Living wage

A living wage is defined as the minimum income necessary for a worker to meet their basic needs.^[3] This is not the same as a subsistence wage, which refers to a biological minimum, or a solidarity wage, which refers to a minimum wage tracking labor productivity. Needs are defined to include food, housing, and other essential needs such as clothing. The goal of a living wage is to allow a worker to afford a basic but decent standard of living through employment without government subsidies.^[4] Due to the flexible nature of the term "needs", there is not one universally accepted measure of what a living wage is and as such it varies by location and household type.^[5] A related concept is that of a family wage – one sufficient to not only support oneself, but also to raise a family.

The living wage differs from the minimum wage in that the latter can fail to meet the requirements for a basic quality of life which leaves the worker to rely on government programs for additional income.^[6] Living wages have typically only been adopted in municipalities. In economic terms, a minimum wage is a price floor for labor created by a legal threshold, rather than a reservation wage created by price discovery. The living wage is one possible guideline for determining a target price floor, while a minimum wage is a policy to enforce a chosen price floor.

In the United Kingdom and New Zealand, advocates define a living wage to mean that a person working 40 hours a week, with no additional income, should be able to afford the basics for a modest but decent life, such as, food, shelter, utilities, transport, health care, and child care.^[7][8] Living wage advocates have further defined a living wage as the wage equivalent to the poverty line for a family of four. The income would have to allow the family to 'secure food, shelter, clothing, health care, transportation and other necessities of living in modern society'.^[9] A definition of a living wage used by the Greater London Authority (GLA) is the threshold wage, calculated as an income of 60% of the median, and an additional 15% to allow for unforeseen events.^[5]

Living wage campaigns came about partially as a response to Reaganomics and Thatcherism in the US and UK, respectively, which shifted macroeconomic policy towards neoliberalism.^[10] A living wage, by increasing the purchasing power of low income workers, is supported by Keynesian and post-Keynesian economics which focuses on stimulating demand in order to improve the state of the economy.^[10]