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Last week I participated in a round table organised by the Living Wage Foundation. The aim of the meeting was to explore if there are common principles about the concepts at international level.

Living wage is a concept that is generally used in the UK. On top of the national minimum wage established in the UK, the living wage is an hourly rate set independently and updated annually calculated according to the basic cost of living in the country: the current UK Living Wage is £7.85 an hour, while in London it amounts to  £9.15 an hour. Employers choose to pay the living wage on a voluntary basis. So far the campaign has reached 1.500 employees.

The first question of the round table was about the understanding of the difference between living wage and national minimum wage. It immediately became apparent that stakeholders have different views. A representative from the European Association of Craft, Small and Medium-sized Enterprises (UEAPME) doubted that small and medium enterprises can afford to pay living wages and that it seems that mainly multi-national companies which have their headquarters in large cities have joined the campaign in the UK. A representative from the European Trade Union Confederation (ETUC) counter-argued that  the principle should be that a national minimum wage should be set at least at the level of a living wage. The reason is that in the EU a national minimum wage tends to become a maximum.

We at Social Platform started working on minimum wage last year and we hold several discussions with our members on what term would be the best to use. Finally, we decided for minimum wage, as it seemed to be the most commonly used in the EU. In our understanding the aim of adequate minimum wage should be to contribute to minimum labour standards below which no employment relationship is considered socially acceptable. Minimum wage must be in line with human rights obligations that set the principle of fair and adequate remuneration as a basic social right.

Whatever is the mechanism used (collective bargaining, national minimum wages, extension of collective agreements to other sectors, etc.), there should be a guarantee that the lowest wages in each sector of the economy and with no exception support decent standards of living and well-being of people, allowing workers to fully participate in society. This wage policy would also contribute to more equal and cohesive societies. It could help to combat in-work poverty and child poverty.

It doesn’t really matter what term you use, what really matters is the adequacy of wages. It is not acceptable that in the majority of EU countries statutory minimum wages are below the poverty wage level, which is commonly considered to be a wage that lies below 50% of the median wage. According to the Organisation for Economic Co-operation and Development, in 2012 minimum wages – measured in terms of the median wages of full-time employees – registered a value above 50% in seven countries, between 40% and 49% in ten countries, and around 36% in Estonia and the Czech Republic. View our infographic.

In our views, as a general rule, for a minimum wage to be considered adequate, it should be set at least at 60% of national median wage. This benchmark level should then be tested for its adequacy in real price terms by the use of appropriate reference budget methodologies (e.g. priced baskets of goods and services that represent a targeted living standard for a specific target population). In fact 60% of national median wage could not be enough in countries where wages are very low.

It is important to have a debate with all concerned stakeholders on this topic. To learn more about our understanding of the concepts, you can read our position paper and the related infographic.