The ILO Governing Body convened a Meeting of Experts on wage policies, including living wages in Geneva from 19 to 23 February 2024. The experts were asked to examine the key principles of wage-setting processes and the factors that should be taken into account for adequate wage-setting practices, review recent initiatives on living wages, provide guidance on a definition of living wages and how to operationalize the concept of living wages from an ILO perspective and look at how the ILO could provide additional support to its constituents and strengthen its global leadership on the question of wage policies, including living wages. After late night negotiations the meeting reached a set of conclusions, but it may not have resolved the basic question – why are living wage demands growing around the world and what does that tell us about statutory minimum wage setting mechanisms?
The conclusions of the meeting can be found in the report to the Governing Body, but they essentially fall into three buckets:
1. Wage-setting standards
The first bucket reaffirms the ILO’s standards and clarifies that the correct way to set and adjust wages is through collective bargaining and/or statutory minimum wage fixing, preferably with tripartite social dialogue. They emphasise that wage policies and wage-setting mechanisms should promote gender equality, equity, and non-discrimination, and that representative, timely and reliable statistics should be used.
2. Living wage concept and methodology
The second bucket addresses the living wage concept and methodology. The experts note that the ILO Constitution, the Declaration of Philadelphia, and the Universal Declaration of Human Rights (UDHR) inform the ILO concept of the living wage, namely the wage necessary to afford a decent standard of living for workers and their families, taking into account national circumstances and regular working hours. Living wage methodologies should include at least food, housing, health and education, and other necessary goods and services, using local prices, and estimates should be evidence-based, transparent, regularly adjusted and reviewed, and must include consultations with representative employers’ and workers’ organizations at every stage of their development. They should also take regional or local context and socio-economic and cultural realities into account, promote gender equality and non-discrimination, and specify the family size and the number of wage earners.
The review of existing living wage initiatives recognised that some of them contributed to an improvement in wage levels, but criticised others for not taking ILO principles of wage setting, especially tripartite social dialogue and collective bargaining into account and ignoring national wage setting institutions such as minimum wage commissions. Local context, economic factors and the root causes of low pay are also frequently overlooked by living wage initiatives according to the experts.
3. Implementation and operationalisation of living wages
The third bucket deals with the implementation or operationalisation of the living wage and stressed the importance of tripartite and bipartite social dialogue and local circumstances. Living wage improvements can only be sustained if they are based on economic transformation and productivity gains. The role of the State was noted. Governments need to invest in the provision of social services and infrastructure to make the living wage possible. They also need to strengthen labour inspection systems.
The ILO was asked to support this by promoting ILO Conventions, providing training and guidance, and developing an assessment framework for wage setting based on Convention No. 131. This should take the following factors into account: the need for economic development and employment growth, productivity, the profitability of enterprises, industry-specific factors, macroeconomic conditions, and labour market conditions. The ILO should promote the concept of living wage, provide guidance and technical assistance to ILO constituents, engage with living wage initiatives to promote alignment with ILO standards, and conduct further research.
The Governing Body took note of the conclusions of the Meeting of Experts and authorized the Director-General to publish and disseminate them, allocate sufficient resources to future ILO activities on wage policies, including living wages, and present an implementation report to its 355th Session in October-November 2025.
Commentary
The living wage discussion has never really found a home at the ILO. The ILO constituents and standards view the statutory minimum wage setting process as covering the basic needs of worker’s and hence equal to a living wage. As a result, the ILO never developed a separate living wage methodology or programme of work.
This may well be justified when the statutory minimum wage setting process is tripartite, based on representative data and regularly updated. Minimum wages set in this way could then serve as benchmarks for collective bargaining and other wage fixing. The problem is that many statutory minimum wage setting bodies do not meet the standards set in ILO Conventions. Many are not tripartite or representative, and do not make timely adjustments to account for changes in inflation and the cost of living. They may not cover all sectors of the economy or categories of employment, leaving workers and their employers exposed to official minimum wage rates that do not reflect the lived reality of workers. These inadequate wage setting mechanisms are prominent along the global value chains of many high-profile brands and retailers and are a source of conflict and risk.
Global trends
Bangladesh is a case in point. The Minimum Wage Board is only convened every five years and hard-pressed garment workers often resort to wildcat strikes and mass protests before that date. The last round of wage-related conflicts in 2023 resulted in at least four deaths, hundreds of injuries and some 40,000 workers facing potential criminal charges for protesting.
At the other end of the global value chain, the federal minimum wage in the US has not been increased by Congress since July 2009, leading over half the States to adopt minimum wages above the federal rate. The erosion of the spending power of wages is one of the factors leading to massive increases in work stoppages and days lost in recent years. Even in Europe, the issue of in-work poverty and inadequate coverage of statutory minimum wages and/or collective bargaining agreements led to the adoption of Directive (EU) 2022/2041 on adequate minimum wages in 2022.
A further complication is that many of the countries with unresponsive minimum wage setting mechanisms also have weak labour relations systems with relatively low levels of collective bargaining. The combination means that necessary wage adjustments are even less likely, leading to hardship for workers and potential conflict with employers.
These shortcomings in statutory minimum wage setting and labour relations in key exporting countries help explain the popularity of living wage demands. Formulated by global union federations (GUFs), labour rights campaign groups, multistakeholder initiatives (MSIs) and even multinational companies looking to ensure compliance and stability along their value chains the living wage demands all testify to the fact that official minimum wage levels are not sufficient.
The bottom line
This ILO Experts Meeting was helpful in clarifying the criteria for representative and legitimate wage setting processes and we will hopefully see the recommendations adopted by both statutory minimum wage bodies and private living wage initiatives, but the elephant in the room is that the official systems are often failing workers and employers.
Governments everywhere are struggling with limited financial and human resources to enforce labour laws and the inescapable conclusion is that workers and employers will have to find their own solutions to ensure efficient and equitable labour market outcomes.
Due diligence laws now require that companies in Europe assess whether they face material risks related to wages in their own and value chain workforces. The Corporate Sustainability Reporting Directive (CSRD) requires that companies disclose whether workers are paid an adequate wage, and if not, in which country or countries, and the percentage of workers affected in each. The Corporate Sustainability Due Diligence Directive (CS3D) goes further and requires that companies ensure that their business plans and purchasing practices contribute to living wages and living incomes along their chain of activities.
The implication of these due diligence obligations is that when companies identify a material risk or adverse impact, they must provide access to remedy or remediate it themselves. Companies cannot point to the statutory minimum wage or future wage setting processes as a response. Instead, companies will have to work with business partners and their workers to align on independently verified living wage levels and develop plans to achieve them.
The bottom line is that global value chains traverse countries with varying degrees of human and labour rights governance. This exposes companies and workers to risks that due diligence processes should identify and seek to prevent or resolve. When it comes to wages, that involves more than simply checking compliance against the statutory minimum wage. It requires an objective assessment of the wage needed to meet the basic needs of workers. If current wages are shown to fall below that level, the company must consult with workers and their representatives to develop a plan to bridge the gap. Organisations like our strategic partner the Fair Wage Network have data and survey tools to help companies do that, and Equiception’s due diligence platform allows companies to monitor the evolution of the living wage plan (and other conditions of work) over time.
This content has been prepared by Equiception for informational purposes only and does not constitute legal advice. Readers should contact a legal or professional advisor before taking decisions on any of the matters discussed herein. We make every effort to ensure that the content is accurate and up to date, but situations evolve and the content may need to be updated accordingly. Equiception cannot be held liable for any errors or omissions it might contain.