UC Santa Barbara

Abstract We estimated the global living wage gap (LWG) as $US674 billion per year, which is comparable to the gross domestic product (GDP) of Switzerland. India (IND), the largest LWG country, contributed 32% of the global LWG. For a pair of jeans, closing the gap increases low-skilled cotton and textile wages in IND by 137% and 52%, respectively, while the retail price would increase only by 8% if consumed in Western countries. However, we found that most of the outputs with large LWGs from low-income countries are consumed domestically, suggesting that (a) closing the gap significantly increases the domestic price of products such as agriculture and textiles in low-income countries; and that (b) living wage premiums in high-income countries alone have a limited impact on closing the global LWG. The results highlight the need for both ethical trade and domestic living wage initiatives to close global LWGs.