundtable, staff more acceptable to consumers who might need to look at transport satisfaction and turnover rates were seen be happy to pay a premium...Perhaps in and health as these are the as the best measures for establishing Living London, in a wealthier society, consumers biggest barriers to greater Wage benefits. Nonetheless, one may respond, but in South Africa the efficiency of the lower participant suggested that employee premium for paying a Living Wage is surveys, ‘are always biased as employees smaller’. Another Johannesburg participant skilled and poor’. are always unhappy with their own pay’. was also ‘not sure if a Living Wage will Johannesburg participant Another recognised that other employment increase business in an economy still benefits, such as pension contributions, focused on the cheapest product and have an impact on staff retention. where people are commoditised’.

Reputational benefits Holistic assessment needed In the London discussion, reputational and One challenge in measuring impacts, as corporate social responsibility (CSR) identified in Shanghai, was that employers benefits were cited as persuasive factors might make adjustments in other areas to internally when seeking to win support for compensate for paying the Living Wage – the Living Wage from Pay & Rewards (P&R) these need to be considered too: ‘With teams: ‘First discussions were met with a typical labour costs around 30%, if you real push-back from P&R, which felt [it] force someone’s hand and say they have should set pay and not be influenced by to increase labour costs then they’ll make external inputs. But as the Living Wage has changes elsewhere to maintain become linked to human rights, CSR, productivity – by improvements, or reputation and corporate responsibility, reducing benefits, or looking at people implementation is a ‘no brainer’.’ not affected by the Living Wage (cutting management) to maintain margins... The benefit of avoiding negative impacts Human capital must come at the top not on the business from paying low wages the bottom, from the outset, but mindset was also noted in the New York roundtable. change is the biggest challenge in China’.

In Hong Kong the ‘need to measure all ‘The other side [from the productivity impacts fully’ was also raised, because of argument] is to look at the possible the potential impact on overall reputational damage for public- employment levels – employers may need facing companies who develop a to reduce headcounts in order to pay poor reputation for paying terribly higher wages. Concern that the Living and it’s something they should try Wage might result in unanticipated to capture, although difficult’. injustice was also expressed in New York participant Johannesburg, particularly when considering the mining sector.

The London roundtable also noted the risk The social justice case In Johannesburg, the discussion of knock-on effects when contractors bid highlighted the importance of the social for fixed-price contracts with both the justice argument, and the need to end the private sector and public bodies. The exploitation of low-paid workers. There was successful supplier ‘then has to make the also some scepticism about the numbers work by squeezing the workforce’ productivity business case: ‘If we raised the in different ways when Living Wage rates Living Wage and workers were more are changed. ‘The client feels good, the productive, it’s a win-win situation, the best contractor takes the pain and becomes the of all worlds, and if I were an employer I bogey man and not all workers benefit would be foolish not to raise the income of from the Living Wage, and can even lose my workers as I’m interested in my bottom extra income, bonus hours, etc, and line. But why, as a smart employer, don’t I therefore don’t benefit.’ The Living Wage: 5. Measuring the impact to employers of a Living Wage 20 Core principles and global perspectives

In a number of roundtables, including Research to support the business case ‘Surveys of consumers London, the fact that many businesses Being able to demonstrate positive asking them how much have large numbers of outsourced staff impacts on business from paying the Living more they would pay for effectively working for them was noted as a Wage could encourage more employers to a product if it abided by challenge when measuring Living Wage pay it. As was noted in the Brussels some standard are really impacts. One London participant asked: roundtable, little research has been done ‘What kind of indicators can we create so far on the impact of the Living Wage on helpful for these types around those not technically employed by human capital. In fact, a study by Professor of campaigns’. the employer?’ When looking at the supply Wills of Queen Mary’s University has found New York participant chain, one London participant agreed it a positive impact on the psychological was difficult to measure human capital, but well-being of Living Wage workers. that anecdotal reporting could provide Separate research into the impact of the useful insights. NMW for employers also found positive results: they found it easier to recruit skilled Macro impacts workers, workers were more motivated and As discussed in New York, there is growing productivity increased. interest in trying to assess the ‘ripple effect’ of paying higher wages, as those workers In the Hong Kong discussion it was become able to spend more money on thought that, ‘employers who can afford goods and services. Obtaining this kind of more’ might pay the Living Wage first, ‘and macro-economic measure is ‘challenging if they can show paying a decent wage can but important’. A somewhat different increase productivity and improve brand ripple effect was identified in the Hong reputation, then SMEs will join in, followed Kong discussion, where it was thought that by micro-enterprises’. The need to capture paying a Living Wage in Hong Kong would anecdotal evidence, as well as financial put up prices globally – ‘are UK customers evidence, to help build employer support willing to pay more?’ for the Living Wage was highlighted in the London discussion. The value of research into consumer opinions in order to strengthen the business case was also made in New York, ‘Anecdotal reporting can be much where one participant commented: more powerful than employee ‘Surveys of consumers asking them how surveys, which can’t link employee much more they would pay for a product feelings and retention to Living if it abided by some standard are really Wage issues’. helpful for these types of campaigns.’ London participant 6. The risks and benefits of a 21 Living Wage on the supply chain

Q6. The Living Wage has a particular subcontracting and sub-subcontracting are ‘Our impact becomes impact on supply chain management. the most challenging, from down the street smaller and smaller down What, in your experience, are the risks to internationally.’ Even so, it was thought the supply chain until we and benefits derived from introducing that all workers could still benefit. this aspect of supplier management? have only a 5% share of the supplier’s contracts and so Roundtable discussions (eg in New York) highlighted the fact that the further down ‘If a company only takes 20% of have no power or influence’. the supply chain they go, the less influence the output of a factory, it can pay a Shanghai participant a company has over the payment of a Living Wage equivalent which will Living Wage: ‘It comes back to the issue of not get every worker to the Living how much leverage you have within a given Wage but will raise the bar, and supply chain’. Even some of the world’s pays into a pool which raises wages. largest purchasers might still only buy a So steps can be made – it can be relatively small amount of total production. an excuse to say ‘I don’t have the buying power’. In the Johannesburg roundtable, one retail New York participant participant explained how the business had changed its purchasing approach, buying bananas directly from farms rather than Vertical integration intermediary suppliers. This had enabled it As the New York discussion highlighted, to gain a better understanding of the costs one solution to the influence challenge is of production, including the impact of to go for a vertical integration – a paying a Living Wage. completely different operating model: ‘In agriculture it goes from dealing with an In Shanghai the impact that could be intermediary to taking ownership of farms, achieved through consolidation was noted, etc. in order to improve living standards. with Nike being used as an example of a This is a totally different way of working and company that had managed to achieve means dealing with communities and may substantial influence over its supply chain. require a skill set which does not exist in the corporation, so is a fairly radical shift.’

‘They have consolidated into four Legal and voluntary tensions suppliers which bridge out to In the Hong Kong discussion, participants other countries; these are the only noted the difficulty of persuading suppliers factories that will ever make their to pay wages above legal requirements – products and Nike can control the ‘when I push beyond this my leverage factories because they have leverage’. seeps away’. It was also thought that some Shanghai participant companies did not want to pay above the minimum wage because this ‘can cause trouble with the government’. The fallout from the global financial crisis has affected big brands’ purchasing power, The Shanghai roundtable also highlighted as was noted in Hong Kong: ‘The the mobility of smaller suppliers. If they assumption in the NGO community is that were unwilling to pay higher wages and companies have the power over suppliers, this led to a loss of workers, they would but as many Chinese production expect to relocate their factories to areas companies disappeared in the global crisis where labour was abundant, ‘then they hire of 2008, the capacity or demand equation local villagers, who may not ask for more has reversed’. In addition, there are the than other workers’. ‘cost challenges’ (as noted in New York) of trying to get all suppliers in the chain to Coordinated action introduce Living Wages at once. The New York roundtable noted that multilateral action was more likely to have The interesting question was also raised in an impact than unilateral action: New York of what happens in situations ‘Companies acting alone incur costs which where a supplier is required by one make them uncompetitive, so how can you customer to pay a Living Wage, but not by organise? So it becomes a pre-competitive others: ‘If you only order 10% of a factory’s issue with everyone coming together to garments, should only 10% of the workers share the responsibility.’ Such joint action get the Living Wage? These issues of could help to ‘move the market’. The Living Wage: 6. The risks and benefits of a Living Wage on the supply chain 22 Core principles and global perspectives

In Brussels the limitations of a ‘company- In Hong Kong one participant commented, ‘For 20 years in Hong Kong down model’ in affecting wages through ‘The Living Wage in the supply chain we have been talking about the supply chain were also highlighted: should be a global issue, and all members the Living Wage in the ‘Supply chains are not static, suppliers of the supply chain should agree to the supply chain and it come in and out all the time...Relationships Living Wage concept, especially across “scares the hell” out of with brands can be very fleeting – and they China. This could start a consumer can be undercut on the next order, so there campaign to buy these types of goods’. On most companies, as they is no incentive [to pay a Living Wage] the other hand, the same discussion raised source from different without longer-term supplier relationships. a note of caution against placing too much factories around the world, This is why we are fighting to raise the reliance on consumers – what they say and which pay different wage wage floor across the entire sector or what they do are not always the same. rates and have different industry rather than taking a brand-down Although consumers might say they would approach. This concept has lots of traction pay more for a brand that paid the Living immigration policies’. in the garment industry, and lots of brands Wage, they might not necessarily do so. In Hong Kong participant want to collaborate on a whole-industry Shanghai, participants noted that suppliers model.’ It was thought that a brand-down would always try to push the cost of paying approach might have more impact in a Living Wage back onto the buying brand. sectors where it is harder to change This inevitably depends on the willingness supplier, such as in IT. It was also hoped (in of the consumer to pay a higher price. the Brussels discussion) that the power of the internet to make supply chain data In Johannesburg, the roundtable also more accessible and transparent could considered the power of the consumer, but lead to more stable supply chains, to the thought that this was less likely to be a benefit of those arguing for a Living Wage. factor in less-developed economies than in developed ones such as the US or UK: ‘We Contractual requirements [in South Africa] don’t have the same Some companies, as discussed in the New reputational pressure at a retail level that York roundtable, are looking at whether would affect the chain because consumer Living Wage requirements can be included make-up and income distribution gives less in supplier contracts, which already cover leverage for a Living Wage’. The same environmental, health and safety issues. participant commented: ‘I don’t think They found, however, that they were there’s a single South African clothing ‘getting push back because the Living factory which doesn’t buy tons of stuff from Wage affects profit and we have to make countries such as Bangladesh and Myanmar hard choices’. where workers are very low paid, but I don’t think consumers say, “I won’t buy this This theme also emerged in the Hong dress because this is where it comes from”. Kong roundtable: ‘We talk about a Living There is no reputational gain – otherwise Wage for the workers making our products, the companies would have changed’. but when translated into a corporate action it becomes a cost and we select factories Due diligence and monitoring required based on quality, delivery and price. So we In the Kampala roundtable, emphasis was need to understand that when the Living placed on the need for international Wage concept is turned into action it companies to undertake due diligence in becomes the responsibility of the sourcing relation to the wage rates paid by suppliers. department, who are very hard-headed.’ One participant noted: ‘In Uganda there is very little or no management or due Consumer power diligence of supply chains; we [my company] In some roundtables it was argued that deliver to one international company which global consumers could have an influence does due diligence on us about living up on Living Wages being paid in the global to its ethical code, for example, regarding supply chain if they were prepared to buy underage workers and rates of pay’. Such from Living Wage employers and pay more due diligence applied to the Living Wage for their products. One London roundtable could then ‘trickle down through society’. participant, when considering the conditions that would allow employers to pay a Living In Brussels, too, the need for ‘effective Wage, noted that ‘support is needed from monitoring and enforcement systems’ was commercial customers and consumers for noted, whether state-run or managed by the Living Wage – consumer pressure’. people within companies or unions, to check whether a Living Wage was being paid. The Living Wage: 6. The risks and benefits of a Living Wage on the supply chain 23 Core principles and global perspectives

Risk of market distortion Support needed ‘How can we convince In Kampala, a note of caution was expressed Large, influential businesses could support companies to ask about the impact that international businesses lower down the supply chain by outsourcing suppliers organisations could have on a local offering advice to suppliers, for example, to pay their workers a employment market if they pay substantially on ways to improve productivity. One Living Wage? This is a higher wages: ‘The international NGOs international retailer noted the impact that came in and said they wanted the best requiring the Living Wage had had on local key problem’. people, paid triple the rate and sent the farmers. Some had seen it ‘as a punishment’ Hong Kong participant whole market into a spiral. The private sector but were now looking at efficiencies: couldn’t keep up with this and make a profit, ‘Whereas before the farmer may have drawn which distorted the market... [In Uganda] in another 10 workers in the off-season to the salary for a secretary in an NGO is the do key jobs, now it is more about up-skilling same as for a general manager elsewhere.’ and investing in workers to get them to perform a number of different skills.’ In London, too, it was suggested that there were risks in involving employers in setting Outsourced staff the Living Wage in countries with a Outsourced staff provide a particular significantly lower minimum wage. The challenge when it comes to implementing ‘real employer’ in the supply chain needs the Living Wage. As noted in Hong Kong, to be involved. ‘Less well-paid workers usually come from outsourcing companies – how can we Impact on small suppliers convince companies to ask outsourcing There was some recognition (eg in New suppliers to pay their workers a Living York) that imposing the Living Wage could Wage? This is a key problem’. It was argued be particularly hard on small suppliers: ‘In that some business people did not care manufacturing, for example, where carpets about their outsourced workers: ‘Because of are made in homes with only three Hong Kong’s tendering system, where the weavers, the owner doesn’t have an lowest bid always win, cleaning companies, income that reflects a Living Wage, and for example, who say they would like to asking them to pay the Living Wage will pay higher wages can’t because they will have economic consequences – and so it is lose their contract’. One UK-based Living difficult in these supply chains’. Wage employer had addressed this challenge by introducing a contractual Similarly, in Hong Kong one participant requirement that all outsourced staff are expressed concern about the impact of the paid the Living Wage. In the UK, accredited Living Wage on SME suppliers, ‘especially Living Wage employers are required to pay those with very low profit margins onsite contractors a Living Wage. producing fast-moving goods, for example, supermarkets and discount shops’. Despite In London, a participant noted: ‘In large this, best practice examples were emerging. companies there are not many temps, but more workers are outsourced, and this is the same in the global workforce. In this ‘For instance, many SMEs are context the real employer sits at the top of looking to save costs through the contract chain and that’s where better environmental management responsibility for wages lies. For the last 30 and the money saved could be years we’ve been depending on a business reallocated to remuneration’. model which relies on a huge quantity of Hong Kong participant very low-paid outsourced workers with contracts squeezed each time [they are] renewed. The only way to deal with this is to go to the outsourced employers and say they are at the top of the chain.’ 7. Additional Living Wage key issues 24

Q7. Which key issues in addressing the Workers’ rights ‘The effect of the Living principles to be applied universally on Participants in Kampala noted the Wage on retail should be a Living Wage strategy have not been importance of linking pay with discussed and we should mentioned so far? performance and that both sexes should help consumers understand The need for measuring the impact of the receive equal pay. Participants also considered the broader human rights of the effect of paying a little Living Wage on people and societies (eg in relation to health, disability and poverty) workers, seeing the need for action (eg bit more’. was emphasised in the Brussels discussion. more workplace inspection by the Hong Kong participant The impact of the Living Wage on young government) to protect their human rights workers was particularly highlighted, ‘as (including maternity rights) and prevent there is a problem with wages not being exploitation. Particular reference was made adequate caused by too few working hours to the exploitation of foreign workers from and impact on benefits’. Asia who were brought to Uganda and paid ‘even less than Ugandans’, even though they often were more highly skilled. Business case and examples The roundtable in Kampala highlighted the This was distorting the market. There was importance of building a business case to also some discussion of the need for better show that the Living Wage resulted in skills development in Uganda, to help increased performance. support higher wages.

Monitoring needed ‘A Living Wage Foundation should Monitoring of employers who claim to pay show how a Living Wage can the Living Wage is important, as noted in support increased performance so Brussels. The UK’s Living Wage Foundation that companies will make more sees workers as playing a vital role here. money and increase salaries’. Living Wage employers must tell all workers what the Living Wage is, and when Kampala participant the rate will be implemented. They are also required to display the Living Wage badge in buildings. If workers know about the This theme also emerged in Hong Kong, Living Wage, they can complain if it is not where participants expressed an appetite paid when it should be, and in this sense for research and for sharing experiences on the scheme is ‘self-policing’. how Living Wages had had positive impacts in companies (eg on productivity, It was also noted in the Brussels discussion staff turnover): ‘Broadcasting good that some employer commitments to pay a examples to employers, workers and Living Wage become translated into consumers in Hong Kong is a precondition collective agreements. Some unions now for a successful Living Wage campaign... use the Living Wage as the ‘bottom point’ Then we can settle down to discuss in their negotiations. Although some details’. In the New York roundtable it was sectors, such as retail, hospitality and social noted that some recent research papers care, still have many low-paid workers, had made the link between higher wages pressure from governments and customers and the ‘benefits for the company of could potentially have an impact. The need having a more motivated and stable to inform consumers was also noted in workforce, and the need for the US Hong Kong, where a parallel was drawn to economy to have better wages to drive consumers’ willingness to pay more for growth through consumer demand’. organic products. The Living Wage: 7. Additional Living Wage key issues 25 Core principles and global perspectives

Risks identified Although the Hong Kong roundtable also ‘It is not an issue which can In Shanghai, the roundtable referred to the noted the links in the global supply chain be tackled piecemeal by risk, if the Living Wage were introduced, of and the global impact of paying a Living companies. It is a systemic increased subcontracting (outsourcing), use Wage, participants also thought NGOs and problem which needs a of an increased level of technology, and the media could do more locally to give systemic collaborative the moving of manufacturing or sourcing to local companies an incentive to change. even lower-paid and less-regulated areas. There was also some discussion of the value solution in industries, sectors There was also a reference to concerns of implementing collective bargaining. and countries in order to among some workers that an increase in avoid more inequalities or wages would simply be cancelled out by an disadvantages’. increase in employer-subsidised rents. ‘There is no legislation to protect London participant this and so even though we have Similarly the London roundtable highlighted unions who want to discuss the global nature of the problem, and the wage levels and benefits with risk that the setting of a national Living management, they face huge Wage could risk sourcing and other difficulties as legislation prevents business activities moving elsewhere. them from having the opportunity’. Hong Kong participant

‘There is nothing to counteract this race to the bottom, not just with companies but with countries, so the globalised nature of the problem stymies everyone’. London participant The Living Wage: 7. Additional Living Wage key issues 26 Core principles and global perspectives

Q8. Are there any other key issues that Complexities noted ‘Fundamentally it is right need to be taken into account? The New York roundtable emphasised the to have a global Living complexity of the Living Wage issue because Social Justice in South Africa of changes in working patterns: ‘It’s difficult Wage movement that In the Johannesburg roundtable, the to separate wages from hours in the US and can make inroads into need for social justice was strongly other countries given the rise of involuntary all continents and then emphasised: ‘We have an economy that’s temporary and precarious work. In some so exploitative, we have to talk to broader various stakeholders will sectors it is very difficult to find full-time justice issues as part of this debate, and we be involved’. work...You cannot separate this [Living have to face the broader immorality of this Wage] from the rise of the “precariat”’. Johannesburg participant economy. The fact that we are the most There was a call for co-ordinated unequal economy and society in the world mechanisms: ‘employers’ associations are has to be addressed.’ needed to help raise the floor and to bargain between the global north and the It was suggested (in Johannesburg) that global south’. Another complexity noted in the social justice case could be presented New York was that some workers (eg more positively – a ‘gigantic opportunity of migrant workers) wish to earn as much as embracing a new mindset’. Another possible, and may not appreciate a participant in the Johannesburg roundtable limitation on their working hours if this was argued that providing more information a result of Living Wage application. about the housing, transport, education and other needs of domestic workers and their families would enable their employers to become better informed, and this might ‘In China, for example, workers have some impact: ‘A lot of wealthy people come prepared to work long hours think they pay their domestic workers a for a short time to earn maximum reasonable wage as they have no notion of wages, and would not see fewer how they live’. hours as an advantage. So how do we take the voice of the migrant worker into account?’ Right time for China? In Shanghai there was some discussion New York participant about whether China is ready for a Living Wage: ‘Is China ready for a Living Wage conversation? There is no enforcement of The London roundtable also highlighted the minimum wage in factories and stores the need to address the challenges faced after 10 years. So is a Living Wage, by people in ‘precarious work’ whose lack especially in manufacturing, premature?’ of job security deterred them from joining unions. These were low paid workers who One participant still argued that this was lacked any collective bargaining support. It the right time to talk about the Living was also noted, however, that the Living Wage, because of the current economic Wage was ‘less of an issue’ for people conditions: ‘I think it’s just the right time to working fewer than 10 hours a week, and consider the Living Wage – not too early that it was important not to ‘load up’ the – as China is entering a period of low Living Wage with too many expectations of growth. Up to now, factories have always what it could achieve. had new orders, always been growing by up to 20% per annum and this won’t happen again. To be successful, factories need to be efficient, productive, with more automation’. The Living Wage: 7. Additional Living Wage key issues 27 Core principles and global perspectives

Strong labour movement needed SME challenge and opportunity ‘Asking for a higher Living The weakness of the labour movement was The challenges facing SMEs from a Living Wage when we don’t even raised in Kampala as a barrier to improving Wage were discussed in London. One have a basic minimum wage wage levels: ‘Issues such as [working] participant asked: ‘As this process is easier is a big challenge, so where conditions could be improved with a for larger companies, is it inadvertently do we start?’ stronger labour movement; that’s why no helping large multinationals against local one leaves work, because where would businesses?’ It was noted that UK research Kampala participant they go? The environment itself does not had found that ‘lots of SMEs want to be in promote the development of a strong the Living Wage marketplace as they want labour movement as there are not enough to recruit the best-quality staff, and see employment opportunities’. The weakness themselves as ethical businesses’. of the government and its inability to enforce laws effectively was also cited as a Supply chain emphasis barrier, as was the extent of bribery and The New York roundtable emphasised the corruption, including among the judiciary importance of addressing the supply chain, and police. The challenge of calling for a given that numbers employed in supply Living Wage in a depressed economy was chains are generally far higher than also mentioned: ‘A challenge is the risk of numbers employed directly in company being branded oppositional or a saboteur operations – ‘by multiples of hundreds to if you suggest this kind of approach’. one’. Would customers assume that, if an employer were Living Wage accredited, One complexity associated with paying that everyone in its supply chain would be higher wages (raised in the London paid a Living Wage? Participants discussion) concerned the potential impact emphasised the importance of engaging on the workers who had previously earned the agent or first-level supplier in a drive to the lower wages: ‘The Living Wage raises pay a Living Wage. Supply chain and cost issues of substitution, as higher wages transparency were also needed, though it attract a different and more educated and was acknowledged that ‘this is very difficult ambitious workforce. These employees are to talk about even in long-term also more socially mobile, which means relationships, as its tough if you want to that the people a Living Wage could really change the way of working after 20 years’. help are squeezed out of the jobs they used to do. Therefore another negotiation (in an ideal world) is that a Living Wage should be used with an existing workforce’. Acknowledgements 28

ACCA and the Living Wage Foundation would like to thank all participants for sharing their views. Roundtables included the following participants, accurate as at June 2015:

Colin Angel, UK Home Care Association Japhter Makwakwa, Sangoco Oilanya Aom, FUE James Male, National NGO Forum Sabita Banerji, Ethical Trade Initiative Anne McMullen, Labour Behind the Label Rohini Barreto, Social Accountability International Tania Moodley,Tesco Kirsti Battista, Cities Reducing Poverty – Vibrant Communities Canada Rhys Moore, Living Wage Foundation Pamela Batty, Burberry John Morrison, Institute for Human Rights & Business Teodora Berkova, Pearson Jacqueline Mugisha, National Association of Women’s Organisations in Uganda Nigel Branken, Transform Torsten Müller, ETUC Laura Brooks, KPMG Mary Nannono, CEEWA-Uganda Lary Brown, Esprit Lisa Nathan, ShareAction Valentina Caimi, Social Platform Bandile Ngidi, Wits University Joyce Chau, Business Social Compliance Initiative Patrick Noglobe, HRMNU Brandon Coate, HSBC Vincent Ojambo, Uganda Mines Metal Oil, Gas Tom Cooper, Living Wage Hamilton/Hamilton Poverty Paola Panzeri, COFACE Anne Copeland, sustainability adviser, ACCA Global Sustainability Forum Professor Elmarie Papageorgiou, Wits University Professor Bryan Evans, Ryerson University, Toronto Loris di Pietrantonio, European Commission Professor Deborah M. Figart, School of Education, Stockton University NJ Sébastien Pivet, A.S. Watson Group Charlotte Fischer, Citizens UK Joy Qiu, University of Manchester Helen Ford, World Federation of Sporting Goods Industry Veronique Rochet, H&M Matt Friedman, The Mekong Club Caitlan Russell, Russell and Associates George Gabriel, Citizens UK Guy T. Sasso, HSBC New York Amanda Gardiner, Pearson Paul Sellers, TUC Joanne Goddard, Aviva Wong Shek-hung, Oxfam HK Jan Paul Grolle, WageIndicator Foundation Paul K. Sonn, National Employment Law Project Carola Groom, Independent Social Research Ian Spaulding, Elevate Global Samantha Hale, Pathway to Potential Maria Strid, HSBC New York Frank Harle, Restless Development Irit Tamir, Oxfam America Adrian Henriques, independent consultant Professor Zeynep Ton, MIT Sloan School of Management Donald Hirsch, Centre for Research in Social Policy, Loughborough University Dean Imraan Valodia, Wits University Jenny Holdcroft, IndustriALL Adam Vasey, Pathway to Potential Larry Holm, People Performance Group Bishop Paul Verryn, Methodist Church of South Africa Poon Man Hon, HK CTU Liliane Volozinskis, UEAPME Professor Wong Hung, Chinese University of HK Liz Weaver, formerly Vibrant Communities Canada Rachel Jackson, formerly ACCA Jeannette Wicks-Lim, Political Economy Research Institute, University of Massachusetts, Amherst Neil Jameson, Citizens UK Freya Willams, Edelman Ronald Janssen, ETUC Professor Jane Wills, Queen Mary, University of London Sian Jones, European Anti-Poverty Network Rachel Wilshaw, Oxfam Professor David Kaplan, UCT University Anthony K. Wong, HK Council of Social Services Alex Katz, Social Accountability International Fred Wong, Burberry Mike Kelly, KPMG and formerly Living Wage Foundation Joseph Wong, Sear Holdings Bonnie Kiconco, QUAM Niki Wong, Oxfam HK Programme Unit Greg Lavender, Restless Development Yaeesh Yasseen, Wits University Deborah Littman, VanCity Alliance (BC) Gao Yun, Ethical Trade Initiative Rebecca Loyo Mayo, Burberry Professor Stephanie Luce, City University, New York

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