What Makes Up a Living Wage?

Sometimes when we talk about ethical factories, that can feel nebulous and vague if you don't understand the breakdown of what goes into making an ethical factory. In case you are interested in learning the 8 standards of an ethical factory you can get our free download by subscribing to our weekly newsletter here. But since one of the standards of an ethical factory is paying your workers a fair wage, you might wonder, "What is a fair wage versus a living wage? And who sets that rate?" Let's dive in.

What is the Difference Between a Fair wage and a Living Wage?
At THR3EFOLD we define an ethical factory as paying their employees a fair wage based on the standards of the many ethical certifications we accept. This means these factories are paying at least the legal minimum wage of the local country. This would be similar to the minimum wage to cost of living debate we have in America and Europe. In addition,  paying a fair wage means workers are paid on time in a manner that is accessible to them, have no personal documents seized in collateral for a debt owed, and they get paid premium for overtime work. A living wage is higher than minimum wage and accounts for the living expenses of the local area. This naturally drives the labor cost up and you'll find a living wage is required from factories who have a World Fair Trade Organization certification.  

What is a Living Wage?
The Asia Floor Wage Association exists to calculate living wages in Asia. These are the factors they include in their assessment. 

• A worker needs to be able to support themselves and two other “consumption units” (1 consumption unit = 1 adult or 2 children)
• An adult requires 3,000 calories a day to be able to carry out physical labor. In Asia specifically, food costs account for half of a worker’s monthly expenditure; and non-food for the other half.
• Work-week is a maximum of 48 hours, not including bonuses, allowances or benefits.
  
• 50% of a garment worker's wage goes towards food costs (compared to Europe and other parts of the world  where housing costs are higher)
  
• 40% of a garment worker's wage goes to clothing, housing, travel costs, children's education, and health costs
  
• 10% of a garment worker's wage goes to discretionary income i.e. entertainment and savings in the event of job loss.
  

After these calculations are made by the country and currency you can formulate the living wage for that area. Click here to see the living wage of various Asian countries and it's fluctuation over the last 5 years.

If you are interested in producing with an ethical factory who pays a fair wage or living wage, our Ethical Manufacturing Platform has a database of ethically certified factories around the world that produce in various categories and quantity offerings that could be just the right fit for you. Test drive our platform today by setting up a demo call. 

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