In search of income reference points for SLCA using a country level sustainability benchmark (part 2): fair minimum wage. A contribution to the Oiconomy project

Purpose: This paper is part 2 of our twin articles on income reference points for social life cycle assessment (SLCA). The purpose of this article is to provide a well-founded fair minimum wage standard, which enables the determination of the preventative costs for the impact category of unfair prices for labour in preventative costs-based SLCA. Methods: A five-step procedure was followed, comprising of (1) definition of the impact category and characterization factor, (2) a literature survey on standards and practices on fixing of minimum and living wages, (3) our proposal of a fair minimum wage based on the principles set in ILO conventions, the $2 World Bank moderate poverty line and a country level benchmark, (4) a literature study on current sub-fair wages and (5) a proposal of how to use the findings. For justification of the results, the results were compared with other systems and tested the sensitivity of the results to changes in the composition of the benchmark group of countries. Results and discussion: Because literature showed that an absolute minimum wage is only suited for the lowest-income countries and relative minimum wage only for higher income countries, this paper proposes a relative system, bottom cutoff by an adjusted absolute minimum wage. The mean proportion of the minimum wage of the gross national income (GNI) per capita in a benchmark group of the top 20 % performing countries in the Sustainable Society Index—Human Development, is used as the relative principle for a fair minimum wage. The proposed absolute minimum wage is based on the 2005 World Bank $2 (PPP) poverty line. The proposed relative system, based on 2011 data, is 44.4 % of a country’s GNI per capita and the proposed absolute minimum wage is $1547 (PPP) per year and $0.830 (PPP) per hour. Conclusions: A well-founded set of fair minimum wage targets is proposed for 183 countries to be used in SLCA and beyond. We also propose to use the difference between actual payment and a target determined according to the here presented methods as the measure in preventative costs-based LCA, such as the EcoCost system and the Oiconomy system.