Level pay: vector for social progress

Several measures allow companies to take into account the concept of “living wage” and limit the risks associated with it.

Decent pay is a vector of social progress that enables employees to make a decent living from their work, and it is back in the public debate. While waiting for a convention and a universal calculation method, several measures allow companies to take this view into account and limit the risks associated with it.

The concept of living wage appeared at the beginning of the XXand century, with the establishment in 1919 of the International Labor Organization (ILO). Subsequently, the concept was raised many times in international texts (Universal Declaration of Human Rights, Tripartite Declaration on the Principles of Multinational Enterprises and Social Policy).1ILO Declaration2…).

According to the ILO, the living wage3 (similar terms in French and English: living wage, decent wage and reasonable wage, decent wage) should allow a worker and his family to live decently. It must include food, housing, education, clothing, social protection, transport, but also savings and leisure.

According to the ILO, although 92 per cent.4 of its member states have one or more legally set minimum wages, these wages do not guarantee a living wage in some countries.

Level pay and its four pillars – job creation, social protection, rights at work and social dialogue – are key elements of the UN’s 2030 Agenda for Sustainable Development through the Sustainable Development Goal5 (SDG) 8 – Decent work and economic growth, a goal largely taken up by companies.

The goal is to create a dynamic in social progress by giving employees the opportunity to live properly from their work with reasonable working conditions.

Receiving a decent salary for his work is a fundamental human right. The level wage must apply to all employees, including in countries where the standards are inadequate or non-existent, and must relate to all companies’ supply chains.

As a responsible investor, our investment decisions are guided by consideration of social and societal criteria and respect for human rights.

For a company, the risk associated with the living wage can be operational, regulatory, structural or reputational and can therefore have financial consequences in the short or medium term.

If rules and legislation continue to strengthen, social dumping can6 is no longer acceptable, in addition to the operational risk (social movements, work stoppages, etc.), companies are exposed to structural risks (unsuitable business models) and should change their economic model.

How to absorb the increase in labor costs?

The final cost can be significant for the business. Will it be shared by all stakeholders (suppliers, intermediaries, distributors and / or consumers)? At this point, no company has yet spoken.

Companies that manage these risks correctly (reconsideration of the economic model, internalization of the supply chain, taking into account the increase in labor costs, reduction of intermediaries, etc.) are the ones that will resist the best.

For companies, there are several measures that can limit risks and contribute to social progress:

  • A newly designed and more inclusive business model;
  • A method for calculating the living wage, a dedicated policy with an area of ​​action and its implementation in company codes;
  • Access to collective bargaining for workers;
  • Ongoing collaboration with governments and suppliers;
  • Monitoring the remuneration of internal staff or supplier staff with an audit process and the possibility of non-renewal of a supplier in the event of non-compliance;
  • A robust and anonymous whistleblowing system (internal alarm unit).

Several international companies (L’Oréal, Unilever, AXA, Microsoft, Hitachi, Accenture, Schneider Electric, Danone, etc.) are required to offer a decent salary to all their employees. A requirement that these companies also want to find in all their strategic suppliers. For example: “In the period 2021-2025, Schneider is committed to ensuring that 100% of its strategic suppliers offer decent work to their employees”7. These commitments can be verified as part of its duty to be vigilant, through internal or external audits or through dedicated procurement teams.

The absence of convention and methodology for the universal calculation of decent pay does not allow for sanctions or social progress as quickly as necessary.

However, the French regulation “law of duty of care” is moving towards a European duty of care. The new climate and social roadmap led by PFUE8 which emphasizes the social component, the coalitions of investors and multinational corporations and civic awareness suggest that a dynamic is in place. If this is indeed the case, the first advances should soon be visible.

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