Abstract
The concept of a living wage is defined by quality of life and work life, not merely economic subsistence. It extends to adequate participation in organizational and social life. In development economics, these crucial components of “decent work” connect with “capabilities”, whose development is important to individuals, organizations and society. However, the links between income and capabilities remain unknown, and living wages are often set by fiat. By integrating theories from development studies, management, psychology and employment relations into a single concentric, contingency model, the authors derive a series of propositions with which to test this context‐sensitive model in empirical research.