Living wage and voluntary CSR, still an oxymoron

By Álvaro J. de Regil

After decades of evolution CSR remains a useless societal instrument to make business responsible for the impact of its economic activity on its sphere of influence. A myriad of norms, standards, guidelines and codes have been introduced and, yet, little has changed. Corporations are still free to roam the world in pursuit of the most efficient sources of raw materials, suppliers, workers and the most lucrative markets to achieve their mantra: the maximisation of shareholder value.

The root cause is not a rocket science conundrum, but quite easily identifiable. The market has been imposed on societies as an end in itself and lacks democratic control. As we can easily observe daily, financial markets and their rating agencies literally dictate to governments the market-centric policies that they want to see in place or they will decrease the credit ratings of non-complying markets –no longer regarded as nations. Governments expediently oblige. How can they not? The political careers of many politicians have been funded by the largest institutional investors and their corporations. The public matter has been privatised and politicians discuss it in private with the market’s owners. Actually, in case it has not been noticed yet, we have been living in corpocracies and not democracies for many decades now and the symptoms continue to get worse.

Not surprisingly, CSR continues to have two conspicuous traits that reflect the same ethos and expose its lack of true social responsibility and sustainability. First, all instruments available are strictly voluntary. They are written in the context that CSR is a tool for corporations to improve their performance and their image. Since they follow the market’s logic they are generally oblivious to the fact that in true democratic societies CSR must be a process driven by regular citizens and their communities, as the main stakeholders of corporations, to ensure that corporations act in a sustainable manner from the perspective of public and not private interest. This is fundamental because it should be the citizens and not corporations who define the areas to cover and the depth with which they are covered. Instead, CSR remains voluntary for it expects the market’s invisible hand to make “the best allocation of resources”. Clearly, contrary to conventional wisdom, the raison d’être of today’s governments is not to procure the welfare of all ranks of society but to provide the best conditions for the maximisation of shareholder value. Thus, any talk of making CSR a legally-binding instrument to ensure that companies do not profit over people and planet is a taboo issue not to be brought up at any time.

The other taboo issue is living wages, which is systematically excluded from the CSR ethos to the point that both concepts represent an oxymoron. Indeed, the issue is mired in blatant hypocrisy because companies know quite well that they are paying modern-slave-work wages to most workers in the developing world to impose an unequal exchange to secure the amount of shareholder value demanded by their institutional investors.

For this reason, Jus Semper has made of living wages its sole mission through The Living Wages North and South Initiative (TLWNSI), a long-term program designed to gradually close the North-South living-wage gap within thirty years.Our definition is a clear axiom. Using the same logic of ILO ́s Convention 100 for gender equality, a living wage awards “equal pay for work of equal value”, not just between genders but between North and South workers using purchasing power parities (PPPs) as the mechanism to define it. Equal pay occurs when purchasing power is equal. The premise is that workers must earn equal pay for equal work for reasons of long-term sustainability.

The concept is also anchored on two additional criteria of international law:1. Article 23 of the UN Universal Declaration of Human Rights:a. Everyone, without any discrimination, has the right to equal pay for equal work,b. Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection.
The benchmark to determine what should be a living wage for a specific job in a specific country is the wages paid to equivalent workers in the benchmark country, which in the case of PPPs is always the U.S. A clear example: a worker working on Ford’s assembly lines in Dearborn, Michigan earns $27 dollars an hour, whilst the workers doing the same in Ford's plants in Brazil and Mexico only earn about $7 and $4 respectively. However, since Brazil's PPP index is 80 and Mexico's 64 then these Brazilian and Mexican workers must earn $21,60 and $17,28 an hour respectively, yet they only make about $7 and $4 respectively.

Typically, closing the gaps will take several decades, but the key factor is the political will of governments to harness the market’s power and pursue this critical issue, and even shorten the time to fulfil it. Two real life examples of countries with the political will are emblematic of our concept. At their current pace, Brazil’s minimum wage recovery plan, launched in 2010, will enable manufacturing PPP wages to close their gap in 24 years, whilst Argentina’s economic policy since 2003 will enable manufacturing PPP wages to do it in seven years. China and India, in contrast, will take many generations to close the gap unless they shift to demand-side policies now.
In brief, including living-wages at the core of CSR and making it a legally-binding instrument of international law would make an invaluable contribution to the building of a truly democratic ethos. Yet, if CSR continues to be offered not only voluntarily but also on an a la carte basis –where companies can cherry pick only what they like, it will contribute to further the mocking of democracy and nullify the prospects for sustainability.

Alvaro J. de Regil is Executive Director of The Jus Semper Global Alliance and initiator of The Living Wages North and South Initiative. He writes on various subjects such as CSR, business and human rights and the long-term sustainability of people and planet for Jus Semper and occasionally for journals and academic books such as the Social Responsibility Journal and the Gower Handbook of Corporate Governance and Social Responsibility.

Why is True Democracy Indivisible from the New Economy?

By Alvaro J. de Regil

Reflecting on the “Principles of the New Economy” advanced by the “New Economy Network”: Measuring progress; Respecting natural limits; Democratising the economy; Ensuring economic progress; Localising control; Taming finance; Reducing inequality; Providing adequate livelihoods; Re-defining globalisation; Fostering new values, at first glance, they seamlessly and coherently make much sense.

I am, however, pleasantly and particularly surprised with the explicit reference to the need to exert “democratic control” over the system, which must be its most important underpinning. Furthermore, these principles have much in common with the concept of degrowth economics (Latouche, Harribey, Custers, Stoll, et al) that proposes a new paradigm of no more conventional growth, where GDP growth ceases to have a meaning and where progress and development are based on qualitative human development with a much smaller bio-ecological footprint. Well, it so happens that such concept requires a true democratic ethos. Hence, in our living wages initiative, that we advance at Jus Semper, this truly democratic paradigm is also embedded at its core.

Consequently, for these principles to have a realistic possibility to become the core of a new economic paradigm, we must explicitly call for the urgent need to first build a new societal edifice of true democracy. That is, currently we do not live in a truly democratic ethos whatsoever. On the contrary, we are enduring the consequences of allowing capitalism to impinge on our “so-called” democratic institutions and transform them into marketocratic institutions. Thus, we are enduring a marketocracy where the public matter has been privatised and politicians discuss it in private with the owners of the market, the so-called institutional investors of the casino economy, the same people who finance their campaigns and obviously get to set the public agenda.

Accordingly, I believe that it is indispensable –to develop a new economic model– to first move from the current mockery of “representative” democracy to a “true democracy paradigm for the sustainability of people and planet, and not the market”. True democracy must be direct, bottom-up and with the citizenry empowered to permanently participate in the public matter, propose, approve and reject initiatives, and remove public servants every time they fail to fulfil their responsibilities. In this new ethos, the only purpose of truly democratic governments would be to unrelentingly pursue the sustainable welfare of all ranks of society and the planet with a much smaller bio-ecological footprint (with all its implications). Thus, the market would no longer be an end in itself, like today, and would strictly be a medium for the exchange of the output of sustainable economic activities.

In this way, the new economic paradigm, with a new set of principles would be firmly anchored in a new truly democratic context. If, on the contrary, we attempt to build a new economic system, without first building a truly democratic edifice, I am certain that we will never achieve this quite alluring new economic ethos.

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Alvaro J. de Regil is Executive Director of The Jus Semper Global Alliance and initiator of The Living Wages North and South Initiative. He writes on various subjects such as CSR, business and human rights and the long-term sustainability of people and planet for Jus Semper and occasionally for journals and academic books such as the Social Responsibility Journal and the Gower Handbook of Corporate Governance and Social Responsibility.