How to Find the Most Inclusive Living Wage

Abstract: Not all living wage standards are equally inclusive. Mainstream ‘shopping basket’ calculations for determining the living wage do not capture the diverse needs and experiences of workers and their households, and/or only identify an indeterminate living wage range. Addressing these concerns is an alternative approach which measures wages and wellbeing directly, using induction to discover not only the wage range in which there is a cusp in wellbeing but also how far it can be adjusted as a psychometric cutoff score to maximize the number of workers and households benefitting, in-context, from its coverage. Evidence from a study of wage and wellbeing conducted in New Zealand, before and during the COVID-19 pandemic, reveals that applying this protocol could have provided a significantly greater number of individuals and households with a functional living wage. Some of the wellbeing indicators used have theoretical and empirical links to work productivity. This psychometric protocol thereby addresses both halves of Sustainable Development Goals (SDG) 8, i.e., Decent Work and economic prosperity. It may render econometric methods, based on shopping basket assumptions and conducted largely by fiat, unnecessary.