December 20, 2021 Liana Khanaghyan

Decent Work: Realizing Living Wage in Mbale, Uganda

Co-authored by: Daniel Pedersen, Liana Khanaghyan, and Rebecca Spohrer

The Challenge Fund for Youth Employment (CFYE) strives to create decent employment opportunities for youth. But what does decent employment mean in practice?

The International Labor Organization (ILO) defines decent work as work that, amongst others, pays a fair wage, provides security in the workplace, is conducive to personal development, and assures freedom for the workers to organize and engage in the decisions that impact their lives. Based on this convention, CFYE considered multiple elements of decent work and set guidelines for three of them in its first call for proposals in Uganda: the ability of projects (or jobs) to provide a living wage or living income, not exceeding a maximum number of working hours, and ensuring the minimum legal working age.

To understand how the youth in the country perceives decent work, some of CFYE’s Youth Ambassadors in Uganda carried out action research. They asked the participants (19-34 years old) what would constitute a decent job for them. The responses demonstrated that both monetary and non-monetary rewards were essential for the youth. Many mentioned that a decent job should provide security and respect and foster an environment where one can develop their professional and personal skills. The most significant component the participants noted, however, was earning enough. The majority of respondents emphasized that a decent job should provide a wage that allows for extra expenses/savings after covering basic costs, such as rent, food, and healthcare. This points to the urgent desire of Ugandan youth to earn a wage that transcends affording the bare necessities.

There are currently limited regulations and practices governing minimum wage in Uganda. A few living income & wage benchmarks have been developed by non-governmental associations, e.g., WageIndicator Foundation. This limits the ability of our implementing partners to accurately measure the number of decent jobs created. In addition, most methods to calculate a living wage are too costly and time-consuming for our implementing partners to conduct themselves.

In order to close this information gap, we partnered with the strategy consultancy NewForesight and one of our Ugandan implementing partners, Balloon Ventures, to conduct a living wage benchmark for the peri-urban region of Mbale in Uganda. Balloon Ventures helps small businesses in the brick-and-mortar industries by providing financial and technical assistance to foster business growth and long-term success.

What is a living wage?

A living wage (LW) is a remuneration paid to an employee that is sufficient to afford a decent standard of living and covers the basic needs of the worker and their family, helping to create a life of dignity. Elements of a decent standard of living include food, water, housing, education, health care, transportation, clothing, and other essential needs, including provision for unexpected events. A living wage is not the same as a country’s legal minimum wage, as the latter does not always guarantee a decent life. Thus, the living wage benchmark aims to close the gap between subsistence (minimum) wage and a wage for a basic but decent standard of living.

LW benchmark tool

A living wage benchmark allows assessing living wage gaps and determining the number of jobs that qualify as decent. A living wage must be relevant to local conditions, considering the local customs and consumption patterns one should be able to afford for a basic standard of living. Therefore, NewForesight set out to establish an LW benchmark that would accurately reflect the socioeconomic conditions in Eastern Uganda while also creating a tool that CFYE could use more broadly to develop locally-applicable LW benchmarks for other countries and regions.

The initial focus was to determine a living wage proxy applicable for Balloon Ventures-supported businesses. The benchmark would look at the living conditions and expenditures in the peri-urban Mbale region in Eastern Uganda, covering areas adjacent to cities or urban districts. NewForesight applied the Anker Methodology and other reference guidelines to estimate the costs of food, housing, and non-food non-housing expenditures for a reference size household in the region. NewForesight’s methodology relied on input from local experts, global databases, and, to a lesser extent, data collection in Mbale to develop a more time- and cost-efficient proxy benchmark.

The result of the study established that, for peri-urban Mbale, a reference size household consists of 6.7 people – two adults and 4.7 children. For these families, a basic but decent life costs a total of $354 (USD) gross a month. The estimation considered the costs of what constitutes decent food (e.g., the nutritious makeup of the regional diet) and decent housing in the region. It also includes non-food, non-housing expenses and a margin for unexpected and miscellaneous events. NewForesight’s tool demonstrated that for a typical Mbale household with 1.5 earners, decent living would require a monthly gross wage of $270 per FTE.

LW of Balloon Ventures businesses

Having established the living wage benchmark for the Mbale peri-urban area, our teams evaluated the wages of Balloon Ventures-supported enterprises at baseline in relation to national average wages, regional poverty lines, and the NewForesight-established LW benchmark. It became evident that the median wages for Balloon Ventures-supported small and growing businesses (SGBs) are currently higher than the Eastern Ugandan average. Despite this, there is still a gap to close between current median wages and the living wage benchmark developed by NewForesight;  median wages will need to increase by two to three times to reach the revised living wage threshold.

LW gap based on gender and job category

A multitude of personal and professional circumstances determine who earns a living wage in Mbale. The most prominent of these are gender and the professional position one holds. For example, female employees in small and growing businesses (SGBs) consistently earn less than their male counterparts, although this difference shrinks when formal labour contracts are introduced. By the same token, employees working in Clerical Support, Service and Sales, Skilled Agriculture, or holding Professional Associate positions show some of the most significant gaps to reach a living wage.

Towards a living wage for all

Our close collaboration with NewForesight helped us understand the intricacies of accurately measuring a living wage: setting ambitions in line with the country’s economic reality and considering key demographic and lifestyle factors that can potentially influence the wage benchmark. The insights we gathered empower us to work out a tailored (job category-specific) incremental plan with Balloon Ventures to help SGBs close the living wage gap over the coming years.

Our commitment to decent work encourages us further to raise awareness on living wage among our implementing partners. We also aim to continue exploring and implementing practical approaches to help our partners reach a state where they can provide a living wage to all their employees.

We’d like to thank all CFYE and NewForesight colleagues who contributed to this publication.

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