Davos 2023: WEF experts urge business-government partnership to tackle living wage crisis with innovative policies
A living wage should provide succour to all workers to meet their basic needs, as well as some discretionary income for emergencies.
A living wage or living income is the local remuneration received for a standard workweek that is sufficient to afford a decent standard of living for a worker and their family.
Generally, a living wage is higher than the minimum wages governments mandate. It causes many business owners’ concern as they are worried over how living wages may negatively impact their bottom line.
According to estimates, globally implemented living wage could generate $4.6 trillion in additional GDP each year through increased productivity and spending. Amid a worsening cost of living crisis, what would it take to radically reimagine a world with living wages for all?
A host of leaders, including Nela Richardson, Senior Vice-President; Chief Economist, Automatic Data Processing Inc. (ADP), Stefanie Stantcheva; Professor of Economics; Harvard University, Denis Machuel; Chief Executive Officer; Adecco Group AG, Christy Hoffman; General Secretary, UNI Global Union, and Hubertus Heil, Federal Minister of Labour and Social Affairs, Federal Ministry of Labour and Social Affairs of Germany, brainstormed over the issue at the annual World Economic Forum (WEF) in the Swiss town of Davos recently.
‘A living wage for all crisis’ is not due to the pandemic, and in fact, the global health crisis made the situation worse.
For Stefanie Stantcheva, the living wage is actually part of good jobs. “Lack of good jobs is one of the key issues we are facing right now. It is driven by two trends, globalisation and technological change, which are really hollowing out the middle class and standard of living,” Stefanie said.
She suggested new policy thinking and coordination between businesses and governments as troubleshooting measures. “Focusing on pensions and social insurance for risks like unemployment, illness, and disability makes a lot of sense. Merging the productivity and inequality agendas together will also help.”
What is a good job/work
Based on the findings of the survey at the Economics Lab at Harvard University, Stefanie described that a good job would definitely provide a decent standard of living.
Besides wages, a good job goes beyond monetary gain. “Getting rewarded for their effort, some level of personal autonomy, stability, security, and some scope for career progression collectively make a job good,” explained Stefanie.
Speaking about the ‘Living Wageforr All’ Hubertus Heil said that it is just a question of respect, and stability of democracies. It's also a question of stabilising economies. Last year Germany instituted a 15% increase in the minimum wage to benefit nearly 6.2 million low-paid workers across the country. Germany is the second country after Luxembourg to pay the highest minimum wage in Europe.
“Many workers in global supply chains do not make enough to live on or they often work in difficult environments and long working hours. Hence, we have a duty to work towards living wages around the world. Not just in our country,” said the German minister.
On how to promote decent pay, Hubertus Heil suggested the implementation of joint initiatives through partnerships with developing countries.
At the World Economic Forum, Hubertus Heil suggested that the minimum wage is still a minimum wage and we need to talk about strengthening it once again.
Shortage of skilled workers is a threat to growth
To meet future demands and fight the shortage of skilled workers, Germany is devising a reskilling and upskilling strategy. The German minister also wants companies and even states to become a "skilling and upskilling nation as the shortage of skilled workers is a threat to growth. In view of the looming recession, he called for a step-by-step process to find a fair wage and to have stable societies.
Government intervention in collective bargaining
Christy Hoffman called for government intervention in collective bargaining for a sectoral living wage. Citing examples of Bangladesh, home to garment manufacturing industries, call center employees, or people employed as security guards or cleaners, Christy said that they need support. “Collective bargaining is not limited to wages, it is about day-time off, upskilling, and working conditions,” she said.
Explaining how his company tackled the living wage particularly when wages are rising in many parts of the world, Denis Machuel said, usually when we talk about wages, it is about the cost to the company. And this is where we go wrong.”
According to him, investing in people would help us solve our problems. He cautioned that investment should not be limited to the leadership level, but at all levels of the organisation.
Adding to this, Denis Machuel said when people are financially secure, they demonstrate more resilience. “Besides, taking care of mental health is equally important. In a post-Covid world, mental health is a big plague in the workforce. People are more engaged and productive if their mental health is better. Such employees are loyal and bring a better reputation to companies.”
Echoing Christy, Denis Machuel also advocated a sectoral approach, as there is no simple answer to the question.