Living Wages in the Paradigm Transition – The Imperative Challenge of Transcending the Market
The living wage is a human right even though most governments do not recognise it as such. Most workers in the world still earn less than a living wage for their labour. Living on an unliveable wage is a global challenge of immense proportions, affecting the wellbeing of billions worldwide and dragging on the prospects for achieving just and sustainable societies. Although we must work to transform the system and transcend the market, through a systemic transition, the right to a living wage must be recognised in its own right irrespective of the prevailing system. Transcending the dominant marketocratic paradigm is essential not only because of its incompatibility with basic human rights but because the market cannot sustain limitless growth without violating ecological limits. Achieving this requires building a new truly democratic ethos, rooted in harmonious coexistence for people and the planet.
The premise of this paper is that the living wage is a prerequisite to a life with dignity and security. A remuneration for labour must be enough to fulfil basic household needs for food, housing, clothing, healthcare, education, transportation, and leisure. Both the living wage and environmental preservation are essential components of a just and sustainable future. The current market-driven system, where poverty, inequality, and environmental degradation are deemed acceptable and inevitable, cannot be compatible with the equity and inter-generation tenets that lie at the heart of sustainable development.
The living wage is an essential element of true democratic practice to uphold the rights and responsibilities inherent to the social contract. The primordial responsibility of a truly democratic government is to procure and protect the economic and social welfare of all members of society. Citizens consent to delegate certain powers to government in return for the government’s provision for basic needs, public goods and the respect and protection of all citizen rights. Conversely, citizens have the responsibility and vested interest to actively participate in the democratic process and engage in the public matter to protect and enhance the general welfare of the community. Yet if workers are not remunerated with the income necessary to fulfil all the basic needs of their families, they are excluded from participating as citizens in the democratic life of their countries. Because, every day they must struggle to scrape a living they are automatically disenfranchised from the sphere of citizenship, the agora. Thus, truly democratic governments, more than anything, have the fundamental responsibility to guarantee an ethos that provides wage remunerations worthy of human dignity. Without such agreement, democratic institutions cannot flourish, and trust and accountability, the underpinnings of the social contract, will not exist. Today, though a majority of countries enjoy at least nominally democratic governments, significant segments of workers in the Centre (the major economies of global capitalism) and the vast majority of workers in the Periphery (the so-called emerging markets and the rest of the developing world) still do not receive a living wage. Despite the historical recognition of the living wage as a human right in international law, it has yet to be realised in practice. This is why we must continue to pursue the making of the living wage a fundamental element of true sustainability in both the current marketocratic paradigm and in the new paradigm of people and planet, as we gradually transcend the market.
Download the Essay on living wages in the change of paradigm here!
NEW ASSESSMENT OF ARGENTINA'S WAGE rate GAP 1996-2012
Despite high inflation and currency devaluations since 2010, real wages grew powerfully in US dollars. This allowed manufacturing wages to gain four points in their Equalised Index (Eq-Idx) since 2010, to reach a 55 index in 2012, the highest recorded in the seventeen-year period.
After Argentina’s economic collapse at the start of the century, economic policy made an essential point of its recovery to recover real wages across all sectors; the opposite of what practically all governments do after an economic crash with high inflation and a deep devaluation. Nominal wages increased on average annually 26,2% in local currency, 20,2% in dollar terms, with PPP real wages in dollars averaging an annual rate of 10,1% for the 2003-2012 period. As a result, real wages in the manufacturing sector have not only recovered but have nearly doubled their equalisation position at the lowest point in 2002-2003 with equivalent US wages. Moreover, not only have they been able to nearly double their equalisation index with the US but they have clearly surpassed the living-wage equalisations of Brazil and Mexico, the largest economies in Iberian America, and are rapidly approaching the positions of European economies long regarded as developed economies, such as Spain and Italy. To this respect, Argentina’s real wages in the manufacturing sector have already clearly surpassed the equalisation of European emerging economies both in the west, such as Portugal, as well as in the economies that were part of the Soviet block, such as the Czech Republic. It’s equalisation has also improved at a faster pace than the real wage equalisation of South Korea, the country that has recorded one of the most explosive economic growths in the world for over half a century.
The challenge in order to sustain its current wage appreciation policy is to cope with all the pressures of a variety of actors both domestic and foreign. On one hand Argentina seeks to continue supporting –as a core element of its economic policy– its current wage appreciation policy that induces economic growth through a Keynesian aggregation of demand, which inherently distributes income across all sectors. On the other hand, it is fighting to avoid succumbing to foreign pressures that, prominently, seem to aim at pulling Argentina back to the customary vicious cycle of indebtedness, by forcing a new foreign debt default and new debt restructuring through the IMF, with all the well-known economic and social predatory demands. The support by the US judicial system of the so-called “vulture funds” that bought 7% of Argentina’s debt for cents on the dollar, with the sole objective of demanding payment for 100% of its face value through the courts –which even The Economist has considered to have rendered a perverse verdict in favour of the “hold-outs”– is quite telling of the ulterior motives of the metropolises of the system.In this way, the future of Argentina’s wages and its labour’s share of income depend on the resolve of the government to reject the predatory interests of the robber-baron bondholders, as well as on controlling inflation, which has stubbornly continued at high levels, forcing it to devalue its currency drastically by 44% since 2012, and on resuming a healthy economic growth of no less than 2,5%. Bond holders have succeeded in making financial markets, once again, award Argentina with a default status. If the vulture funds get their way, they would completely disrupt Argentina's economy. Argentina’s move to diversify its foreign markets, particularly with the BRICs, may bring good relief, but this will take time and demand a lot of discipline to protect real wages in the process, a very hard task. Yet, if it succeeds and it is able to continue increasing real wages, living-wage equalisation in the manufacturing sector could approach the levels prevalent in Western European economies in a matter of a few years.
Download the pdf file with the analysis of Argentina's wage ratge gap here.
PPP WAGE RATE GAPS FOR SELECTED DEVELOPED AND "EMERGING" ECONOMIES FOR ALL EMPLOYED IN MANUFACTURING WORKERS (1996 up to 2012).
From an equalisation perspective, East Asian countries, particularly Singapore and South Korea, experienced very strong gains in Eq-Idx between 1996 and 2012. Both economies also experienced very powerful growth between 2010 and 2012. However, while South Korea’s growth was due to a very strong growth in local currency wages, with low PPP growth and small currency appreciation, Singapore’s was due to strong growth of wages plus strong currency appreciation, enough to more than offset a strong PPP increase. Japan also increased its Eq-Idx, but mostly due to a very strong currency appreciation. South Korea and Japan registered record Eq-Indices in 2012, with Singapore only one point below its highest index recorded in 2008.
Beginning with the 2012 living-wage gap assessments, the purchasing power parities (PPPs) that all our assessments use refer to private consumption (i.e., household final consumption expenditure), as opposed to the PPPs for Gross Domestic Product previously applied. The PPP for GDP includes prices for the entire economy and not just for the private consumption of consumer households. This change enables Jus Semper to deliver a more accurate metric of all the indicators that we used in our methodology to assess the wage gaps between actual and equalised wage rates. The PPPs for private consumption have been therefore revised for all years beginning with 1996.
In 2012, Germany shows a competitive advantage of its wage rates over the rates of equivalent workers in the U.S. Germany’s hourly wage rates have a purchasing power 19% stronger than the rates of their U.S. counterparts and is the only country in this assessment to have an advantage over the U.S. rate for all employed in the manufacturing sector. Based on Germany’s PPP cost of living, workers in the manufacturing sector needed a rate of $38,33, to be at par (equalised) with the U.S. rate. Yet, its current nominal rate is 19% higher ($45,79) than what is required.
In contrast, all other economies recorded at least a small gap. France, Italy, Australia and Canada recorded gaps between 2% and 20%, whilst the U.K, Spain and South Korea recorded gaps between 20% and 30% of their respective equalisation level. Far behind these economies, Brazil and Mexico continue to have huge gaps with their U.S. counterparts of 68% and 74% respectively. To be sure, Mexico continues to have the worst position in this assessment and, baring the Philippines, also has the greatest living-wage gap of the 31 countries in the three regions of our assessments.
Brazil is now showing the positive effect of its minimum-wage appreciation policy, recording a significant reduction of its wage gap since 2010 with its smallest gap since 1996. Mexico, in contrast, remains with virtually no change since 1996.
Download the pdf file with the wage rate gap update for 12 economies (Germany, France, Italy, Canada, U.K., Spain, Japan, South Korea, Singapore, Brazil, Australia and Mexico).
UPDATED ASSESSMENT OF MEXICO'S WAGE RATE GAP 1996-2012
Nothing has changed, unless it changed for the worse. The Mexican State, which has been permanently challenged for the lack of legitimacy of its elections in 2006 and 2012, corroborates every year its vocation as a customary violator of the labour rights of its citizens
The premeditated and carefully designed State policy of all governments in power since the 1980s –which deliberately pauperises the Mexican labour force– leaves no alternative but to continue exhibiting the nefarious consequences of such policy on the real wages of workers and the huge wage gaps with equivalent workers in the U.S. and, barring the Philippines, in all 31 countries included in our assessments. Moreover, it is necessary to depict once again the political context in which this planned pauperisation is imposed. Assessing the wage data of Mexico’s manufacturing sector since 1975, irremediably exhibits the exploitative and repressive character of the group that has wielded real power for more than three decades. A group that has completely submitted itself to international financial capitalism and the interest of its corporations, by working as its market agent in exchange for the benefits of its full support to remain in power. This ethos stands out on a global scale for the tremendous erosion of labour rights. The illegitimate and mafia-like nature that accurately delineates the Mexican State, has imposed an ethos of modern-slave-work, of near labour bondage that drags the country back to conditions prevailing before the social revolution of 1910..
The future of wage rates for all employed in the manufacturing sector in Mexico is absolutely ominous unless society removes from power those who have imposed the Mafia State and impose a citizen’s government of real democracy. Every year the government’s economic policies contain or further erode real wage rates. Additionally, the State has unleashed a policy of repression of the rights of freedom of association and to organise and collective bargaining. Contrary to what corporate media, (such as The Economist) like to portray, the deep impoverishment of Mexicans is an incontrovertible fact. To put TLWNSI’s living wage equalisation concept in a local context, we have assessed the real value of nominal wages of all employed in the manufacturing sector vis-à-vis the “indispensable basket of goods”. This basket (or CBI by its Spanish-language acronym) is an academic standard developed to measure the purchasing power of wages, to acquire 40 basic goods (food and other basic items for a household of five), as a reliable indicator to assess poverty. The CBI is considered the bare minimum necessary for the reproduction of the workforce. Typically, this assessment is performed against Mexico’s minimum wage. In January 2014 the minimum wage could afford 8,8% of the CBI, down from 49% in 1994, an 82% loss of purchasing power in 20 years (1) STPS: Salarios Mínimos Vigentes 1994 & 2014; 2) Laura Juárez Sánchez: Polítíca económica neoliberal y salarios, Trabajadores, Universidad Obrera de Mexico VLT, Vol. 61, julio-agosto de 2007: 3) Laura Juárez Sánchez: Violencia económica en contra de los trabajadores mexicanos, Revista Trabajadores, Universidad Obrera de Mexico, VLT, Noviembre-Diciembre 2011, Número 87). The daily cost of the CBI in dollars was $9,15 in 1994, $23,09 in 2009, $39,91 in 2011 and $46,07 in 2012 (extrapolating our own calculations for 2012 based on: reporte CAM_UNAM 109, p. 14, Cuadro No.5, June 2013), a 403% increase in eighteen years. Applying the CBI costs to the hourly direct pay (not counting social or company indirect benefits) of all employed in manufacturing in Mexico shows that while they were able to afford 98% of the CBI in 2009, they could only afford 65% in 2011 and 56% in 2012, a loss of 43% of their purchasing power in just three years. Evidently, while price indices for the entire economy average 4% between 2009 and 2012, the CBI inflation averaged 25% annually for the same period. Clearly, the wages for all workers including all employed in manufacturing have been pauperised and permanently converted into hunger wages. Parting from these findings, it is estimated –with a great degree of confidence– that less than 10% of all salaried workers can afford the CBI in 2013. This prospectus remains with exactly the same tone conveyed in previous reports since 2007, for the deprivation, depredation and deliberate pauperisation – as a State policy– continue deepening.
In summary, three decades of predatory capitalism in Mexico exposes, decisively, a government's policy –from the perspective of manufacturing wages rates in particular and all wages in general– of perverse and premeditated pauperisation and exploitation of Mexican labour, for the only public policy of the Mafia State is to govern for the benefit of domestic and foreign institutional investors and their corporations. In this way, as long as the “robber baron” elites currently in power remain in control, the deepening of the pauperisation of Mexico’s population is more than guaranteed, in such a way that the odds in favour of making the closing of Mexico’s living-wage gap a reality in the term of thirty years is currently zero.
Download the pdf file with the analysis of Mexico's wage rate gap here.
UPDATED ASSESSMENT OF BRAZIL'S WAGE rate GAP 1996-2012
Hourly wage ratings in the manufacturing sector for 2012 finally show the positive effects of Brazil’s minimum wage appreciation policy that began to be implemented in 2010.
The biggest obstacle to sustain the closing of the wage rate gap is the dramatic increase of the PPP cost of living. Indeed, in 1996 the PPP cost of living for private consumption was $1,043 dollars or 104,3% the U.S. cost of living. Then, at the deepest point of Brazil’s recession, the PPP had dropped to $0,45 in 2002. However, Brazil’s recovery has made it extremely expensive again, to the point that by 2011 Brazil had become more expensive than the U.S, with a PPP cost of living of $1,09 or 109% the U.S. cost of living, to then drop to $0,97 in 2012. The higher the PPP, the higher the equalisation wage rate required. If the PPP is 97% of the U.S. rate, then the nominal Brazilian wage rate required in U.S. dollars, to be fully equalised with the U.S. wage rate, must be 97% of the U.S. wage rate. If inflation is higher than in the U.S., the PPP will grow and viceversa. The Real has revalued 49,6% between 2002 and 2012. Exchange rates have a direct bearing on the PPP but not on equalisation. As previously explained, the PPP is the rate of currency conversion that equalises the purchasing power of different currencies. Thus, it acts as an estimated effective exchange rate used to reflect the real cost of living in a given country. The factor more directly affecting the PPP is the NCPI (inflation rate).
For Brazil to consistently reduce its living wage gap to equalise real wages with those of their U.S. counterparts for all employed in manufacturing, it must put inflation in check (below 5%) and continue to increase nominal wages above inflation rates. Concurrently, Brazil must recover its momentum and resume high economic growth rates of 4 to 5% annual GDP. Between 2002 and 2005 Brazil averaged a 3,05% GDP; for the 2006-10 period it averaged a 4,5% GDP growth, but for 2011 and 2012 it averaged a 1,95% growth, and the forecast for 2013 is of 2,2%.
Nonetheless, the probability of achieving living wages equalisation actually looks better than it appears. Brazil recorded a very powerful growth in local currency wages (23,3%), most likely ensued by its minimum wage recovery plan that began in 2010. Brazil’s currency (real) devalued considerably (9,9%) since 2010, with also a drop in its PPP of 4%. This reversed its previous trend of consistent PPP growth fuelled by strong inflationary pressures. The combination of these factors enabled Brazil to record its best Eq-Idx since 1996 with a three-point gain since 2010.
Download the pdf file with the analysis of Brazil's wage ratge gap here.
UPDATED ASSESSMENT OF SPAIN'S WAGE RATE GAP 1996-2012
In 2012 Spain (and the rest of euro-area countries), for all workers employed in the manufacturing sector, do not appear to be affected yet by the global capitalist crises.
In Spain, real wages in local currency have sustained a consistent improvement since 1996. Inflation increased 52,5% for the 1996-2012 period, but nominal wage rates did so by 77%. Thus, real wage value improved in euros by 24,5%. As for their behaviour in U.S. dollars, while U.S. wage rates for all employed in manufacturing increased 58,7% between 1996 and 2012, Spanish wage rates grew 73,3% for the same period. As a result, equalisation improved from a 68 Eq-Idx in 1996 to a 75 Eq-Idx in 2012. In fact, when looking at wage rates for production-line workers in previous reports, which go as far back as 1975, the Eq-Idx for Spain climbed from a 52 to an 89 Eq-Idx between 1975 and 2009. Thus, Spanish wages in the manufacturing sector have consistently improved for the last 35 years and have nearly converged with the equalisation levels of the largest western European economies. This was not the case of other sectors, where hourly labor costs dropped 3,1% in 2012 (INE: Índice de Coste Laboral Armonizado (ICLA). Base 2008, 11 de marzo de 2013). However, this trend has been reversed in 2013 when hourly labour costs grew 2,8% (INE: Índice de Coste Laboral Armonizado (ICLA) Base 2008, 11 de marzo de 2014).
We must point out, nonetheless, that while hourly wage rates improved in 2013, unemployment continues to remain at an extremely high rate of more than 26%, which directly ensues from the harsh policies imposed. The results for 2013 could not be more illustrative of the marketocratic assault on the Spanish citizenry. Unemployment has already climbed from 4,7 million people without work, which amounted to a 22,9% rate, and 49% unemployment among those 16-24 years of age, at the end of 2011, to almost 6 million people unemployed, accounting for 26,03% of the economically active population (from 26,1% in 2012), and 55,1% of the 16-24 age bracket, both in 2012 and 2013 (INE: Encuesta de Población Activa (EPA) Cuarto trimestre de 2013, 23 de enero de 2014). Lastly, the GDP dropped 1,8% in 2012 and is estimated to have dropped by 1,2% in 2013 and to barely grow by 0,7% in 2014.
In summary, the capitalist systemic crisis has served to ensue a new assault on labour rights and the Welfare State in Spain and across the entire European Union, converting it into a factory that is a net producer of legions of people that are making up the new class of capitalism, the precariat.
Download the pdf file with the analysis of Spain's wage rate gap here.
UPDATED TO 2012!
TABLE T5: 1996-2012 REAL-WAGE GAP rates FOR TWELVE ECONOMIES, IN PURCHASING POWER PARITY (PPP) TERMS, FOR ALL EMPLOYED IN MANUFACTURING. *(The base table used for all PPP real-wage gap analysis)
Beginning with the 2012 living-wage gap assessments, the purchasing power parities (PPPs) used refer to private consumption (i.e., household final consumption expenditure), as opposed to the PPPs for Gross Domestic Product previously applied. The PPP for GDP includes prices for the entire economy and not just for the private consumption of consumer households. This change enables Jus Semper to deliver a more accurate metric of all the indicators that we used in our methodology to assess the wage gaps between actual and equalised wage rates. The PPPs for private consumption have been therefore revised for all years beginning in 1996.
Overall, ten out of the twelve countries in this assessment are better off in 2012 than in 1996, with East Asian economies recording the greatest gains in their wage-rate position. In contrast, Canada is at nearly its lowest point, whilst the UK has the same gap as in 1996. Ten of the twelve economies recorded a gain in their Equalisation Index (Eq-Idx), with six of the twelve economies recording their best position in 2012 for the seventeen-year period.
Download the pdf file of Table 5 here.
TABLE T5-EUROPE: 1996-2012 REAL WAGE GAP RATES FOR EUROPEAN ECONOMIES, IN PURCHASING POWER PARITY (PPP) TERMS, FOR ALL EMPLOYED IN MANUFACTURING.
In 2012, thirteen of the twenty one economies included in the assessment experienced a loss in living-wage equalisation vis-à-vis their 2010 position. Eight of the thirteen euro-area countries and five of the eight non-euro-area countries recorded a loss. Only Estonia, France, Germany, Spain and Sweden recorded gains in their Equalisation Index (Eq-Idx), while Italy, Norway and the UK did not change. Germany and Sweden recorded the greatest progress while Greece recorded the deepest drop in equalisation.
Download the pdf file of Table 5 for European economies here.
TABLE T5-ASIA AND OCEANIA: 1996-2012 REAL-WAGE GAP RATES FOR ASIA AND OCEANIA, IN PURCHASING POWER PARITY (PPP) TERMS, FOR ALL EMPLOYED IN MANUFACTURING.
In comparing 2012 with 2010, all economies, barring the Philippines, recorded healthy gains in their living-wage Equalisation Index (Eq-Idx). South Korea, Australia and Singapore recorded some of the highest gains in their Eq-Idx position not just in the Asia and Oceania region but amongst the 31 countries in the three regions covered in our assessments.
Download the pdf file of Table 5 for Asia and Oceania economies here.
Table T5: New 1996-2012 REAL WAGE GAP RATES for the four largest economies in the Americas (Canada, Brazil, Mexico and Argentina), in purchasing power parity (PPP) terms, FOR ALL EMPLOYED IN MANUFACTURING.
In the Americas, Argentina clearly stands out from the rest of countries included in this assessment for its powerful growth in real wages since 2010 and the almost uninterrupted gains in its index (Eq-Idx) since 2002. Brazil also made good progress in its Eq-Idx since 2010, whilst Canada barely improved, and Mexico confirmed, once again, the imposition of a State wage policy designed to block any gain in real wages and in living-wage equalisation for the last three decades.
Download the pdf file for Table 5 of wage gaps for all employees in manufacturing in the Americas here.
AEQUUS INDEX – Living-Wage Equalisation in the Manufacturing Sector
From inception, TLWNSI developed its living-wage equalisation index, which measures how close the real wages of manufacturing workers in a specific country are to those of equivalent workers in the U.S. in purchasing-power-parity terms. The index exposes either the size of the gap or, in some countries, the true compensation advantage that real wages have over the wages of equivalent U.S. workers. Given that in 2011 we expanded our list of 13 economies included in our living-wage assessments to up to 32 economies, we decided to convey the most relevant indicator of our work in a very explicit manner. Hence we have named our index the "Aequus Index", Latin for "equal" or "balanced", which accurately reflects the purpose of our index.
In doing so we provide two indices. The first index measures wage differences for all employees in the manufacturing sector, which includes all persons employed full or part time in an establishment during a specified payroll period. The second index measures differences for production workers, which refers to only those employees who are engaged in activities directly or closely related to the production process. Both criteria belong to the methodology used by the Bureau of Labour Statistics (BLS) of the U.S. Department of Labour, our source for all nominal wages included in the indices. Yet, the 2009 wage rate data was the last year with available data for production workers, the same indicator that we have assessed since 2003 for 12 economies, for the BLS has decided to stop updating the wage data for production workers. Nonetheless, we will keep readily available this table as a historical reference, going back as far as 1975, for it allows us to provide a comparison for many countries between that year and, in most instances, 2009. The index for all employees dates back, depending on the country, to 1996 and, except for India and China, compares the benchmark year with 2012 and will continue to be updated every year. India and China's wage data is currently available for the periods 1999-2010 and 2002-2009 respectively. A word of caution, nonetheless, is required with these data, for India and China data gathered by the BLS are not fully comparable to the rest of countries due to some inconsistencies in methodology. However, given that in both cases the BLS argues that this does not substantially affect the hourly compensation estimates, rough comparisons can still be made, and thus, we have decided to include them in our Aequus Index.
Download the 1996-2012 Aequss Index for All Employees here!
Download the 1975-2009 Aequss Index for Production Workers here!
SOUTH KOREA'S TORTUOUS ROAD TOWARDS A LIVING-WAGE ETHOS
South Korea followed a tortuous yet keenly distinctive road to achieve sustained growth and drastically reduce inequality. What did it do differently from other countries? It eschewed the now discredited mantra of the Washington Consensus, to grow with a good degree of equity. Yet, the market’s unrelenting necessity for sheer consumerism is now generating such inequality that it demands from Korea and everywhere the urgent need of replacing it for being absolutely unsustainable
This paper is divided in three parts. The first examines the development path followed by Korea since the end of its war, with a relative emphasis on the travails of its labour force to achieve a dignified share of the income generated. The second part addresses the question of what Korea has done differently from other developing countries, particularly in Iberian America and with special emphasis on Mexico, given the dramatic differences in economic policies and considering that Mexico was far ahead of Korea half a century ago. The final part assesses in particular the trend followed by the labour compensations in the manufacturing sector for production-line workers from 1975 to 2009 and for all Koreans employed in the manufacturing sector from 1996 to 2012, in the context of our The Living Wages North and South Initiative (TLWNSI). Given that in this context Korea has been able to drastically reduce its living-wage gap with the US, this paper also provides a projection of the time required for Korea to achieve full living-wage equalisation, if real wages are increased at the annual rates of 4% under concrete assumptions.
It goes without saying that TLWNSI is conceived in the context of the current and inherently unsustainable market-driven paradigm. It is an idea developed to expose the prevalent labour exploitation and to advocate a concrete methodology to address this issue in a practical way. It is a concept valid only as long as most governments in the world continue to act as market agents on behalf of the international institutional investors instead of as public servants in pursuit of the welfare of their peoples. Consequently, the future of Korea´s welfare as well as that of all countries, requires, whether we like it or not, a radical change of paradigm. In the new paradigm, classic indicators such as the GDP economic growth cease to have meaning and are replaced by indicators of human development with a stationary economy with a good quality of life but clearly lacking the sheer consumerism of today. It is the paradigm for the welfare of people and planet and NOT the market. It is a paradigm that will only be possible if we replace the current mockery of representative democracy, a euphemism for marketocracy, with an ethos of true democracy for the long-term sustainability of people and planet, and NOT the market.
Download the Assessment on South Korea's living-wage ethos here!
The Catastrophe of Bangladesh
An emblematic case of globalised capitalism
In this brief Teitelbaum analyses the catastrophe that occurred in Bangladesh in a building where more than 3000 people worked and where almost a third died. The author makes it clear that this is not an isolated mishap but the most recent "accident" in an extremely perverse system that operates consciously knowing the high probability of recurrence. The author lays bare the enormous hypocrisy of transnationals, that often react only after these calamities, which are a byproduct of blatant and deliberate corporate irresponsibilities, are exposed in the international press, with the sole purpose of whitewashing their image. His assessment exposes how the whole system is corrupt and subdued by the power and greed of transnationals. Given that the only reason transnationals outsource their garment production to Bangladesh is to maximise their profit margins to in turn maximise shareholder value, the entire production cycle subjects subcontracted workshops to accept the lowest prices. This forces subcontractors to pay modern- slave-work wages, and prevents them from meeting the most rudimentary standards of industrial safety.
Then come the accidents, and companies sign agreements that avoid addressing the fundamental problem. Agreements that although they mitigate the effects of the context of blatant super-exploitation, they deliberately do not take responsibility for being the intellectual authors and material beneficiaries of said context. At best they offer derisory indemnities for the bereaved, which amount to little more than the amount of income of the current international poverty line. Incidentally, the vast majority of Bangladeshi textile workers not only earn half or less of what is considered the minimum wage necessary to sustain the reproduction of the labour force in that country, but they are paid daily wages below the international poverty line. From the context of TLWNSI’s concept –of equal pay for equal work– a living wage, according to the cost of living in Bangladesh, is at a gargantuan distance from reality. Nonetheless, the payment of a living wage within thirty years in accordance to our concept is realistic if the Bangladesh State commits to this endeavour. What is greatly lacking, as in much of the world, is the political will to make it happen.
Download the full document on the Catastrophe of Bangladesh in the context of globalised capitalism in a pdf file here!
Labour Resources – Historical comparison of production-line versus all employed in manufacturing living-wage equalisation indices 1996-2009
The Bureau of Labour Statistics (BLS) of the U.S. Department of Labour issued annual reports of hourly compensation costs for production-line workers (PLWs) in manufacturing all the way back to 1975. However, beginning with the 2010 data, the annual report incorporates all employed in the manufacturing (AEM) sector, and the BLS will no longer publish reports for production workers only. For this reason, Jus Semper has prepared the comparative assessment of production workers’ compensation costs vis-à-vis those of all employed in manufacturing (which includes production workers). This provides an estimate of the gap between compensation costs for AEM and PLWs for 28 countries. This allows analysts to assess the average gap for all countries combined as well as to identify the countries with gaps significantly greater or smaller than the mean for all countries. Unfortunately, annual comparisons cannot date back to 1975, for the data for AEM starts in 1996. It should be noted that the gaps in this case do not have a negative implication per se, for PLWs earn generally less than the average for all employed in manufacturing, which includes managerial and executive levels. Yet when the gap is greater than average it indicates that PLWs are compensated at substantially lower rates than they generally are on average in the 28 countries in this assessment.
On average the hourly compensation cost (wage rate) for PLWs amounts to 82,6% of the cost for AEM between 1996 and 2009 (or a gap of 17,4 percentage points).
Download the 1996-2009 Aequss Index assessment for All Employees vis-à-vis production workers here!
GEORGE KELL’S BLACK SENSE OF HUMOUR
Recently, George Kell, Executive Director of the United Nations Global Compact, entitled asserted in the article “Building a Sustainable Future – The Compact Between Business and Society”: “Can we envision a day when a critical mass of companies is investing in a better world? Where business is delivering value for the long-term – not just financially, but also socially, environmentally and ethically? Over a decade ago, it was hard to imagine, but we can now say with confidence that a global movement is underway”.
Alejandro Teitelbaum, one of the most savvied analyst, and with the longest experienced on the topic of the social responsibility of business answered back: “The lethal action of transnational economic power in all spheres tries to vainly disguise itself –amongst many other ideological, cultural and propaganda media– under the shroud (increasingly ragged) of the Global Compact, whose Executive Director is a candidate for the Pinocchio Award of sustainable development, which is given to those who stand out the most in the recovery of the idea of sustainable development for radically different purposes.”
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Capitalism from the perspective of true democracy
Alejandro Teitelbaum’s assessment of capitalism is the result of decades of previous works, studying it carefully as a researcher as well as a social representative committed to protecting the human rights of citizens through a binding regulatory framework of capital‘s activity. A regulation never achieved due to the concerted and systematic opposition of global business lobbies with the enthusiastic backing of the governments of the major powers. In this work Teitelbaum elaborates on the core aspects of capitalism and updates the wealth of evidence on its falsehoods and contradictions. Based on Marx's theory of the appropriation labour’s value, Teitelbaum shells out the main features of the capitalist system to display its contradictions and arrive at a well articulated conclusion. This is that capitalism is incompatible with true democracy from the moment that its supreme value is to protect the private ownership of the means of production, by which it appropriates the surplus value of labour, rather than seek the welfare of society, as it is in true democracy. Therefore, he argues, it is not possible to reform capitalism to make it compatible with democracy, but, rather that, it needs to be replaced by radically changing the essence of human labour as it exists in the capitalist system, in which the worker stands in the production cycle both at the beginning, alienated as a producer, and at the end, alienated as a consumer; from which it is inferred that a move towards true socialism is required. Yet, Teitelbaum asserts that, contrary to what happened in the Soviet Union and other societies, the transition towards socialism must take place in an environment of genuine and fully participatory democracy. That is, in an environment where the only purpose of the societies is the welfare of each and every one of the ranks of society to create social wealth to meet the material and spiritual needs of citizens, according to a social and democratic planning of production and distribution for the full realisation of the human being.
This implies that to live in a truly democratic ethos –and not in the mockery known as representative democracy– a hitherto unknown model must be built –in a superior stage of humanity– in which the citizens hold the initiative and are permanently involved in the public matter, in such a way that the public agenda is set by the fully acquainted citizens so that decision making becomes the result of a direct and informed participation. This is so, says Teitelbaum, for “capitalism has reached a level of development and is such a cumulous of contradictions that it has in fact become on the verge of socialism, as a way of resolving those contradictions in a humanly superior stage
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CAPITALS, TECHNOLOGIES AND THE REALMS OF LIFE. THE DISPOSSESSION OF THE FOUR ELEMENTS
This essay proposes a reflection on the current change of epoch, considered herein as a new worldwide configuration of the capital connection, both in its underpinnings and its trends, and particularly in the foundational relationship between objectified labour and living labour.
For its insightful and comprehensive outlook on the dislocation and extermination of the human, flora and fauna realms of life by the predatory power of capitalism, Jus Semper is republishing this essay by professors Gilly and Roux, well known for their work concerning the grave danger that we humans are inflicting to the sustainability of life on the planet and the almost unimaginable consequences that all life forms will endure if we maintain the current marketocratic ethos. An ethos with no morals, whatsoever, and, thus, no qualms regarding the impact of its, by now, almost ubiquitous sphere of influence on the social, economic and environmental dimensions. Gilly and Roux expose a clearly undemocratic economic system whose only need is the unrelenting consumption of things by we humans, strictly regarded as disposable consumer units, for the sustainability of the reproduction and accumulation of enormous material profit and wealth for a tiny human cluster, namely the 1%, at the expense of the 99% and, more importantly, of a planet with finite resources. Gilly and Roux offer us, from a historical perspective a somewhat deterministic rationale of how capitalism seeks to establish domination-subordination relationships with human societies to fulfil its only goal of maximising the appropriation of the surplus value of work –of the share of income that belongs to wages– through any necessary means: legal or illegal, moral or amoral, gentle or violent. The authors’ hope is that human dignity will no longer tolerate a clearly intolerable and ominous state of our world.
Download the full document on Capitals, technologies and the realms of life on a pdf file here!
MEXICO AND LIVING WAGES: THE UTMOST EPITOMIZATION OF SOCIAL DARWINISM AS A SYSTEMIC PUBLIC POLICY
The policies undemocratically imposed by the governments entrenched in power for the past thirty years provide irrefutable testimony of their deliberate transformation of Mexican workers into labour-bondage disposable items.
This assessment arrives at a paramount conclusion: there is a deliberate policy in place to pauperise Mexico’s work force, to serve as a source of the most competitive labour cost possible in the neoliberal globalised division of labour. Such conclusion is the result of assessing the quality of Mexico’s manufacturing wages, gauging the trend they have followed from 1975 to 2009 for production-line workers and from 1996 to 2009 for all people employed in the manufacturing sector.
Additionally, this work makes two projections exploring two different scenarios to close the huge wage gap of Mexican production workers with the wages of equivalent workers in the U.S. The first projection will assess what kind of real wage average annual increase it would take to close the wage gap with equivalent U.S. wages in the term of thirty years. The second projection assesses how long it would take to close the same wage gap by following Brazil’s concept of annually increasing nominal wages by the sum of inflation plus GDP growth. Both projections are fully in line with TLWNSI’s concept of equal pay for equal work of equal value through gradual wage equalisation.
Yet, currently the questions posed by these projections are undoubtedly rhetorical questions. Indeed, closing the gap to make Mexican wages of a living wage kind will remain an absolutely impossible endeavour as long as Mexican society does not get the resolve to organise to peacefully remove from power the structures that have historically been working to maintain the centre-periphery relationship that keeps all the benefits from economic activity for the robber barons and their foreign neoliberal tutors. Or, as the citizenry worldwide is increasingly denouncing, as long as the 1% keeps taking most of what belongs to the 99%.
Download the assessment of Mexico's living-wage gap here!
ARGENTINA'S MANUFACTURING LIVING-WAGE GAP: STILL A WAYS TO GO BUT STEADILY CLOSING IN
After the complete economic debacle of 2002, Argentina is enjoying a substantial recovery and real wages are at their best level ever. Yet, they still have considerable ground to cover before becoming of a living-wage kind; a goal that is realistically attainable in less than a decade if Argentina is able to sustain the current trend and control inflation
Under the new supply-side paradigm Argentina experienced a short bout of economic boom at the end of the century. But in 2001, the laissez-faire opening of Argentina’s economy actually resulted in its complete collapse due to the sheer speculative and predatory basis upon which it was anchored. With “el corralito” –the actual freezing of all bank deposits due to lack of funds provoked by massive capital flight– Argentina was forced to declare a credit default of its large and mostly securitised foreign debt. As a consequence, since 2003, Argentina has moved from sheer laissez-faire to far more cautious economic policies –with some measure of regulation, and a less privatised and a more demand-side economic approach.
As for the quality of wages, although real wages in Argentina since WWII were not nearly as good as they were in the first part of the century, they continued to be by far the highest in Iberian America and reflected low levels of inequality up to the mid seventies. To be sure, with the abandonment of demand-side economics in favour of a sheer neoclassical approach, real wages deteriorated substantially –except during the brief period of neoliberal GDP growth during the last decade of the past century, and inequality grew exponentially, particularly during the turn of the century until the economy collapsed in 2001-2002.
Since then real wages have improved dramatically in line with the unprecedented sustained economic recovery that began in 2003. As a result, manufacturing real wages in particular are at their highest level since at least 1996, more than doubling their previous real value during the short neoliberal boom.
By the same token, since 2003 the living-wage gap vis-àvis equivalent real wages in the U.S. has decreased dramatically as well and, as could be expected, it is much smaller than comparable manufacturing wage gaps among its counterparts in Brazil and Mexico, the largest economies in the region.
Nonetheless, from TLWNSI’s (The Living Wages North and South Initiative) living-wage perspective, before Argentina’s real wages in the manufacturing sector can be considered of a living-wage kind, they still have considerable ground to cover to reach the levels of Western Europe and East Asian wages. Yet, if Argentina is able to sustain the current trend, it will cross the livingwage threshold in less than a decade at a gradual pace and will attain comparable wages –in living-wage terms– to those of Western European and East Asian countries. A realistic goal indeed.
Download the assessment of Argentina's's living-wage gap here!
NEW EDITION OF TLWNSI'S WORKING DRAFT!
The idea of The Living Wages North and South Initiative (TLWNSI)It was conceived to address a very conspicuous question: why do workers in Southern countries, who work for global corporations, earn a miserable wage by any standard, whilst their counterparts in Northern countries earn a living wage for doing the same job, of equivalent market value, for the same corporation?
Our work drew a first certainty: the wages paid to workers in the South have nothing to do with the cost of living differentials between economies; rather, they have to do with the logic of comparative advantages that puts supply and demand arguments to work on behalf of a global market system that practices labour exploitation as a core strategic asset of its global operations model.
Nevertheless, contrary to what we envisioned, when the first decade of the current century came to an end, we saw an ever more entrenched fixation with supply-side neoliberal economics both among governments and markets, and a much less than expected opposition from the part of people, both as citizens and consumers, despite their substantial and exponentially growing dissatisfaction. This despite the dramatic and evident systemic crises of the current undemocratically imposed market-driven ethos.
This has moved us to redefine our focus and variables. That is, our living wage concept and argumentation to support it remains exactly the same, but our strategy and tactics have been redesigned to have a full bearing on the marketocratic ethos in which we are living. We go about this through an approach that address the logic of the market in such a way that –in sync with a wide global movement of civil society organisations– we can realistically expect to gradually transition from the current market-driven paradigm into the new true-democracy paradigm in the term of thirty years or about one generation.
In this way, by clicking here you will get a copy of the latest edition of TLWNSI’s working draft, for it will always remain a working draft as we continue to adjust our strategy and tactics to increase effectiveness.
Observations on the Final Report of the Special Representative of the UN Secretary General on the issue of human rights and transnational corporations and other business enterprises, John Ruggie*
Alejandro Teitelbaum has devoted many years to work on the issue of human rights in the realm of global corporations and other business enterprises. As the former Permanent Representative to the United Nations Office in Geneva, for the American Association of Jurists –based in Buenos Aires, he spent time toiling with the bureaucracies of the UN and member States, in his pursuit of an international legal framework that would harness business activity so that it would stop violating a wide array of human rights in its sphere of influence, as is customarily the case today. As such, he witnessed how, time and time again, the bureaucracies succumbed to the will of the leading economic powers, who were adamant at maintaining the preeminence of corporate interest over their responsibility for their infringement on human rights.
In recent years, Teitelbaum has assessed the extremely pro-business slanted work of John Ruggie, appointed, arguably, to design a framework that would “increase the stakes” for corporations when infringing upon human rights in their daily operations. Teitelbaum has consistently criticised Ruggie’s clear inclination for neoliberal ideology at the service of transnational economic power, which clearly opposes any kind of instrument that would govern, in a binding manner, business practices concerning human rights.
In this brief, Teitelbaum provides his final observations on the perspective that Ruggie attempts to advance in his Final Report. The author incorporates into his assessment the consistent laissez faire course followed by Ruggie since the time when he was the UN Secretary General’s principal advisor for the Global Compact; a public relations instrument –now even derided inside the UN– to allow companies to look good without really doing the public good. In his previous assessment,** Teitelbaum succinctly concludes that Ruggie puts up an act to change so that, at the end, everything remains the same. That is, he advances no binding rules to ensure that business activity does not infringe on human rights, but only an encouragement to voluntarily incorporate into business culture a consideration for respecting human rights. Thus, the author’s recommendation to really address the issue was that “the UN Human Rights Council should make an about turn of 180 degrees on this issue to be in sync with the gravity of the social and economic situation in which the world is living”.
Yet, as could be expected, Ruggie’s Final Report remains consistently on the same course and constitutes merely a meek orientation, wrapped as “Guiding Principles,” that lacks a binding nature for both States and corporations. It is on this respect that the author makes his main observation, conspicuously pointing at the central fault of Ruggie’s laissez faire non-binding premise. His argument is that Ruggie takes advantage of a past mistake made in the Norms Draft for Business and Human Rights “to create the confusion between the inherent obligation of the State to promote, guarantee and ensure respect for human rights and the obligation –and the corresponding direct responsibility in case of violation– of corporations (as of all moral and physical private persons) of respecting the human rights upheld in international norms.” For Ruggie, the author argues, “human rights would constitute a special category of rights that can only be violated by States and their civil servants and not by private persons, except in certain war crimes and crimes against humanity”. However, the author asserts, “there is no doubt that transnational corporations, as all private persons, have the obligation to respect the law, and if they do not do it they must suffer the civil and penal sanctions at an international level as well, which clearly emerges of a relatively attentive examination of the current international instruments”.
In this way, Teitelbaum’s conclusion is that if transnational corporations benefited when the Norms Draft was buried, Ruggie’s Final Report sinks again any attempt to create an instrument of binding nature to enforce respect for human rights in the realm of business activity. Consequently, and as could be foreseen, Ruggie’s work is once again a ploy so that everything remains the same.
*(A/HRC/17/31, 21 March 2011)
** A Dialogue with Ruggie?
Download the assessment of Ruggie's Final Report (2011) here!
Pour obtenir un exemplaire de la version française, cliquez ici.
INDIA'S LIVING-WAGE GAP
Another modern slave work ethos
Regarding the real value of the manufacturing wages, India’s living-wage gap is not as dramatically dire as that of China. However, as could be expected, it is still one of the worst in the world, for it clearly exhibits its sheer modern slave work nature. As a result, India’s increasingly deregulated economy is rapidly becoming a very important source of misery wage manufacturing workers for the Darwinian capitalist system of today’s global corporations and their institutional investors. Whereas there is increasing talk about China reaching a turning point when its pool of surplus labour would start declining, India is expected to contribute, over the next few decades, a larger labour supply to its manufacturing sector than China. Yet, to be sure, this will continue to occur at rather meagre real wages. Consequently, along with China, India will continue to exert tremendous downward pressure on the wages of all the developing nations that have bet their economic strategy on the traditional centre-periphery relationship, anchored on the offering of comparative advantages. In this way, as Álvaro de Regil, the author of this analysis argues, from the perspective of real democracy and human rights, this poses a rather intractable problem for the labour endowments of workers worldwide, but all the more so for those in the periphery of the world’s Darwinian capitalist system in which we have been undemocratically immersed.
Download the assessment of India's living-wage gap here!
GLOBAL WAGE REPORT 2012/2013
The global crisis has had significant negative repercussions for labour markets in many parts of the world, and recovery is proving uncertain and elusive. At the global level, average wages have grown but at lower rates than before the crisis. However this Global Wage Report 2012/13 shows that the impact of the crisis on wages was far from uniform.
This Global Wage Report presents data on trends in wages around the world and compares them with trends in labour productivity, analysing their complex effects on the global economy with a view to shedding some light on the current debates over distribution, competitiveness and labour costs. When wages rise in line with productivity increases they are both sustainable and create a his Global Wage Report presents data on trends in wages around the world and compares them with trends in labour productivity, analysing their complex effects on the global economy with a view to shedding some light on the current debates over distribution, competitiveness and labour costs. When wages rise in line with productivity increases they are both sustainable and create a stimulus for further economic growth by increasing households’ purchasing power. However for a decade or more before the crisis, the link between wages and labour productivity was broken in many countries and this contributed to the creation of global economic imbalances. The report shows that since the 1980s a majority of countries have experienced a downward trend in the “labour income share”, which means that a lower share of national income has gone into labour compensation and a higher share into capital incomes. This has happened most frequently where wages have stagnated but also in some countries where real wages have grown strongly. On a social and political level this trend risks creating perceptions that workers and their families are not receiving their fair share of the wealth they create. On an economic level, it could endanger the pace and sustainability of future economic growth by constraining wage-based household consumption. This is particularly true where the era of debt-based consumption has now led to an extended period in which households must pay off earlier debts.
At the global level, while some countries can run a trade surplus or export their way out of recession, this must come at the expense of deficits in importing countriesand relocation of jobs. To avoid beggar-thy-neighbour competition, the path to sustained and balanced economic growth must come through increased domestic consumption in surplus countries, based on wages that grow in line with productivity. International coordination can contribute to achieving equitable outcomes that benefit all countries. Many countries in the world are trying to address these challenges, often by implementing innovative policies. I hope this Global Wage Report will help them and will stimulate fresh thinking on issues which today stand at the centre of international decision-making.
Click here or on the picture to download the full pdf file.
Click here to download the french version of the ILO's Global wage report in a pdf file.
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