Toward the Pursuit of What People Value: Determining a Living Wage Based on Capability Gaps

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This study sought to initiate conversations on the utility of the capability approach and a psychological lens in approximating a living wage. We put forth the concept of capability gap – defined as the difference between what one values and what one perceives as attainable. We used a set of valued domains of a good life that were identified based on well-being indicators in determining capability gaps. Five hundred workers (all breadwinners) belonging to households selected through stratified random sampling from purposively chosen middle- and low income communities in the Philippines participated in the survey. From the data; we constructed a weighted capability measure that determinesthe capability gap; weighted by the perceived importance of each of the good life domains. We likewise derived an estimate of a living wage that yields a weighted capability that represents individuals’ capabilities to achieve and pursue valued outcomes; freedoms; and entitlements. This initial attempt at estimating a living wage based on individuals’ capability to achieve and pursue a good life is presented as the main contribution of the research. The limitations of the study as well as its implications to living wage research and policy are discussed.