switzerlanden
Paying fair wages is part of sustainability

Paying fair wages is part of sustainability

10-09-2019 | Insight

Sustainability is more than just climate change – it’s also about protecting the social fabric of society. And that means companies should go further than meeting a legal minimum wage and embrace the concept of fair wages, says Professor Daniel Whitehead-Vaughan.

Speed read

  • Investors should pay more attention to the S factor in ESG
  • Paying fair wages means sustainable, successful companies
  • Gap remains between legal minimum wages and living wages

Professor Daniel Vaughan-Whitehead

Founder and co-chair of the Fair Wage Network

Sustainable investing means looking at the environmental, social and governance (ESG) credentials of companies. Much of the focus in recent years has been on the E, as the world battles global warming, and the G, as investors demand more sustainable governance at companies and countries.

There has been less attention paid to the S, and particularly the social consequences of low pay, says Professor Whitehead-Vaughan. He is the founder and co-chair of the Fair Wage Network, a non-profit organization focused on sharing, aligning and promoting wage-related research, methodologies and best practices. The Geneva-based group also engages in direct consulting with corporations and their supply chains worldwide.

Stay informed on Sustainable Investing with monthly mail updates
Stay informed on Sustainable Investing with monthly mail updates
Subscribe

Employees’ basic needs

“Fair wages are those that cover the real cost of an employee’s basic needs while also respecting the economic constraints of employers,” says Professor Whitehead-Vaughan, writing as a guest author in the RobecoSAM Yearbook 2019. “Moreover, for many industries, this involves not only evaluating their own wage practices but also being a ‘fair-wage’ champion and resource for the companies within their supply chains.”

Using case study evidence, he demonstrates why addressing compensation using a fair wage approach is beneficial for employee well-being. It also improves company profits and helps respective supply chain partner achieve more sustainable outcomes. Investors can also contribute in their role as active owners, he says.

“Investors, concerned about protecting not only the Earth’s natural resources but also its human resources, should push global companies for more accountability, transparency and action when it comes to fair wages and compensation for employees and their dependents,” he says.

Some startling statistics

Professor Whitehead-Vaughan presents some ‘startling statistics’ to back up his case. He says the number of people in ‘vulnerable employment’ – defined as those lacking formal work arrangements, having inadequate earnings or difficult working conditions – is an incredible 42% of the total global workforce. This now affects 1.4 billion people, a figure that is growing at a rate of 11 million a year.

Half of these are the ‘working poor’, defined as those earning below US 3.10 a day in terms of purchasing power parity, mainly in emerging and developing countries. Legislated minimum wages have improved things in some countries, but there remains a gap with real living costs, he says. 

“The main problem is that [minimum wages] are not fixed systematically at the living wage threshold, but are rather a threshold borne out of political compromise between governments, trade unions and employer organizations, based on prevailing ‘economic and social considerations’,” he says.

Addressing the imbalance

“As a result, the minimum wage is often much lower than the living wage. The gap between what workers earn as a minimum wage and what they actually require to support the basic needs of themselves and their families is stark. Unsurprisingly, the gap is higher in regions with weak labor institutions; among these, Africa, the Middle East and Russia stand out.”

To address the imbalance, the Fair Wage Network has established a methodology to calculate what it should be. “Transparent thresholds and standardized benchmarks can be established which can be used to compare wages of companies, for instance, along a supply chain,” says Whitehead-Vaughan. “The importance of common standards, unified methodologies and analyses tools have also been recognized by other groups seeking progress and equality within worldwide wages.”

Subjects related to this article are:
Logo

Disclaimer Robeco Switzerland Ltd.

The information contained on these pages is for marketing purposes and solely intended for Qualified Investors in accordance with the Swiss Collective Investment Schemes Act of 23 June 2006 (“CISA”) domiciled in Switzerland, Professional Clients in accordance with Annex II of the Markets in Financial Instruments Directive II (“MiFID II”) domiciled in the European Union und European Economic Area with a license to distribute / promote financial instruments in such capacity or herewith requesting respective information on products and services in their capacity as Professional Clients. 

The Funds are domiciled in Luxembourg and The Netherlands. ACOLIN Fund Services AG, postal address: Affolternstrasse 56, 8050 Zürich, acts as the Swiss representative of the Fund(s). UBS Switzerland AG, Bahnhofstrasse 45, 8001 Zurich, postal address: Europastrasse 2, P.O. Box, CH-8152 Opfikon, acts as the Swiss paying agent. The prospectus, the Key Investor Information Documents (KIIDs), the articles of association, the annual and semi-annual reports of the Fund(s) may be obtained, on simple request and free of charge, at the office of the Swiss representative ACOLIN Fund Services AG. The prospectuses are also available via the website www.robeco.ch. Some funds about which information is shown on these pages may fall outside the scope of the Swiss Collective Investment Schemes Act of 26 June 2006 (“CISA”) and therefore do not (need to) have a license from or registration with the Swiss Financial Market Supervisory Authority (FINMA). 

Some funds about which information is shown on this website may not be available in your domicile country. Please check the registration status in your respective domicile country. To view the RobecoSwitzerland Ltd. products that are registered/available in your country, please go to the respective Fund Selector, which can be found on this website and select your country of domicile. 

Neither information nor any opinion expressed on this website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. An investment in a Robeco Switzerland Ltd. product should only be made after reading the related legal documents such as management regulations, prospectuses, annual and semi-annual reports. 

By clicking “I agree” you confirm that you/the company you represent falls under one of the above-mentioned categories of addressees and that you have read, understood and accept the terms of use for this website.

I Disagree