On Implementing a Living Wage

Living wage is a term used to describe the minimum hourly wage (or annual salary) necessary for an individual to achieve a particular standard of living, typically to pay for the basic necessities of life.  It is different from the minimum wage set by law; it is typically established on the principle that the minimum wage fails to meet the requirement of a living wage. 

The living wage movement is an international one.  Here in the U.S., a range of government entities have enacted ordinances which set a living wage minimum for jobs within their jurisdiction.  In addition, a number of private employers have implemented a living wage policy covering their own employees, typically as a reflection of their organizational purpose and mission.

While it is indeed my typical position to advocate directing and defining compensation programs as based on cost of labor, rather than cost of living, (and, as I will elaborate later, I do not see this position as incompatible with the use of a living wage standard) I do also want to dedicate some discussion to the phenomenon of living wage, for the benefit of those organizations who decide that it behooves them and their particular mission to implement one. My intent here is not to argue the political or economic pros and cons of the concept of a living wage.  Rather, I accept that there are organizations (often, but not exclusively, not-for-profits) who have established this as an important and necessary step.  With them in mind, I wanted to take the opportunity to share some of what I've learned in this area.

I have not been involved in any public sector living wage initiatives, which is where the bulk of these efforts seem to take place, but I have assisted a few private client organizations in developing and implementing their own programs.  I have found this territory to be largely uncharted with respect to formal program development guideposts.  For this reason, I hope - with the assistance of informed readers - to shed a little light to help others starting down this path.

First of all there appears to be no universally agreed-upon standard for what comprises a living wage, or how you go about implementing one.  It is therefore up to your organization, and its governing body, to determine this.  We - my clients, their other advisors and I - have found sources such as the Economic Policy Institute and their family budget calculator to provide helpful information on detailed living costs for different geographic areas and different family configurations.  Readers, I am certain, can suggest others as well.  One of the first and most important steps your organization must take is to identify a living wage figure.

As with many aspects of implementing a living wage, there doesn't appear to be a lot to guide your decision.  I would simply recommend that you make the decision in a manner and using a process that reflects your mission and your original objectives for seeking to take this step.  If other organizations in your labor market have implemented a living wage, their decisions might provide useful precedents as well.  Finally, it may make sense to have key constituents - internal and external - weigh in with their thoughts and opinions.

Continued in tomorrow's post.