How can wages sustain a living? By getting ahead of the curve

Abstract

Work may be a panacea for poverty but the world of work in 2018 is characterised by ‘Working Poverty,’ including poor wages. Living wages are a contested idea for resolving the paradox, with empirical evidence on how they might do so being scarce. Theoretically, a living wage enables people to escape from poverty traps, indicated by qualitative improvements in quality of work and life beyond a set income. Alternatively, diminishing marginal returns suggest that any wage is a good wage, particularly at low pay levels. We explored these possibilities with almost 900 low-income workers across two diverse countries, New Zealand and South Africa, on reliable indicators of workplace justice, job quality, and life satisfaction. A coherent pattern occurred: trap-rise-pause-rise. At wages below ± $2000 per month, workers felt trapped in injustice, disengagement and dissatisfaction; above, they reported the opposite. This rise was starker in South Africa, where income inequality was highest. After a pause in satisfaction level (rising aspiration/relative deprivation), levels rose, with diminishing marginal returns. This pattern of trap-rise-pause-rise links two ‘competing’ theories of sustainable livelihood. Each matters but at different points on one wage spectrum. Wages may become ‘living’ only once they get ahead of a cusp in a wages-wellbeing curve, at a point or range determined empirically. Replicating this pattern across two very different countries suggests robustness, and may be a promising step towards a science of sustainable livelihood. However, we still require more systematic sampling, across more countries and groups, before the findings may be generalized.