latamen
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:

Important information

The Robeco Capital Growth Funds have not been registered under the United States Investment Company Act of 1940, as amended, nor or the United States Securities Act of 1933, as amended. None of the shares may be offered or sold, directly or indirectly in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”)). Furthermore, Robeco Institutional Asset Management B.V. (Robeco) does not provide investment advisory services, or hold itself out as providing investment advisory services, in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act).

This website is intended for use only by non-U.S. Persons outside of the United States (within the meaning of Regulation S promulgated under the Securities Act who are professional investors, or professional fiduciaries representing such non-U.S. Person investors. By clicking “I Agree” on our website disclaimer and accessing the information on this website, including any subdomain thereof, you are certifying and agreeing to the following: (i) you have read, understood and agree to this disclaimer, (ii) you have informed yourself of any applicable legal restrictions and represent that by accessing the information contained on this website, you are not in violation of, and will not be causing Robeco or any of its affiliated entities or issuers to violate, any applicable laws and, as a result, you are legally authorized to access such information on behalf of yourself and any underlying investment advisory client, (iii) you understand and acknowledge that certain information presented herein relates to securities that have not been registered under the Securities Act, and may be offered or sold only outside the United States and only to, or for the account or benefit of, non-U.S. Persons (within the meaning of Regulation S under the Securities Act), (iv) you are, or are a discretionary investment adviser representing, a non-U.S. Person (within the meaning of Regulation S under the Securities Act) located outside of the United States and (v) you are, or are a discretionary investment adviser representing, a professional non-retail investor. Access to this website has been limited so that it shall not constitute directed selling efforts (as defined in Regulation S under the Securities Act) in the United States and so that it shall not be deemed to constitute Robeco holding itself out generally to the public in the U.S. as an investment adviser. Nothing contained herein constitutes an offer to sell securities or solicitation of an offer to purchase any securities in any jurisdiction. We reserve the right to deny access to any visitor, including, but not limited to, those visitors with IP addresses residing in the United States.

This website has been carefully prepared by Robeco. The information contained in this publication is based upon sources of information believed to be reliable. Robeco is not answerable for the accuracy or completeness of the facts, opinions, expectations and results referred to therein. Whilst every care has been taken in the preparation of this website, we do not accept any responsibility for damage of any kind resulting from incorrect or incomplete information. This website is subject to change without notice. The value of the investments may fluctuate. Past performance is no guarantee of future results. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. For investment professional use only. Not for use by the general public.

I Disagree