A vector of social progress that enables workers to live decently from their work, the decent wage is again the subject of public debate. While waiting for a convention and a universal calculation method, several measures enable companies to take this idea into account and limit the associated risks.

The idea of a “decent wage” appeared at the beginning of the 20th century with the founding in 1919 of the International Labour Organization (ILO). This concept was subsequently invoked on numerous occasions in international texts (Universal Declaration of Human Rights, Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy¹, ILO declaration² etc.).

According to the ILO, a decent wage³ should enable workers and their families to live decently. A decent wage should cover food, lodging, education, clothing, social protection and transportation as well as savings and leisure.

According to the ILO, even if 92%⁴ of its member states have one or several legally established minimum wages, these minimum wages do not guarantee a decent wage in certain countries.

The decent wage and its four pillars – job creation, social protection, workplace rights and social dialogue – are the core elements of the United Nations 2030 agenda for sustainable development by way of the Sustainable Development Goals⁵ (SDG) 8 – Decent Work and Economic Growth, goals that have additionally been largely adopted by companies.

The objective here is to create a movement in favour of social progress by enabling workers to live decently from their work under fair working conditions.

Receiving a decent wage in exchange for one’s labour is a fundamental human right.
The decent wage principle should apply to all employees, even in those countries where standards are insufficient or even non-existent, and should cover all the supply chains of companies.

As responsible investors, our investment decisions are guided by social and societal criteria and the respect of human rights.

For a given company, the risk linked to the decent wage can be operating, regulatory, structural or reputational and as such can lead to financial consequences over the short or medium term.

If regulations and legislation continue to strengthen and social dumping⁶ is no longer acceptable, in addition to operating risks (social movements, strikes etc.), companies are exposed to structural risks (ill adapted business models) and will need to change their economic models.

How can the increase in salary costs be absorbed?

The final cost can be significant for the company. Will this cost be shared by all the stakeholders (suppliers, intermediaries, distributor and/or consumers)? No company has yet expressed itself as to this point.

Companies that correctly manage these risks (rethinking of the economic model, internalisation of the supply chain, taking into account the increase of salary costs, reduction in intermediaries etc.) are those that will show the best resistance.

For companies, there are several measures that could limit risks and contribute to social progress:

A revamped and more inclusive business model
A methodology for the calculation of the decent wage, dedicated policies with a perimeter of action and implementation included in the company codes
Access to collective bargaining for employees
Continuous cooperation with governments and suppliers
Monitoring of the remuneration of company employees or employees of suppliers accompanied by an audit process and the possibility of the non-renewal of suppliers in case of lack of conformity
A robust and anonymous whistleblower system

Several multinational companies (L’Oréal, Unilever, AXA, Microsoft, Hitachi, Accenture, Schneider Electric, Danone etc.) have promised to offer a decent wage to all of their employees. These companies also wish to see this policy adopted by all their strategic suppliers. By way of example: “for the 2021-2025 period, Schneider is committing itself to assuring that 100% of its strategic suppliers offer their employees decent work”⁷. These commitments are verifiable in the framework of the company’s due diligence obligation through internal or external audits or through the intermediary of dedicated purchasing teams.

The lack of a decent wage convention and universal calculation methodology does not allow sanctions or social progress as rapid as necessary. Nevertheless, the French “due diligence law” is a step in the direction of a European due diligence requirement. The new climate and social roadmap implemented by the FPEU⁸ (which emphasises the social aspect), investor and multinational company coalitions and the enhanced public consciousness imply that forward movement is underway. If this is truly the case, the initial signs of progress should become visible over the near future.

Sources (consulted on 19 January 2022):

¹ ILO: Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy
² ILO: ILO Declaration on Fundamental Principles and Rights at Work
³ ILO: Decent work
⁴ ILO: Combien de pays ont un système de salaire minimum ?
⁵ United Nations: Goal 8 – decent work and economic growth
⁶ Social dumping consists of profiting from differences between different countries in terms of salaries and workers’ rights in order to gain competitiveness.
⁷ CFTC Schneider Electric : Salaire décent - quand les multinationales s’engagent
⁸ FPEU: French Presidency of the Council of the European Union

The decent wage: a vector of social progress

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