Posted by Alastair Usher

Living wage: broader commitments but continuing challenges

We’re very happy to see the publication of the UN Global Compact’s new digital report, Improving Wages to Advance Decent Work in Supply Chains, which we have collaborated on, and which aims to encourage companies to promote and provide a living wage to workers in supply chains worldwide.

It’s six years since I last blogged on this topic and the challenge certainly remains acute. As ILO reports, even before COVID-19 hit, hundreds of millions of workers worldwide were being paid less than the minimum wage. The pandemic has shown in stark relief the vulnerability of low-paid workers and made plain the consequences of economic vulnerability on human capital development. As the UNGC report highlights, this deepening of inequality presents an urgent threat to both communities and economies.

But much has happened in the intervening period since we developed the Joint ETIs ‘New Agenda for Business’ on living wages in global supply chains. A range of initiatives have commenced or scaled up activities to engage companies in addressing this complex challenge – promoting social dialogue and bargaining to address sector-wide systemic failures, focusing on the role of purchasing practices in influencing supply chain wages, developing recognised benchmarks and systems for collection of data on current wages to establish a clearer idea of gaps and deficits.

And a number of leading brands have made time-bound commitments to addressing poverty wages in their supply chains, recognising that achieving living wages in their supply chains can reinforce and catalyse a much wider range of sustainable development and human rights commitments. They recognise that the root causes of many decent work deficits and broader human rights risks are often linked to poverty and vulnerable working arrangements. Investors too are paying increasing attention to how companies account for supply chain living wages.

Post-COVID, we have a critical opportunity and political momentum to address the challenge of growing inequalities, especially among low-paid workers. This is a moment for clear-eyed focus on common objectives: that workers everywhere can realistically expect that their hard work will be rewarded sufficiently to support themselves and their families to a standard that is universally considered decent.

For policy-makers, this means serious consideration of the adequacy of minimum wage and social protection systems, and recognising the role that collective bargaining – based on effective rights of freedom of association – plays in determining durable economic outcomes. It also entails a recognition that the private sector has a crucial responsibility in creating an enabling environment for wage improvement in global supply chains.

For companies, this means setting out a clear strategic approach which recognises that individual companies can and must assume their own responsibilities – and that initiatives on supply chain wages must be accompanied by parallel action for direct workforces – but which also identifies those areas where partnership and collaboration are vital. Of course, when acting on wages we need to focus on numbers, and benchmarks can be essential for understanding and conveying the scale of living wage gaps in the supply chain, but ultimately the question is the how, not the what: not least, how does our business need to change to enable the payment of a living wage in our supply chain?  The answers to this question may closely reflect the answers to another: how can we ensure that we are resilient to new shocks, able to grow new markets, able to attract and retain key talent, and able to innovate into a new future where companies draw wisely on their finite resources?