Calculating Wage Gaps and Living Wage

What is a living wage?

Living wage varies based on where you live and is broadly defined as the amount a person needs to be paid during an average workweek to achieve a decent standard of living for their family. It can change based on the local cost of living, how many earners are in a household, and how many people are being supported.

A living wage is different from a minimum wage. A living wage is calculated based on current circumstances while a minimum wage is set by the government.

How do I determine the living wage for my business?

Some regions already have a defined living wage:

• In the U.S., you can use the MIT Living Wage Calculator
• The Living Wage Resource Library of Global Living Wage Coalition covers an additional 36 regions

If there is not a defined living wage for your region, you will need to calculate it. GOTS recommends using the living wage calculator from amfori BSCI. The calculator uses information about the cost of living in your region to define a living wage for a full workweek.

How do I determine the wage gap for my business?

The wage gap is the difference between the defined or calculated living wage for your area and what your workers are paid.

I.e. Living Wage – Actual Wage = Wage Gap

Do I need to pay my employees the defined living wage?

In the new GOTS version 6.0, all certified businesses need to have a plan in place to work towards paying workers the defined living wage for their area. OTCO encourages all GOTS-certified businesses to work towards closing the wage gap, as it may be required in the future.