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The living wage gap—a quantitative measure of poverty in global supply chains

  • SOCIETAL LCA
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Abstract

Purpose

This paper explores the definition of fairness and reviews recent developments for methods, data and models for the social life cycle assessment (S-LCA) fair salary subcategory indicator. The living wage gap (LWG) is proposed as a new indicator for quantifying poverty in global supply chains, with particular relevance to sustainable development goal (SDG) 1 no poverty.

Methods

Ethical theories and existing S-LCA fair salary methods are reviewed to define arguments and limitations for defining a fair salary. The LWG is then expressed as a S-LCA fair salary subcategory indicator following existing typologies. The computational structure of the LWG is defined using existing methods for the living wage, value added and the Leontief price model. A general modelling framework is developed to accommodate initiatives since the publication of the S-LCA methodological sheets and to discuss challenges and opportunities for implementation.

Results and discussion

The LWG is a S-LCA type II quantitative fair salary subcategory indicator for the impact category of working conditions. The evaluation of fairness is limited to basic needs. A broader definition of fairness requires meeting other primary social goods such as liberties and freedoms for workers and limiting inequality based on primary social goods of the least advantaged. The modelling framework draws upon background models to identify areas for primary data collection and provide a complete system boundary. A novel use of the Mincerian earning function is applied for estimating the average LWG for LCA process data. The development of both LCA price data and detailed multi-regional input–output models are discussed for addressing uncertainty for industry and geographic resolution. The foreground model draws upon Ankers method for primary data collection, which has been noted in many S-LCA fair salary initiatives and has been adopted by a consortium of ethical trade organisations.

Conclusions

The LWG is a limited measure of fairness which focusses on basic needs of workers and directly addresses UN SDG 1 no poverty. The method and modelling framework show the potential to use recent developments to calculate the LWG for the whole supply chain. Research is recommended for Living Wage Benchmarks to capture urban, rural and regional differences within a country and to consider gender in LWGs. Collaboration with ethical trade labelling initiatives is also recommended to address these challenges and to gain policy impact.

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Fig. 1

adapted from Neugebauer et al. (2017)

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Notes

  1. The Mincerian earnings function (MCF) shows that wage levels increase with increasing education up to about 15 years of education. This means that, regardless of what is being produced, if the same skill levels are required, then the wage distribution will be the same. For example, the MCF shows that earnings for low skilled labour in the agricultural sector will be the same regardless of whether the workers pick apples or oranges.

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Acknowledgements

Acknowledgements to Professor Pierre Mukheibir and Professor Cynthia Mitchell, Institute for Sustainable Futures, University of Technology, Sydney, for support for the initial draft of the manuscript.

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  1. Living Wage Check, Brisbane, Australia

    Murray R. Hall

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  1. Murray R. Hall
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Correspondence to Murray R. Hall.

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Communicated by Marzia Traverso.

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Hall, M.R. The living wage gap—a quantitative measure of poverty in global supply chains. Int J Life Cycle Assess 26, 1867–1877 (2021). https://doi.org/10.1007/s11367-021-01945-7

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