TLWNSI - A Strategic Program to Socially Commit the Private Sector
Introduction
Globalisation, as its pundits define it, is a process by which the economic theory of Neoliberalism, where everything relies on the forces of free trade and open markets, produces the most efficient distribution of resources and, thus, achieves the greatest level of welfare. However, its goal of achieving maximum efficiency in profit generation is in direct opposition to the goal of achieving social justice. This is a great conflict of interests. We cannot reduce to mere formulas the fate of hundreds of millions of people who become subjects of visions based on a set of morals that uphold the accumulation of wealth as its central value. These visions disregard the need for human solidarity and claim that the right way is for individuals to look each one, individually, for his or her own sake. But this argument opens the way for corporations to achieve maximum efficiency by securing the cheapest cost of labour in the world through exploitation. This is the real motivation behind the pressure of the economic powers for the opening of Third-World markets, for they achieve maximum efficiency at the expense of social justice.
Ethical Framework of Reference
How does Neoliberal Exploitation Occur? Through the zero-sum game= the benefit of the few at the expense of the many. » There is a double standard for the market economy: - Globalisation of consumer and labour markets
- Globalisation of prices
- Anti-globalisation of labour endowments
- Third-World worker earns, on average, <=10% of cost of First-World worker
- Handling of workers as commodities, at speculative and volatile labour costs
- Supply is globalised while demand is not because no aggregate demand is generated
- Hunger wages from multinationals (MNCs) are typically the best wages and become the benchmark for wages paid domestically in each economy
- Competition for foreign investment triggers a permanent trend in the South to depress labour endowments
- Foreign investment benefits predominantly Southern elites
- The odds to generate aggregate demand and sustain growth are cancelled
This ethos has created a tremendous wage gap between North and South as Table 1 reflects. (see Labour Data for further details).
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What are the living wage and fair compensation criteria?
- No fair compensation without living wages even with compliance of the International Labour Organisation (ILO) Conventions
- Same access to material goods as in the North: Benchmark = material quality of life of equivalent workers in the North
- Defined by equalizing wages in terms of purchasing power parities (PPPs)
A Living Wage is a Human Right Societies cannot be viable in a global system, unless individuals have the right to live a dignified life through the use of their abilities, by earning the means to uphold this right above all social and political considerations.
The Concept of Fair Compensation A living wage is the real wage that provides workers in the South with the same ability to fulfil their needs, in terms of food, housing, clothing, healthcare, education, transportation, savings and even leisure, as that enjoyed by equivalent workers in the North. We define this in terms of the purchase power parities (PPPs)* used by institutions such as the World Bank. In this way, by incorporating the cost of living -through PPPs- into the concept, Third World workers would be compensated in an equivalent way to that of First World workers and, thus, enjoy an equivalent quality of life, as illustrated in Table 2 in the case of North America and Brazil. (Please refer to the Economic Data page of our Resources section for detailed information about Purchasing Power Parities). *According to the World Bank's World Development Indicators: The number of units of a country's currency required to buy the same amounts of goods and services in the domestic market as $1 would buy in the United States.
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Core Objectives
- Make a strategic contribution to the gradual closing of the North-South wage gap, by equalising wages of workers of the same MNCs in equivalent jobs.
- Generate upward pressure on the South's formal/informal sectors, in order to raise the benchmark for labour endowments until placed at par with the North's labour endowments.
- Contribute to corporate social responsibility by demanding ILO compliance, and monitoring and qualifying the social, economic and environmental impact of global corporate activity.
Economic-strategic Rationale
"The Macro Benefit of a Micro Concept = a real trickle-down effect" - Equalise MNCs wages »»» pressures domestic sector wages to maintain competitiveness and labour-cost relationship
- Raising wage benchmark of formal sector »»» raises informal sector's benchmark
- Raising formal and informal sectors' wage benchmarks »»» increases aggregate demand »»» generates new jobs North and South »»» contracts South's informal sector »»» further expands markets.
- Expanding markets »»» sustains labour-endowment benchmarks »»» closing the gap
- The best business strategy offers the highest probability of generating a global market with long-term sustained growth.
- This highest probability occurs by aggregating demand to expand the market, including billions currently excluded from the economy
- The gradual wage increase does not cut efficiency, for it is a long-term investment that increases productivity in a sustainable fashion.
- Increases productivity due to economies of scale and not due to miserable labour costs.
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TLWNSI's Proposal
Equalise wages in a maximum of 30 Years, by using the influencing of consumer preferences as key leverage mechanism in CSR program.
Strategic Structure
- Integrate North-South Alliance: NGOs, unions and consumers
- Avoid direct confrontation »»» Selling as long-term investment
- Centre negotiating leverage » Influencing consumer preferences
- Make evident to MNCs the cost/benefit of cooperating or refusing to do so
- Endorsement of corporate partners before consumer global niche market as socially responsible
- Global consumer awareness centred on consumer northern markets= 80%
- Pressure strategic sectors of establishment: Governments, IFIs (WB, IADB)
- Inform CS »»» create conscience
- Make direct consumer aware »»»create conscience
- Sensitise »»» modify purchase intention: Yes to partners - No to "unwilling" corporations
The Cost of Consumer Alienation for an MNC
Market share: Losing less than one point market share is far more costly than gradually paying living wages as described in the example in Table 3 Once consumers have been alienated, one year of lost business, representing a loss of less than one percent of global markets share (0.75%), would be clearly more expensive than the entire investment cost -in thirty years- of very gradually equalising wages in PPPs terms at current market prices.
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The Benefits for Workers Short term: - South: A less unfair compensation
- North: A reduction in the pace of transfer of jobs to the South and a release of downward pressure on wages
Long term:
- South: A gradual equalisation in total compensation, over a reasonable period of time, relative to the standard of living of workers in the North
- North: The complete disappearance of job loss due to labour comparative advantages in the South
- North and South: The generation of many new jobs due to a sustained growth of aggregate demand because of wealth redistribution through wage equalization
The Benefits for Corporations and Shareholders Short term: - Competitiveness gains by receiving Civil Society's endorsement through positive PR campaigns directed at consumers
Long term: - A far greater global market with a predominant middle class
- A far greater global market substantially increases the odds of stable and sustainable business growth with much stronger price to earning ratios and dividend returns on investment
The Benefits for Consumers - An awareness of the companies that are becoming socially responsible and of those refusing to cooperate, so that consumers can exercise their right of choice and vote their conscious in their consumer preferences
- The sense that responsible consumption reduces human exploitation and benefits all parties involved - a highly ethical good deed
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The Benefits for Governments
Home countries: Trade and investment take sustainable growth Global debt decreases and is put under control as individual economies take off with a sustainable path
Host countries: - Their social responsibilities are increasingly being fulfilled, reducing the gap between rich and poor and their middle class taking the central focus.
- Millions formerly excluded from the system are now included, generating a clear decrease in a wide array of social problems.
- The economy takes off at a sustainable pace
- As tax revenue increases and inflation and domestic interest rates decrease, domestic and foreign debts are reduced substantially
- Tangible results in social justice empower governments to democratically remain in power.
The Benefits for Civil Society at large
- A much less unfair Global Society at large
- A far more participative democracy, with governments accountable to their people
- A better world
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Civil society's sensitivity momentum Global Civil Society Demands Control of MNCs! The citizenry wants an active role of governments and consumers to apply checks and balances to MNCs*: - Fully two-thirds of citizens across 25 countries agree that the free market economy works best in society's interest when accompanied by strong government regulations.
- Almost 50% chose as the most effective approach to increase the social responsibility of MNCs either national or international laws.
- Almost 80% want global corporations to not only cover basic medical attention for their workers, but also to extend these benefits for all residents in poor communities where they operate.
*World Economic Forum survey, Nov-Dec 2001
Consumers' sensitivity momentum
Consumers are increasingly more sensitive to the behaviour of MNCs Growing Consumer Social Sensibility - 70% of European consumers say that knowing the social and environmental responsibility of corporations is important or very important (25%) when deciding which product or service to buy. (Corporate Social Responsibility Europe (MORI Sep/2000))
- 44% of Europeans would be willing to pay more for a product or service from a socially responsible corporation vs. 37% who would not do it. (Corporate Social Responsibility Europe (MORI Sep/2000))
- 38% think that responsible corporations must be required to report while 41% think it should be voluntary. (CSR Europe (MORI Sep/2000))
- Globally, 25% think that the best way to enforce CSR is to inform consumers so that they choose from which companies to buy. (World Economic Forum survey, Nov-Dec 2001)
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Conclusions
This program is the practical culmination of an effort to contribute to social justice, the key objective of our Alliance, relative to the role of multinational corporations on the welfare of the inhabitants of the developing world and the protection of jobs in the developed world. Our commitment to this objective, although it will take many years to accomplish, is one that will bring long lasting results in the eradication of poverty. To be sure, we are working on behalf of the Global Civil Society's future generations. In a nutshell:
- TLWNSI is a Micro strategy with a Macro impact that truly generates a trickle-down effect.
- The greatest probability of sustainability of a global market lies in consistent growth, where the highest probability of occurrence resides in the permanent support of aggregate demand through the gradual equalization of the labour endowments between North and South. There is no other real and truly empowering trickle-down effect.
- The successful attack on global social injustice requires the broadest and most diverse global alliance of workers, corporations, consumers and civil society at large.
To get a detailed description of The Living Wages North and South Initiative, download our latest working draft by clicking its icon in the upper right column, or go directly to the working draft service page to download a Spanish-language version: "La Iniciativa Salarios Dignos Norte y Sur" (LISDINYS) Go to working draft.
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