Estimating the Living Wage

Kabeer Dawani

Collective for Social Science Research, Karachi

Living Wage

• Living wage is recognized as a right by the international community. It is also included in the United Nation’s Universal Declaration on Human Rights and the ILO’s constitution.

• Although, there is no consensus on its definition, all definitions have the following in common: a living wage should support a worker and his or her family with a basic living standard that is decent and appropriate to the society and times.

Living Wage Estimation in Pakistan

• A Minimum of two and maximum of 6 estimations of Living Wage have been done, depending on the size and diversity of countries.

• We are in the process of doing Living Wage Estimation for Fair Trade Certified Companies manufacturing footballs in Sialkot.

• Includes Urban, Peri-Urban and Rural Areas.

• This Work will only be representative of small urban and rural north Punjab.

Methodology

• A number of methodologies have been used to determine the living wage in the past, with varying degrees of rigourand appreciation of the local context.

• This study uses a new methodology developed by Richard and Martha Anker, more rigorous than previous ones and provides intra-national and cross-national benchmarks.

• The methodology uses a mix of secondary data and primary data.

• There are four components of a living wage in the Anker methodology:1. Food costs, i.e. Nutritious low cost diet2. Housing costs3. Non-food non-housing costs (education, health, transport,

recreation and culture)4. A 5% buffer for emergencies

PART I. FAMILY EXPENSESLocal

currencyUSD

Food cost per month for reference family (1)

Food cost per person per day

Housing costs per month (2)

Rent per month for acceptable housing a

Utilities and minor repairs per month

Non-food non-housing costs per month taking into consideration post checks (3)

Preliminary estimate of non-food non-housing costs

Health care post check adjustment

Education post check adjustment

Transport post check adjustment

Additional 5% for sustainability and emergencies (4)

Total household costs per month for basic but decent living standard for reference family

(5) [5=1+2+3+4]

PART II. LIVING WAGE PER MONTH

Living wage per month, net take home pay (6) [6=5/#workers]

Mandatory deductions from pay (7) (list these in notes to table, e.g. taxes)

Gross wage required per month for Living Wage (8) [8=6+7]

WHEN LIVING WAGE STUDY HAS AN INDUSTRY FOCUS COMPLETE PART III

PART III: LIVING WAGE IN INDUSTRY CONSIDERING VALUE OF TYPICAL IN KIND BENEFITS AND CASH

ALLOWANCES IN INDUSTRY

Value per month of common in kind benefits in industry (9A) (list in notes to table)

Value per month of common cash allowances in industry (9B) (list in notes to table)

Living Wage take home pay in industry, when workers receive typical in kind

benefits and cash allowances in industry (10) [10= 6-9A-9B]

Living Wage gross pay in industry if worker receives typical in kind benefits and cash

allowance in industry (11) [11= 8-9A-9B]

Summary Table

Secondary data

• Using secondary data from HIES and PDHS, we determined the following: – Using family size data, fertility rates and mortality

rates, we arrived at the average family size = 5.4

– Using labour force participation rates, unemployment rates and part-time employment rates we arrived at the number of full-time workers per family = 1.6

– Local housing conditions

– Proportions of household expenditure by category

Major expenditure group (change if necessary)

Secondary data AdjustmentsSub-major expenditure group (change as necessary)

% Expenditure in secondary data

Adjustments explanation % after adjustment

FoodFood & non-alcoholic beverage 44.44 None 44.44Alcohol (if included in food group) - Put into alcohol & tobacco major group &

use 0 here0

Tobacco (if included in food group) .94 Put into alcohol & tobacco major group & use 0 here

0

Meals away (if included in food group)

- Put part* of this into restaurants & subtract this part here

Cooking fuel (if included in food group)

- Put into housing & use 0 here 0

TOTAL FOOD 43.5 43.5Housing Actual rentals, imputed rentals,

maintenance, other housing expenses

25.32 (WHEN cooking fuel was in food group) Add amount to amount for housing.

25.32

Alcohol & tobacco Alcohol - (WHEN alcohol was in food group) Add

here. Reduce if excessive.(WHEN alcohol was here) Put same amount here)

Tobacco - Exclude 0Restaurants and hotels

- (WHEN meals away was in food group) Add part here (see notes below).(WHEN meals away was here) Put part in food group & subtract this here (see notes below)

Clothing and footwear 5.48 No adjustment 5.48Household contents and appliances

.43 No adjustment .43

Health 3.05 No adjustment 3.05Education 3.28 No adjustment 3.28Transport

Private vehicle purchases 0.00 Subtract part of this when workers expected to exclusively use public transport (see notes below)

0Private vehicle operation .36 .18

Public passenger transport 3.50 No adjustment 3.5Communication 1.82 No adjustment 1.82Recreation & culture .99 No adjustment .99Miscellaneous goods & services

4.05 No adjustment 4.05

TOTAL NFNH 23.02 22.84

Source: HIES 2011-12

Household expenditures

Food Costs

• Model diet based on secondary data

– Purchased grams vs. Edible grams

– Edible grams into calories based on USDA standards

– Minimum standards of carbohydrates, proteins and fats to be met

• Primary data from food market surveys to be entered to calculate cost for the model diet

Model Diet – Inputting purchased grams from secondary data

FOOD GROUPS FOOD

1.A Cereals and grains WheatRice

1.B Prepared cereals Bread

(for example: bread and noodles)

2.A Roots and tubers Potato

(for example: potato, cassava) Onion2.B Starchy fruit or vegetable3. Pulses, legumes, beans Beans

(for example: legumes, beans, nuts) Lentils4. Dairy Milk (cow)

(for example: milk, sour milk, curd) Yogurt5. Eggs Eggs6. Meats & Fish Chicken

(maximum of 3 meats and 2 fish) Beef7.A Green leafy vegetables Spinach7.B Other vegetables Tomato

Turnip8. Fruits Banana

AppleOrange

9. Oils & fats Oil10. Sugar Sugar11. Nonalcoholic beverages Tea

Model Diet: The 11 food groups

Model diet – Adjusting consumption according to norms and protein, fat and carb requirements

Housing Costs

• Housing characteristics from secondary data

• Setting a housing standard – rural vs. urban

• Rental values

• Construction and maintenance cost to be determined if no rental market

Name of local area Urban

Type of dwelling (e.g.

detached, flat, compound

house, hut, etc.)

Standard (with explanation when useful)MATERIALS OF DWELLING

Walls Bricks with cement, cement wall, concrete – Mud

not acceptable

Roof Pakka, e.g. RCC, Tier-Girder – without steel and/or

cement not acceptable

Floor Mud not acceptable.

AMENITIES

Type of toilet Pit or piped. Less than that not acceptable.

Source of drinking water Boring is okay --- what depth?

Source for other water

Cooking fuel Gas; wood fine if proper ventilation

Source of lighting 1 window, 1 bulb

Electricity? Yes

Ventilation quality 1 window per room; 1 fan

Number of windows 1

LIVING SPACENumber of rooms number of bedrooms + kitchen + toilet

Number of bedrooms 1 bedroom for 2 persons or for 3 children

Is kitchen inside house? Should be?

Separate kitchen room in

house (and if with chimney)?

Yes, with some ventilation, along with food storage

space and fridge

Number of rooms per person 0.8

Number of square meters of

space

50 sq. metres, 2+ marla

CONDITON IN GOOD REPAIR

Urban Housing Standard

Non-food Non-Housing Costs

• Communication

• Education

• Health

• Transport

• Recreation and Culture

• Miscellaneous

Arriving at the Living Wage

• Cost for average household

– Food

– Housing

– Non-food Non-housing

– 5% buffer

• Cost divided by number of workers to get living wage