Could a Global Living Wage Put an End to Corporations’ ‘Race to the Bottom’?

Could a Global Living Wage Put an End to Corporations’ ‘Race to the Bottom’?

Could a Global Living Wage Put an End to Corporations’ ‘Race to the Bottom’?

A true living wage would take into account the needs not just of workers but of society as a whole.


Back in the days when open markets were seen as an economic miracle for the “developing world,” the club of the emerging capitalist mini-powers of Brazil, Russia, India, China, and South Africa, the BRICS, was hailed as the shiny new engine of neoliberalism. The export-driven BRICS economies were supposed to lift not just those countries but entire regions out of economic-backwater status. But that dream soon foundered under the weight of the global recession. Today it seems workers in BRICS countries are falling ever further behind.

New research on the long-term impacts of export-driven industries in the BRICS nations shows that, after decades of free-trade policies and massive foreign investment, the manufacturing sector upon which the most hopes were pegged—apparel manufacturing—still fails to pay anything near a living wage for workers. In fact, the garment sector has, in economic terms, fallen tragically short of providing a sustainable level of overall compensation to support a country’s developing tax and social-insurance systems. All of which should raise some pretty serious doubts about the potential for global trade and market liberalization to build a sustainable economy for developing countries.

Maybe what workers in these aspiring middle-class countries need now isn’t growth so much as equity. So how should we think about a living wage for all in fast-changing emerging economies?

The study by the Centre for Environment and Sustainability at the UK’s University of Surrey proposes what it calls a “Living Labour Compensation” benchmark. The LLC builds on the emerging movement for an “Asia Floor Wage”—a proposed base wage for the continent that labor advocates have been pushing for years—as a way to ensure that economic development is more equitably shared across the globe and within individual countries.

The idea behind the LLC is to create a clear compensation level that can be held up as sustainable for a given country. It can then slow or hopefully reverse the global “race to the bottom” of wages and working conditions by curbing multinationals’ incentives to shift their operations to neighboring countries with lower costs. Instituting a regional living wage would, in effect, prevent multinationals from shipping jobs overseas to maintain their bottom lines.

It’s important to note that what the researchers determined to be the LLC level for the BRICS is significantly higher than previous living-wage estimates—in fact, workers in these countries are earning just half of what would be needed to achieve a decent standard of living. All of which makes sense: For Western consumers, it’s almost taken for granted that the mass-produced items that fill even the cheapest retail shops are the product of heavily exploited labor in the poor countries that fuel our import markets. Over the years, sweatshop conditions that would be unacceptable in the Global North have become normalized as the price other workers pay for our lifestyles. The LLC measurements show that, even by “developing world” income standards, the types of jobs commonly seen as a magic bullet for economic modernization still exclude workers from a modern standard of living. Far from spurring the growth of the middle class, therefore, garment jobs are feeding a massive permanent underclass.

The LLC also takes into account things like family nutrition, housing, and basic income stability, on a level that matches the country’s level of development. Critically, the wage level also incorporates the additional cost of social insurance, which “emerging” economies take on as long-term social spending expands.

The researchers focused on garment exports in particular in order to show how workers have been punished by a pattern of uneven development that is heavily reliant on multinational investments. Not only are workers’ wages failing to keep pace with the cost of living, but the export economy is in many ways spurring wage inequality as different wage tiers grow further apart—that is, as factory workers’ wages appreciate at a faster rate than those for the farmworkers who supply the raw materials. As a result, factory jobs have attracted many rural migrants to urban areas for low-wage factory jobs throughout South and Southeast Asia. Despite earning relatively more in cities, garment workers—often a very precarious labor force of young women—continue to suffer extreme inequality and unsafe factory conditions, while attempts at union organization are suppressed.

Ideally, the researchers argue, in order to fully reap the benefits of development, wages and living conditions should rise in a way that aligns with the rising standard of living. According to co-author Simon Mair, the study’s proposal for a living labor-compensation level is “based on the idea that people should earn enough to live a decent life, and our understanding of what constitutes ‘decent’ is dependent on the lifestyles of those around us. Therefore, as countries get richer, their living wage goes up.” For example, workers may also, rightfully, demand health insurance and other benefits. To that end, he adds, the LLC takes “the base estimate of how much it costs to live a decent life in a country [and] as standards rise, incorporate[s] benefits like social-security and insurance protections, because in most countries social security and income taxes are proportional to wages earned.”

Rather than assuming that poverty wages are just the price that workers must pay for upward mobility, unions, policy-makers and civil society in BRICS countries should demand that corporations pay more of the cost of development. Beyond providing “modern” jobs, Mair says, “the ideal of a fair day’s wage for a fair day’s work” should revolve around “workers’ being treated as human beings, rather than commodities to be traded on a market at the lowest possible price.”

For the world’s “emerging” economies, middle-class aspirations in a polarized global economy should prompt labor movements to rethink how a living wage is valued within and across borders. Across the Global South, people are increasingly demanding not just survival but a decent life.

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Katrina vanden Heuvel
Editorial Director and Publisher, The Nation

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