How can you determine the living wage for your employees in East Africa?
The Netherlands government is keen on promotion of responsible business conduct (RBC, in Dutch: IMVO). It means that Dutch companies doing business abroad comply with rules on human rights, working conditions and environmental protection. Living wage is an important component of responsible business conduct.
What is living wage
A living wage is the wage received by a worker that is sufficient to afford a decent standard of living for the worker and their family. Closing the living wage gap in ALL supply chains is part of a broader societal move towards living wage supply chains. Both awareness of human rights issues and the sense of responsibility is growing worldwide. This is especially in reference to SDG 8, which focuses on establishing sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.
Living wage may be affected by the following factors amongst others:
- Economy – During economic growth companies demand for labor increases and inherently they are willing to pay better. The converse is also true, low growth means less jobs.
- Inflation rate – If it is high then it also raises the price of consumer goods thereby affecting the purchasing power of the wages.
- Employment/unemployment – A demand for increase of living wage may raise unemployment as employers have less incentive to hire especially with hard economic times.
- Skills/Education/Literacy- You are able to earn a relatively higher wage as stipulated by law if you possess higher skills.
Living wage in East Africa
In Kenya and Tanzania, quite a number of organizations supported by the Netherlands government are involved in working towards a living wage in the agriculture sector. Examples are Hivos East Africa and IDH the Sustainable Trade Initiative. They are working to support companies to closing wage gaps in their supply chains. For example on identifying methodologies that estimate living wage values, i.e. living wage benchmarks.
To estimate a living wage benchmark, organizations normally apply methodologies that gather data on aspects such as local costs of food, housing, education, healthcare, transportation, etc. In order to calculate the gap between current wages and living wages, companies need reliable living wage benchmarks for every region they source from.
IDH the Sustainable Trade Initiative has therefore - in addition to its work on creating public strong sectorial commitments, pushing for data-driven approaches, and creating projects to close wage gaps in supply chains - developed a process that gives recognition to robust methodologies to assist companies in identifying living wage benchmarks that comply with a set of criteria.
The process by IDH aims to:
- Create alignment through the Roadmap on Living Wages, an initiative which finds consensus on definitions, tools, and approaches for companies to work on living wages in a uniform way.
- Provide guided support to living wage benchmark methodologies and companies that seek such alignment by compiling a set of Criteria for Recognizing Living Wage Benchmark Methodologies.
- Give recognition to robust methodologies that are available.
Additionally, IDH has developed a tool, the Salary Matrix, to assist companies in measuring living wage gaps, once a benchmark has been chosen.
“IDH is committed to assisting companies in measuring potential gaps between current wages and up-to-date, credible living wage estimates that are relevant to their respective regions. We expect that this process will guide interested parties working on living wages in selecting benchmarks generated through IDH-recognized methodologies as a way of advancing dialogue and creating solutions to address potential living wage gaps” - Sonia Cordera, IDH Deputy Director at IDH
The Netherlands government is taking additional measures that will help and encourage businesses to better shoulder responsibility for the impact of their activities (or those of their business partners) on people and the environment in foreign countries (read more here). It is important that measures to foster responsible business conduct are both practical and effective (RBC Link). That is why companies and NGOs are closely involved in this project. Your commitment and knowledge are vital.
To find out more about IDH its work on living wage, including identifying living wage benchmark methodologies and for the Salary Matrix tool, see the IDH website. For benchmark methodologies wanting to find more information on how to apply for recognition, see here or contact IDH through Ronald Sanabria at firstname.lastname@example.org.
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