The living wage is a concept central to the Catholic social teaching tradition beginning with the foundational document Rerum Novarum, a papal encyclical by Pope Leo XIII, issued in 1891 to combat the excesses of both laissez-faire capitalism on the one hand and communism on the other. In this letter, Pope Leo affirms the right to private property while insisting on the role of the state to require a living wage. The means of production were considered by the pope to be both private property requiring state protection and a dimension of the common good requiring state regulation.
Pope Leo XIII first described a living wage in terms that as could be generalized for application in nations throughout the world. Rerum Novarum touched off legislative reform movements throughout the world, eliminating child labor, reducing the work week, and establishing minimum wages.
“If a worker receives a wage sufficiently large to enable him to provide comfortably for himself, his wife and his children, he will, if prudent, gladly strive to practice thrift; and the result will be, as nature itself seems to counsel, that after expenditures are deducted there will remain something over and above through which he can come into the possession of a little wealth. We have seen, in fact, that the whole question under consideration cannot be settled effectually unless it is assumed and established as a principle, that the right of private property must be regarded as sacred. Wherefore, the law ought to favor this right and, so far as it can, see that the largest possible number among the masses of the population prefer to own property.” (#65)
“Wealthy owners of the means of production and employers must never forget that both divine and human law forbid them to squeeze the poor and wretched for the sake of gain or to profit from the helplessness of others.” (#17)
“As regards protection of this world’s good, the first task is to save the wretched workers from the brutality of those who make use of human beings as mere instruments for the unrestrained acquisition of wealth.” (#43)
“Care must be taken, therefore, not to lengthen the working day beyond a man’s capacity. How much time there must be for rest depends upon the type of work, the circumstances of time and place and, particularly, the health of the workers.” (#43)
- “…(T)he wealthy class violates (the common good) no less, when, as if free from care on account of its wealth, it thinks it the right order of things for it to get everything and the worker nothing, than does the…working class when, angered deeply at outraged justice and too ready to assert wrongly the one right it is conscious of, it demands for itself everything as if produced by its own hands, and attacks and seeks to abolish, therefore, all property and returns or incomes, of whatever kind they are or whatever the function they perform in human society, that have not been obtained by labor, and for no other reason save that they are of such a nature.” (#57)
In public policy, a living wage is the minimum hourly income necessary for a worker to meet basic needs (for an extended period of time or for a lifetime). These needs include shelter (housing) and other incidentals such as clothing and nutrition. In some nations such as the United Kingdom and Switzerland, this standard generally means that a person working forty hours a week, with no additional income, should be able to afford a specified quality or quantity of housing, food, utilities, transport, health care, and recreation. In addition to this definition, living wage activists further define “living wage” as the wage equivalent to the poverty line for a family of four.
The living wage differs from the minimum wage in that the latter is set by law and can fail to meet the requirements of a living wage – or is so low that borrowing or application for top-up benefits is necessary. It differs somewhat from basic needs in that the basic needs model usually measures a minimum level of consumption, without regard for the source of the income. A related concept is that of a family wage – one sufficient to not only live on oneself, but also to raise a family, though these notions may be conflated.
The ILO uses various criteria to recommend minimum wage levels: the needs of workers and their families, the general level of wages in a county, the cost of living, social security benefits, the relative living standards of social groups and economic factors such as economic development and employment maintenance. The living wage focuses more on the needs of worker units, social security benefits and cost of living.
Poverty threshold is the income necessary for a household to be able to consume a low cost, nutritious diet and purchase non-food necessities in a given country. Poverty lines and living wages are measured differently. Poverty lines are measured by household units and living wage is based off of individual workers.