Key points
- The living wage is increasingly being introduced at large companies, as a result of commitments, a desire to make the company more attractive, new regulations (albeit indirect) and pressure from investors and NGOs.
- However, the lack of a common methodology and the complexity of the implementation process are still holding back widespread adoption.
- This measure is starting to be extended to suppliers, notably through international social dialogue.
The International Labour Organisation (ILO) report on pay, published on 28 November 2024, shows that pay inequalities – though on the decline – remain very high worldwide. In 2021, the purchasing power of a worker earning the median wage in the poorest countries was only 6% of that of a worker in the same situation in the richest countries, and inequalities are even greater in the poorest countries. The large multinational companies present in these two types of economy have a special role to play in these situations.
The United Nations Global Compact, a UN programme bringing together a large number of companies, has made the living wage one of its priorities. It defines the living wage as remuneration that enables a worker to meet their basic needs (housing, water, energy, food, education, health and pensions) and those of their family. “In several countries, the minimum wage does not necessarily provide a decent standard of living, which raises the question of the employer’s responsibility. […] Companies have a responsibility to ensure that their employees can live decently,” Nils Pedersen, managing director of the programme, told mind RH in an interview in September.
Voluntary commitment by some companies
The issue of inequality and the desire for social commitment are highlighted by the companies that have already implemented the living wage. L’Oréal launched the process in 2020. “According to the statistics, poverty has increased with the pandemic and one worker in five is below the poverty line. A living wage is a way of tackling this and responding to a number of human rights issues, such as the fight against child labour and forced labour,” argued Julie Vallat, who is in charge of human rights in the sustainability department at L’Oréal. The company, which employs nearly 100,000 people in more than 150 countries, has incorporated living wages into its Share & Care programme, which includes a number of commitments, such as the global social protection floor. “We cannot imagine the company as a factor for progress if it is not a factor for social progress. We are building a global social body, and even if there are differences linked to history and territory, it is important for everyone to know that they should benefit from the living wage,” said meanwhile Gilles Vermot-Desroches, director of corporate citizenship at Schneider Electric, which claims to have closed all the gaps between its 150,000 employees worldwide and the living wage by the beginning of 2022.
But these examples are still rare: “A survey by the Dow Jones sustainability index showed that less than 10% of large companies have begun to work on the notion of a living wage. The concept is new and requires a change of mentality to go beyond compliance”, says Daniel Vaughan-Whitehead, director of the Fair Wage Network, a specialist consultancy, and former manager of wages and incomes policy at ILO.
