Should We Bother With Living Wages?
What is a living wage? Both companies and activists would love to know. Living wages remain a highly contentious issue, but as labor rights gain increasing importance in the public eye, there is growing interest on the part of NGOs and companies alike to hammer out a way to determine them. A number of methodologies exist – Novartis has been working on this area for years, Ruth Rosenbaum of CREA has a credible system, SA 8000 has provided members with equations they can use for this purpose – but no methodology has been accepted as definitive.
The reasons for this lack of consensus might be as much political as they are technical, yet it is hard to overlook or dismiss the technical complications, even with the politics involved. For example, say you are able to come up with a reasonable sounding wage for a country. Is it sufficiently accurate for the whole country, or is it regional? If the latter, how big is the region to which it might apply? And how long is it good for, particularly if the country you’re interested in is subject to hyper-inflation or unusual economic trends? These are no small questions, and attempting to address them implies lengthy, costly and perpetual analysis. So is it really worth going this route when we have a far better method of determining wages in the form of collective bargaining agreements (CBAs)?
Critics will argue that setting wages by CBAs will not render a living wage, but something higher. This outcome is possible, but given that there is no accepted definition of a living wage, it is hard to verify. For instance, most businesses will argue that a living wage constitutes the most basic goods and services workers will need, plus some discretionary income; whereas, worker advocates will usually argue that things such as entertainment, adequate leisure time, and the like, should be accounted for. Both of these concepts capture a credible idea of what a living wage is, but neither prevails in terms of acceptance, and the wage amounts resulting from calculations using each concept are likely to be radically different.
There are two main benefits to dealing with wages in CBAs: (1) they are by nature multi-stakeholder tools; and (2) they establish a sustainable mechanism for wage determination. With regard to the first point, employers have no real grounds to complain that wages would be set too high under these agreements as they or their representatives would participate in negotiating the wages. It is true that employees would have greater power in the negotiations than they currently do, but they should. In fact, depending on the structure of collective bargaining, employers might find empowered workers more a positive than a negative. On the second point, a CBA provides a mechanism through which the people most affected can determine when their wages need to be reviewed, and there is no question of a wage being relevant only to a particular region or type of industry. These factors are automatically accounted for in the collective bargaining process. There is potentially a further benefit to promoting CBAs as CSR tools: they often make specific provisions for most issues covered in codes of conduct, including hours of work, disciplinary procedures, health and safety standards, and so on. In other words, the benefits might extend beyond the setting of fair wages.
If CBAs are such a catch-all tool, then should we bother with living wage calculations? Well, yes. I can think of three reasons why at present. First, some countries (most notably China) do not legally acknowledge freedom of association and collective bargaining as established by international standards such as the ILO Conventions Nos. 87 and 98. This process in China must take place through government controlled unions, but some other countries don’t allow this process at all. These conditions don’t automatically mean that collective bargaining is impossible, but workers risk a lot more in asserting these rights where they are not legally recognized. Second, the collective bargaining process can take a long time and is often politically contentious. Third, in some settings, unions are corrupt or are coerced into agreements that do not actually benefit workers. Therefore, while a good collective bargaining process to determine living wages is preferable to a method of calculation, in the absence of political will for or feasibility of the former option, it would be nice to have a back-up option.
