OECD Papers on Well-being and Inequalities

This series features working papers on the measurement agenda for well-being, inclusion, sustainability and equal opportunity as well as papers seeking to deepen the understanding of the drivers of these issues, the ways in which they interact and how they evolve. These papers are prepared by OECD staff, external experts or by outside consultants working on OECD projects.


Living wages in context

A comparative analysis for OECD countries

At a time of rising cost of living, wide wage inequalities and widespread in-work poverty, the demand for a living wage has heightened. The concept of a “living wage” has some limitations, including that it is operationalised in a variety of ways. This variety may serve the purpose of making it a more relevant instrument, typically by providing information on the cost of living that firms and social partners may embed in their wage-setting processes; however, the variety can also increase a lack of transparency. The paper reviews some of the most common methodologies, by identifying points of convergence and divergence. Living wage estimates produced by the Fair Wage Network are then put into context by benchmarking them against internationally comparable wage metrics and poverty lines. Finally, the paper presents a number of critical steps to strengthen the concept of a living wage. This paper does not assess the economic cost or feasibility of living wages, not at the firm level or at the broader industry and economy level. This paper advises using the living wage as one of the pieces of information that – when properly contextualised – could inform wage negotiations and wage policies set in consultation with social partners.


Keywords: minimum wages, living wages, poverty lines, wage levels
JEL: J31: Labor and Demographic Economics / Wages, Compensation, and Labor Costs / Wage Level and Structure; Wage Differentials; E31: Macroeconomics and Monetary Economics / Prices, Business Fluctuations, and Cycles / Price Level; Inflation; Deflation; E21: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Macroeconomics: Consumption; Saving; Wealth; I32: Health, Education, and Welfare / Welfare, Well-Being, and Poverty / Measurement and Analysis of Poverty
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