Insights on Living Wage from the Research of IPSP -27-Oct-Informality and the Living Wage, Ravi Kanbur

How can we better understand the dynamics of living wages worldwide and their impact on our economies and societies? The International Panel on Social Progress (IPSP), in collaboration with the OECD WISE Centre, is addressing this question through new research on how living wages affect poverty, income distribution, productivity, and informality. This research also explores the enablers and barriers to implementing living wages, examining how public and corporate policies can align to raise wages and support informal workers where economic conditions allow. This webinar presented preliminary research findings and discussing how they can inform policy initiatives across OECD countries.

1. Informality and the Living
Wage
Ravi Kanbur
www.kanbur.dyson.cornell.edu
Presentation at OECD
27 October 2025

2. •Based on ongoing work and discussions with Marty Chen, Elva
Lopez Mourillo, Daniel Kostzer, Romina Boarini and the Living
Wage Working Group of IPSP.

3. •A Living Wage is the wage level necessary to afford a decent
standard of living for workers and their families.
•The informal economy encompasses a wide range of activities not
regulated by formal legal frameworks or covered by social security
systems.
•Only 30% the world’s workers are formal wage workers and thus
directly impacted by Living Wage.
•For the remaining 70%: 10% are formal but non-wage; 20% are
wage but informal; and 40% are both informal and non-wage.

4. Workers in the World 2018 (billions)
ILO Data
Informal Formal Total
Wage Work 0.7 1.0 1.7
Non-Wage
Work
1.3 0.3 1.6
Total 2.0 1.3 3.3
:

5. •Informal workers and their families suffer disproportionately from
income poverty, human development deprivation and exposure to
risk.
•Yet implementation of a Living Wage can have only an indirect
effect on the standard of living of those in informal employment.
•What to do for them--the 70%?
•We argue that the Living Wage perspective is still useful and
important, but it needs to be broadened and modified
appropriately.

6. •For those in informal wage employment (20% of all workers),
extension of minimum wage coverage and compliance, and of
collective bargaining, is a key component in improving the
wellbeing of informal workers by ensuring a Living Wage.

7. Panel A. Percentages of domestic workers with
minimum wage coverage, 2020

Panel B. Progress in the extent of minimum
wage coverage of domestic workers since
2010

61.6
5.1
32.1
45.8
8.6
35
0 10 20 30 40 50 60 70
No statutory
minimum wage
applicable to
domestic workers
Minimum wage
for domestic workers
is lower than
for other workers
Minimum wage
for domestic workers
is the same as or higher
than for other workers
% domestic workers
Coverage today with 2020 lawsCoverage today had the laws not changed since 2010

8. •What about those in informal non-wage employment (40% of all
workers—the largest category)?
•These include individuals who operate single-person enterprises,
such as street vendors, waste pickers, artisans, handloom
weavers, and independent taxi drivers.
•Many produce goods or services from their own homes.
•Other classifications: outworkers who are sub-contracted by lead
firms or their contractors in supply chains (called homeworkers if
they work from their own home)

9. •For these workers a different, though related, perspective is needed in
determining Living Income rather than a Living Wage.
•While the basic principles underlying calculation of the costs of
attaining a decent standard of living for workers and their families are
similar for all workers, the translation to the income side has to be
done separately for each specific non-wage context since there is no
longer a defined wage per unit of time worked.

10. •Despite the challenges there are several promising examples
which also highlight the underlying principles of the calculation.
•For industrial and agricultural outworkers or sub-contracted
workers who produce goods from their homes for global supply
chains, the key factor is that they receive piece-rate payments, not
wages.
•Organizations of home-based workers have been working with
allies to estimate, first, minimum piece rates (the equivalent of a
minimum wage) and, then, living piece rates (which include costs
of production absorbed by homeworkers).

11. •Implementing Living Income for Informal Non-Wage Workers:
•Extending Labor Laws to dependent contractors (eg Philippines
Labor Code).
•Organizing and Collective Bargaining vis a vis supply chains: in
keeping with practices in formal wage employment, encourage
and support the formation of organizations of informal workers
who can then engage in collective bargaining with their powerful
counterparts. Example of SEWA in India, www.sewa.org.

12. •Organizing vis a vis local governments.
•For many informal non-wage workers, organizing is not just a
means of negotiating with their purchasers in a supply chain, but
also for addressing the conditions of work that are determined by
their own local governments, since much of the work is done at
home (home based workers) or in the street (street vendors).
•Again, example of SEWA in India, www.sewa.org.

13. •Final points:
•A Living Wage for formal workers can nevertheless have beneficial
effects for all workers and their families through spillover effects
on the economy as a whole.
•Further, strategies of social protection can strongly complement
expansion of Living Wage and Living Income to improve the
wellbeing of all workers, formal and informal.
•Addressing these challenges requires improving data collection
methodologies economy-wide, increasing the coverage of
informal workers in surveys, and establishing more robust
systems to track informal labour markets.

14. Thank You!