Guiding B Corps through the new living wage era

How the living wage space is evolving, and our new application guidance for B Corps.
By Bernard Gouw, Senior Social Standards Manager, B Lab Global
July 18, 2022

Bernard Gouw, Senior Manager, Social Standards at B Lab Global, takes us through the latest developments on how living wage practices are measured in the B Impact Assessment — and what that means for B Corps.

  • The living wage space is fast-evolving. There are new organizations, tools, and resources that are relevant for B Corps.

  • To address these developments, B Lab Global is launching new application guidance on living wage.

  • In the new guidance, we accept more benchmarks and upgrade our verification approach to include a more deliberate use of third-party living wage accreditation and a closer look at how prevailing wages are calculated.

  • There will also be more guidance for B Impact Assessment users, B Corps, and the wider public.

I remember working on living wage at my first job at Oxfam around ten years ago. At that point, few companies had bought into the idea — and a common excuse for inaction was a lack of credible living wage benchmarks. 

“How can we pay a living wage if we don’t know what a living wage is?” 

This was a frustrating time for living wage advocates. A living wage is a human right — a wage that allows an individual to afford a decent standard of living for themself and for their family. It is also an enabling right, meaning it allows other human rights to be fulfilled (e.g. right to education, right to health). Unlike minimum wages, which are the lowest permitted by law, living wages are based on benchmarks determined by specialist organizations. Field researchers visit local shops; they speak to people about their cost of living to determine what wages they actually need to cover their expenses. This is an evidence-based approach to fulfilling a long-neglected human right.

How is the conversation on living wage changing? 

Fortunately, in the decade since my time at Oxfam, a fundamental shift has occurred in the living wage landscape. There is now widespread acknowledgment that minimum wages usually do not allow people to afford a decent standard of living. Yet there have been other key developments: 

  • Matured corporate views on needing to go beyond compliance with legal minimum wage (in part because of the UN Guiding Principles on Business & Human Rights)

  • New living wage benchmarks providing more data on a wider range of countries and populations

  • More organizations that accredit companies on living wage

  • Consensus on the core elements of a living wage definition — for example that it should cover not only an individual, but their family as well 

What are the new living wage benchmarks? 

Crucially, there has also been a shift in what is expected of living wage benchmarks, moving from in-depth, highly-localized, and time-intensive benchmarks to versions that are more cost-effective and provide broader geographical coverage. There is value in both approaches, so the question is: what is the ideal balance?

The Ankers and the Global Living Wage Coalition’s answer was to develop the Anker Reference Value, a lighter version of their pioneering but time-intensive methodology. In addition, new benchmarks, such as WageIndicator and Fair Wage Network, have emerged with new business models. They offer living wage benchmark data for multiple countries that must be purchased. The more companies that purchase data, the more countries they can cover — and the more they can invest in their research.

In the United States, a new standard, certification, and benchmarking nonprofit called Living Wage for US launched at the end of 2021. They offer free benchmark data for the U.S., while charging for accreditation and detailed assessment of total prevailing wages (inclusive of benefits) and its contribution to achieving living wage payment. They are making exciting methodological advancements, such as factoring in commuting zones to better capture the nature of people’s mobility.

As new benchmarks emerge on different parts of this spectrum between depth and breadth, benchmark users are forced to determine what is "good enough." The first organization to tackle this methodically was IDH. They developed a framework to assess living wage methodologies and publicly post which meet their requirements. This work made it easier for us to increase the number of benchmarks that we accept, which in turn means more companies can have their living wage work reflected in the B Impact Assessment. By aligning with IDH and IDH’s living wage roadmap, we help harmonize approaches in the living wage space.

Who benefits from a living wage? 

Living wage is not just about people getting more money. It is about creating an inclusive economy where all workers earn a wage that enables them to live with dignity. Around the world, there are populations that experience marginalization at intersections of race, gender, class, disability, education level, language ability, immigration status, and other factors, leading to wage inequality and poverty wages. By paying a living wage — going beyond the legal minimum to provide people with the resources needed to support themselves and their families — companies transform patterns of exclusion and oppression into empowerment. Fostering this practice among B Corps and all companies that use our standards to measure and manage impact is in alignment with B Lab’s dedication to justice, equity, diversity, and inclusion (JEDI). 

What’s changing in B Lab’s standards?

Developments in the living wage space, including IDH’s work and the introduction of new benchmarks, have prompted B Lab to develop new living wage application guidance. The new guidance:

  • Recognizes new living wage benchmarks so that more B Corps and more workers can benefit from a living wage. This includes new benchmarks in the U.S. and Canada, as well as two global benchmark providers.

  • Recognizes third-party living wage accreditation to leverage the hard work of others and simplify our verification.

  • Takes a closer look at how B Corp applicants are calculating prevailing wages to get a more accurate picture of whether living wages are being paid.

  • Includes updated and comprehensive guidance to better support companies on their living wage journey. This guidance is free and accessible to all, even those outside the B Corp community.

We are also working hard to implement changes for the long term, as part of the new performance requirements. Fair Wages, which will include living wage, will be one of around ten topics in the new standards.

How does this impact companies applying for B Corp Certification?

The new application guidance will not apply to companies that have submitted their B Impact Assessment in the past three months, unless these companies want to update their answer according to the updated guidance. This is because they will not have had time to read, understand, and implement the new guidance.

For companies in the pipeline that are using a newly-accepted benchmark, this new guidance means there may be opportunity to earn additional points on the living wage questions.

Where companies operate in locations with no (free) living wage benchmark, the option of N/A will remain available. B Corps will not be required to purchase living wage data.

Looking ahead

We’re very excited about this launch. We’re harnessing the hard work done by other organizations and offering more companies the opportunity to have their living wage work reflected in the B Impact Assessment. This new guidance captures the most pressing updates, but we recognize we’ll need to continue evolving. We’ll continue evaluating new benchmarks and reflecting on what we should expect of companies on living wages. In the new performance requirements, we’ll look at other aspects of "fair wages" beyond a living wage. But the living wage requirement will be rooted in this new guidance to provide consistency for B Corps.

Learn more about the new application guidance and benchmarks at B Lab’s Knowledge Base: English | Spanish | Portuguese | French | Italian

In his role as Senior Manager Social Standards at B Lab, Bernard Gouw (he/him) thinks about what it means for companies to “be a force for good” when it comes to people. Labor and human rights have been common threads throughout his career, which includes organizations such as Oxfam and the United Nations.

Bernard joined B Lab in October 2021 and works within the Standards Management Team on improving guidance for the existing B Corp performance requirements, including on living wage. Another priority for Bernard is working on the new B Corp performance requirements. The topics he leads on are fair wages, JEDI (Justice, Equity, Diversity & Inclusion), worker empowerment, and human rights.

B Lab Standards, Living Wage, JEDI

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