Ensuring a living wage is one of the most impactful actions a company can take to help tackle social inequality.
Shift, together with the Capitals Coalition, has spent two years working with companies, investors, standard-setters, living wage initiatives and accounting experts to develop an accounting model for living wages to enable standardized, meaningful, and comparable reporting on progress made by companies in their own workforces and supply chains.
Efforts to tackle growing levels of inequality and poverty around the world are increasingly focused on the payment of a living wage. That’s because realizing the human right to a living wage is essential to raising the living standards of the most vulnerable workers and their families – and to fulfilling a range of other human rights, including rights to food, water, health, adequate housing, education, family life, and fair working hours.
The wider impact on society is also clear. Studies have shown that reductions in poverty and inequality can lead to greater social cohesion, as well as benefits to business. Paying a living wage can deliver not only a more motivated and productive workforce, with lower staff turnover, but also improved revenues and profits and increased value chain resilience and performance.
Measuring and reporting on living wage progress is essential to driving better outcomes for workers, businesses, and for society.
Investors are increasingly interested in whether companies are taking action on living wages, and if so, whether those actions are having any positive impact on workers’ wages. To be able to make an informed assessment of this aspect of a company’s performance, investors need access to reliable and comparable data.
An Accounting Model to Measure Progress Towards Living Wages
Until now, there has not been a generally agreed, straightforward and measurable way for companies to reflect their work to achieve living wages in their public reporting. As a result, investors, civil society and other interested stakeholders have not been able to access the information they need to compare companies’ progress, assess which are contributing to the solution and push those sitting on the sidelines to play their part.
“To get more companies to walk the talk on paying a living wage, we need to define what success looks like, and how to measure progress along the way. And we need common metrics for companies to account for that change in their public reports. Only then can markets reward those companies that are part of the solution to today’s growing inequalities, and push others to play their part.”
The Accounting for a Living Wage project has resulted in a model that helps paint a picture of the scale and scope of the living wage deficits experienced by workers, as well as progress towards living wages over time. Having a shared and simple methodology to track and report on progress has proven key to the success of similar efforts to embed sustainability goals in business decision-making. This Living Wage Accounting Model has the potential to play a catalytic role in:
- Delivering greater transparency regarding the payment of Living Wages
- Informing new standards around Living Wages
- Creating incentives for improving wages and reducing inequalities.
These resources are designed to support the work of:
- Businesses – who can use the model and tool to measure and disclose their progress on living wages in a standardized way
- Standard setters – who can embed the model in their standards to ensure that companies provide valuable, comparable information
- Investors and CSOs – who can use the information disclosed by companies to make assessments and incentivize better performance
The Living Wage Accounting Model Tools
A Model to Measure Progress on Living Wages
The background to the project and the rationale for developing a model to measure progress on living wages.