Updating Anker Methodology Living Wage Estimates .
Updating Anker Methodology LivingWage Estimates: MethodologicalIssues and GuidelinesbyKabeer Dawani, Asad Sayeed, RichardAnker and Martha AnkerJanuary 2019Prepared for: The Global Living Wage CoalitionUnder the Aegis of Fairtrade International, Forest Stewardship Council, GoodWeave1International, Rainforest Alliance, Social Accountability Internationalin partnership with the ISEAL Alliance and Richard Anker and Martha Anker.
Table of Contents1.Introduction . 31.1 Including Family Living Expense Benchmarks in Living Wage Updates . 41.2 Templates for Update Reports and Documentation of Sources . 41.3 Technical Expertise Required for Updating Benchmarks . 42.How to Update Living Wage and Living Expenses Benchmarks. 52.1 Information from Original Living Wage Report . 52.2 Inflation Data . 52.2.1 Inflation Index to Use: Consumer Price Index (CPI) . 62.2.2 Where to find CPI data: National statistical office website usually . 62.2.3 Type of CPI Series to Use . 62.2.4 Examples . 72.3 Documenting Sources . 93.Increasing Net Living Wage and Living Expenses by Inflation . 94.Potential Issue: Anomalies in Inflation in Particular Months . 105.Taxes and Mandatory Deductions . 116.How to Calculate Taxes Due on a Net Living Wage . 157.Calculating Gross Living Wage . 208.Converting Living Wage Estimates to US Dollars for Cross-national Comparison . 219.Conclusion . 22Bibliography . 24Annex 1: Template for Living Wage Update Report. 25Annex 2: Template for Technical Annex to a Living Wage Update Report . 30Annex 3: Note on Seasonality in Inflation and When to Make an Adjustment for Seasonality in PricesWhen Updating a Living Wage to a Non-study Month . 38Annex 4: Additional Living Wage Update Reports . 452
1. IntroductionThe Global Living Wage Coalition (GLWC), comprised of several standard settingorganizations, in partnership with ISEAL Alliance and Richard and Martha Anker, has adoptedthe Anker methodology (Anker and Anker, 2017) for estimating living wages. The GLWC hasalso been responsible for estimating living wages for more than 30 locations across the globe. Akey feature of the Anker methodology, as it is known, is that it estimates the remunerationneeded for a basic but decent standard of living for a particular location and point in time. Thismeans that “it is necessary for a living wage to be updated for inflation over time so that itretains its purchasing power and remains sufficient to support a basic but decent living standard”(Anker and Anker 2017, 339). It recommends that living wage estimates are updated every yearto account for inflation and any changes in laws as regards income tax and mandatory deductionsfrom pay (ibid).1It is necessary to update both the net and gross living wage. The gross living wage is of keyimportance to employers because this is how much money they would need to pay out eachmonth if they paid their workers a living wage. It is thus important to take into account incometaxes and mandatory deductions from pay. Payroll deductions are common and often substantial(e.g. social security taxes and provident fund are 9.34% in Ecuador, 10.88% in Mexico, 10.5% inVietnam and 8% in Sri Lanka); in addition, income taxes can sometimes be substantial even atrelatively low rates of pay. In Malawi, for example, the gap to a living wage is large in partbecause the marginal income tax rate is 30% on income above MKL 35,000 per month(approximately USD 47 as of December 2018). In Ethiopia, the gross living wage fell slightlybetween July 2015 and July 2016 due to a change in tax laws – despite approximately 6 %inflation.The present guidelines explain how to update Anker methodology living wage benchmarks tofuture years, and are an extension of recommendations in Chapter 20 of Anker and Anker(2017). These guidelines highlight potential methodological issues one could face in updatingliving wage benchmarks, and suggest solutions. To test out these guidelines and to make themeasier to understand, we updated Anker methodology living wage benchmark estimates for fourcountries of varied contexts – namely Brazil, India, Pakistan, and South Africa – and we draw onthese updates to provide examples of how to update living wage and living expenses benchmarkestimates. These four living wage update reports are appended in Annex 1 and 4.Please note that these guidelines focus to a large extent on the first time that living wage andliving expenses benchmarks for a particular location are updated. It is expected that updates forfuture years will be easier and quicker, because many of the issues pertaining to a specific1Please note that Anker and Anker (2017) recommend updating a living wage benchmark every 5-10 years foradvances in living standards as a consequence of economic development. This report does not cover that aspect.3
context (such as inflation data availability and choices of a CPI series) will have been resolved inthe first update.1.1 Including Family Living Expense Benchmarks in Living Wage UpdatesIn the Anker methodology, the process of estimating a living wage begins by first estimating theliving expenses for a decent but basic standard of living for a reference size family. The familyliving expenses benchmark estimate is then used to arrive at the net living wage by dividingexpenses by the typical number of full-time workers per couple.However, the living expenses estimate, in addition to being used to estimate a living wagebenchmark for a worker, can also be used to arrive at a living income. Living income, as definedby the Living Income Community of Practice, is “the net annual income required for a householdin a particular place to afford a decent standard of living for all members of that household”.2 Asis evident from this definition, both the Anker living wage and living income share the standardof living that is benchmarked for a family.Accordingly, during the process of updating a living wage, we also update family livingexpenses. The idea is that by updating the family living expenses annually, those stakeholdersinterested in estimating a living income can utilize the updated living expenses estimate. Thisestimate can be updated using the same inflation rate used to update the living wage update, andso does not require additional work. Note that mandatory payroll deductions and income taxesare not relevant for updating living expenses.1.2 Templates for Update Reports and Documentation of SourcesThis paper, in addition to providing guidelines for updating living wage benchmarks, alsoprovides templates for (i) an update report (Annex 1), and (ii) documenting sources ofinformation for inflation, tax rules and rates, mandatory deductions from payroll, and exchangerates (Annex 2). It is important to use the template to ensure consistency and transparency acrosscountries and years. Moreover, by documenting sources of information in detail, this alsofacilitates updating living wage and living expense estimates in subsequent years, because whichdata to use would already have been decided on.1.3 Technical Expertise Required for Updating BenchmarksThe process to update living wage and living expenses requires some technical expertise. Thismeans that updates should be done by researchers who are familiar with the Anker methodology,and who have facility using and interpreting inflation data. Ideally, the researcher is also familiarwith the country 4
2. How to Update Living Wage and Living Expenses BenchmarksUpdating an Anker methodology living wage benchmark requires collecting information fromseveral different sources. This section outlines in a step-by-step manner which information needsto be collected and how to use this information to update a living wage benchmark.2.1 Information from Original Living Wage ReportThe first step to updating a living wage benchmark is to read the living wage report tounderstand the context of the living wage benchmark. Researchers should pay particularattention to how income taxes, payroll taxes, and other mandatory deductions from pay areassessed.The next step is to extract the following information from the original living wage report: Living expenses for a decent but basic standard of living for a reference size familyNet living wageIncome taxes and other mandatory payroll deductions (amounts, tax rules and rates, andsources when provided)Gross living wage (this should be the sum of the net living wage plus applicable incometaxes and mandatory payroll deductions)Most recent GLWC living wage reports follow a standardized outline, and include a summarytable and a key assumptions table towards the end of the report. Therefore, most of the requiredinformation from a living wage report can quickly be obtained from these tables. However, it isalso necessary to carefully read the section of a living wage report concerned with taxes anddeductions from pay and the estimation of gross living wage which explains in detail howpayroll taxes and income taxes are assessed. For example, whether in kind benefits and whichcash bonuses and forms of remuneration are subject to tax.It is important to pay particular attention to sections of a living wage report which (i) describethe context for which the living wage was estimated (such as whether it was for urban or ruralareas, or for a particular city or province, etc.) and, (ii) indicate income taxes, mandatorydeductions from pay, and data sources for these. For example, for Pakistan (Sayeed and Dawani2017), the living wage was estimated separately for urban and rural Sialkot in Punjab Province.There was no income tax due on a living wage and the only mandatory deduction from pay wasfor old-age benefits for urban Sialkot. No information was provided on data sources in thePakistan living wage report for either inflation or mandatory deductions, so there was nothing ofnote there.2.2 Inflation DataThe net living wage in an original living wage report is increased by the amount of inflationbetween the study month and the same month in each subsequent year – using the year-on-year5
inflation rate (for the study month3). Use of annual year-on-year inflation rates implicitly takesseasonality in prices into account (ILO 2004) and for this reason it is the preferred approach forupdating a living wage every year.4We outline below which inflation index and series to use, likely sources for these data, and thedocumentation procedure to use for a living wage update report.2.2.1 Inflation Index to Use: Consumer Price Index (CPI)It is recommended to use the inflation data produced and reported by a country’s nationalstatistical office or ministry. Choosing an inflation index is, however, not always straightforward, because countries often report multiple indexes every month. The Pakistan Bureau ofStatistics, for example, publishes the Consumer Price Index (CPI) and the Sensitive Price Index(SPI) every month.In line with recommendations in Anker and Anker (2017), we recommended that CPI be used forall updates. CPI is almost unanimously accepted as the standard measure for inflation bystakeholders in a country (such as firms, unions, workers, government, NGOs, and civil society)as well as by international buyers, companies and organizations across the globe. Using CPI toupdate a living wage benchmark, will, therefore, be accepted by stakeholders and others. Sincethe CPI is a global standard, it also enables us to have a uniform update process across countries.2.2.2 Where to find CPI data: National statistical office website usuallyAs mentioned above, the CPI is usually published by government (usually by the nationalstatistical office). They have the reach, credibility and resources to carry out the needed pricesurveys. This was the case for all four of the countries where we have updated the GLWC livingwage estimate. Therefore, we recommend using CPI data from a country’s national statisticaloffice or ministry website or publications. For example, the government department responsiblefor publishing CPI in South Africa is ‘Statistics South Africa’, and they publish CPI data on theirwebsite: www.statssa.co.za.2.2.3 Type of CPI Series to UseIt is safe to say that almost all countries report a CPI every month in order to determine inflation– but there may be several different types of CPI series published, at different levels ofgeographic or administrative disaggregation, or for specific types of workers. In India, forinstance, besides the national CPI, the Ministry of Statistics and Programme Implementation alsopublishes separate CPI for each state and for rural and urban areas. Furthermore, the Ministry ofLabour and Employment, Government of India publishes a CPI for Industrial Workers. In South3The study month is the month that the data was collected and living wage estimated for.For a particular conference, workshop, trade show, collective bargaining negotiation, or some other event, theliving wage benchmark estimate may need to be updated to a particular non-study month. In such a case, the yearon-year inflation rate to the study month cannot be used. In this situation, it may or may not be reasonable to usereported CPI index inflation values, depending on the extent to which there is seasonal variation in inflation. Ourrecommended approach to account for this situation is discussed and outlined in Annex 3.46
Africa, the government statistical office reports the CPI by income decile. It is common forcountries to report separate national, rural and urban CPI.It is necessary to decide which of the available potential CPI options to use. The principle werecommend to use is the CPI that is the most representative for workers and the area for whichthe living wage benchmark was estimated. In general, the greater the disaggregation of the CPI,the better it will reflect the actual inflation workers face – but this guidance must be balancedagainst the possibility that a city-specific or region-specific CPI might be not be sufficientlyrobust to use. To understand and determine which CPI is the most representative, informationfrom at least the following three sources should be gathered:(a) Geographic area of the original living wage study and the type of workerscovered. This, as was pointed out in Section 2.1, is indicated in the original countryliving wage report.(b) Types of geographic areas covered by the CPI price survey. This information isusually available in the methodology documents for the CPI published by the agencyresponsible for reporting CPI index data.(c) Number of markets covered in a geographic area and stability of CPI values forgeographic area compared to CPI values for larger area including for country. CPIvalues for a specific geographic area could be relatively unstable, possibly due to a fairlysmall number of markets covered when collecting price data. Such CPI series should notbe used despite their attraction of being location-specific. This requires an expert’sjudgement.2.2.4 ExamplesThese three sets of information, then, can be used to guide which CPI series to use for a livingwage update. We illustrate how to choose a CPI series by using the examples of India, Pakistan,and Ethiopia and (a), (b) and (c) information categories noted above.India example(a) The original living wage benchmark for India was for the garment and textile sector inTiruppur City in Tamil Nadu State (Barge et al. 2018). This is a city in southern Indiawith around 444,444 inhabitants in 2011.(b) The Government of India’s Ministry of Statistics and Programme Implementationcollects monthly price data from 1,181 village markets for rural prices and 1,114 marketsdistributed over 310 towns for urban prices.5 These prices are used to compute the rural,5The detailed sampling methodology is published in a 2015 report titled “Consumer Price Index: Changes in theRevised Series” and is available on the Ministry of Statistics and Programme Implementation’s website and at thefollowing link: http://164.100.34.62:8080/PDFile/CPI-Changes in the Revised Series.pdf.7
urban and combined Consumer Price Index (CPI) each month for each state in India andfor the country as a whole, using 2012 as the base year. There are a sufficient number ofmarkets for these price data to be representative for those areas.In addition, the federal government’s Ministry of Labour and Employment reports a CPIfor Industrial Workers (CPI-IW) and collects price data from 78 “industrially importantcentres across the country”.6 Within Tamil Nadu – our state of interest – these centersare: Chennai, Coimbatore, Coonoor, Madurai, Salem, and Tiruchirapally. All of theseurban centers are bigger than Tiruppur City in terms of population, except for Coonoor,which is much smaller. It is therefore difficult to compare any of them with Tiruppur dueto the differences in size. This we feel makes CPI-IW inappropriate for Tiruppur.Having ruled CPI-IW out, we therefore decided to use the urban CPI for Tamil Nadu, aswe feel that is the most relevant for workers in Tiruppur City.Pakistan example(a) The living wage benchmark for Pakistan was estimated for Sialkot (urban and ruralareas separately). Sialkot is a city in Punjab, Pakistan with a population of around592,000 in 2017.(b) The Pakistan Bureau of Statistics surveys 76 markets in 40 urban centers acrossPakistan; however, of these, only one is in Sialkot. This is too small a sample to use toestimate inflation for urban Sialkot. Moreover, there is no separate price survey for ruralareas or for the province. Therefore, there was no option but to use the national CPI toupdate the living wage benchmark estimates for urban and rural Sialkot.Ethiopia example(a) The living wage benchmark for Ethiopia was estimated for Ziway, a small town witha population of around 44,000 in 2007 approximately 167 kilometers from AddisAbaba. The original living wage study was done in 2015.(b) and (c) The Ethiopia National Statistical Agency publishes CPI for 11 regional statesas well as for the country as a whole.7 Price data comes from a retail market survey of119 ‘purposively selected’ urban market places around the country. This means thatprices are for urban areas only and there are not many markets surveyed in eachregional state. For this
Living expenses for a decent but basic standard of living for a reference size family Net living wage Income taxes and other mandatory payroll deductions (amounts, tax rules and rates, and sources when provided) Gross living wage (this should be the sum of the net living wage plus applicable income
3.2. Number of full-time workers in the reference family 24 3.3. Net and gross living wage, payroll deductions and income tax 25 3.4. Wage ladder and the living wage in context 27 SECTION IV. CONCLUSION 29 ANNEX. REPRESENTATIVENESS OF THE STUDY LIVING WAGE FOR SURROUNDING AREAS 31 REFERENCES 36
8008.*3 x slim power banks inc. choetech and mophie 8009.*3 x power banks inc. anker, ravpower and easyacc 8010.*3 x power banks inc. huawei and mophie 8011.*5 x power banks inc. anker, technet, ey, bytech and mobiio power 8012.*3 x power banks inc. anker, romoss and mophie 8013.*
3 PREVAILING WAGE IS DIFFERENT FROM MINIMUM WAGE AND LIVING WAGE. The most common form of government regulation of wages is the requirement that employers abide by a minimum wage that is the lowest possible rate of compensation an employee may be paid legally. The minimum wage set by the federal government is currently 7.25 an hour.2 State
Define a living income and a living wage as a human right and as a starting point. Establish a living income and a living wage as a guiding principle within all Ministries. Be persistent in the necessity of quantifying a living income and a living wage. Follow up concretely on the commitment to support the development of a living income reference
Zonas rurales del Ecuador Región Costa meridional En el contexto del sector bananero Noviembre de 2016 Autores: Janette Ulloa Sosa, Víctor López, Patricio Sambonino, Richard Anker y Martha Anker Fotografía: Cortesía de la Alianza Internacional para la Acreditación y el Etiquetado Social y Ambiental (ISEAL) Serie 1, Informe 21
requires contractors apply the appropriate wage decision(s) and indicate the wage decision(s) to be applied to their payroll records for their portion of the contracted work performed. c. Posting Wage Decisions. Prime contractors are required to post a copy of the wage decision(s), the Application of Wage Decisions, and any approved additional
prevailing wage rate determination on your DGLVR project If prevailing wage applies to your project, you must bid the project as a prevailing wage project and include the prevailing wage rates in the contract with your contractor The prevailing wage determination is valid for 120 days from the date of issue. If there is no signed
accounting and bookkeeping principles, practices, concepts and methods featured in the unit and there was good evidence of preparation and practice with regard to structure, format and presentation of accounting data and information among the sound financial statements, double-entry bookkeeping and cash budgets submitted. That said, this is not a unit solely of numbers or arithmetic and there .
