What is a “fair wage”? France’s Michelin sparks a debate.

When French tire maker Michelin closed its factories amid the coronavirus pandemic, the company’s chief executive, Florent Menego, considered the impact the closures had on employees around the world. An independent study found that thousands of workers at the bottom of the company’s pay scale in Asia, Europe and the United States are struggling to barely get by. Michelin has vowed further improvements.

The 134-year-old company, which has 132,000 employees in 131 factories in 26 countries, announced last week that announced The idea was to guarantee “fair wages” to all employees, no matter where they are in the world. This is part of a wider social plan aimed at ensuring that all employees do not have to struggle to earn a living.

“If workers are just in survival mode, that’s a big problem,” Menegault said in an interview. “If the distribution of wealth within a company is too unequal, that’s also a problem.”

The announcement immediately sparked a debate in France about what exactly constitutes a decent wage and whether more French companies should follow suit. The union warned that Michelin’s pledge would still hurt some workers and there was no guarantee against future job cuts or factory closures.

Companies around the world aim to achieve environmental, social, and governance goals. While many investors are moving away from ESG standards, some companies are signing up to them. living wage employerrequires workers to pay wages that cover rent, food, transportation, and childcare costs in the area where they live.

French cosmetics giant loreal is committed to a living wage and has extended that commitment to its suppliers. unilever I am following the same steps.only 4 percent According to the World Economic Forum, some of the world’s most influential companies have made similar commitments.

Michelin’s pay pledge caught the attention of French President Emmanuel Macron, who wanted companies to share more profits with workers. His government faces a political storm as households struggle with a cost of living crisis. The proportion of workers earning France’s monthly minimum wage of €1,766 (indexed to inflation) has jumped from 13% just a few years ago to 17% of the workforce.

French Prime Minister Gabriel Attal has called for consultations with industry groups and proposed tax reforms to encourage companies to pay more than the minimum wage, but social groups say the minimum wage would mean that workers would end the month without a government. They argue that there is often not enough to get by. Subsidy.

Menego declined to say how much Michelin’s minimum wage workers around the world earn, but said their wages were higher than the minimum wage in the region they live in, calling it “not a decent salary.” . He added that a living wage is a way to help move “employees at the bottom of the ladder up.”

He said he decided to take action when Michelin’s factory closures during the pandemic revealed the fragility of social safety nets around the world. In France, the government protected workers from layoffs by paying companies to take them on partial furloughs. However, in other countries such support was either non-existent or insufficient.

The company, known for its rubbery Michelin Man mascot, looked to standards set by the U.S. government when setting its “fair wage.” United Nations Global Compact: A salary that allows a family of four to live “decently” in the city where they work. That means, after paying basic expenses, you won’t run out of money by the end of the month and can save and spend it sparingly on goods and leisure activities, Menegeau said.

Michelin is fair pay network, a non-governmental organization based in Switzerland, to evaluate its salary structure. It found that 5 percent of Michelin’s employees around the world, or about 7,000 people, are not earning enough money.

In response, Michelin adjusted pay levels to match the cost of living in the cities where its factories operate. In Beijing, the group raised the minimum wage level to 69,312 yuan a year, or just under 9,000 euros. In Greenville, North Carolina, workers’ basic pay increased by the equivalent of €40,000 a year.

In France, the total minimum wage is 21,203 euros a year, but the company has increased the pay of its lowest-paid workers to 39,638 euros in Paris and 25,356 euros in Clermont-Ferrand, where it has its headquarters and has the highest cost of living. lower than Paris.

But spending money on a living wage isn’t worrying Michelin shareholders. The company’s stock price is at a five-year high. “They expect Michelin to make it happen,” Menegault said. “And we’re still delivering.”

Wage increases are not entirely beneficial. Michelin needs to improve its appeal and employee loyalty after factory employee turnover soared in the wake of pandemic lockdowns. And better pay would lead to higher productivity, Menegeau added.

“It will pay off,” he said. “Because when people are compensated appropriately, they are fully engaged and do better work.”

Director Louis Morin Observatory Deingalites, Social watchdogs said Michelin’s living wage pledge shined a moral spotlight on one of capitalism’s most vexing problems.

“Every company should ask themselves this question,” he said. “Those who hold capital say that work creates wealth. But the workers who create that value are often the least paid.”

In France, half of all workers earn less than 2,100 euros a month after tax, and according to data from Observatoire, workers are considered middle class with monthly salaries between 1,500 euros and 2,800 euros. A worker is considered “wealthy” if his monthly income is more than 3,900 euros.

Some French lawmakers are trying to cap executive pay at 20 times the income of a company’s lowest-paid employee. French carmaker Stellantis sparked widespread outrage last month when it announced that CEO Carlos Tavares’ salary in 2023 could rise 365 times to 36.5 million euros. Average compensation for Stellantis employees.

Menegaard called for the salary cap to be capped at 1.1 million euros in 2023. Including performance shares, his total compensation reached his €3.8 million.

The union said the level of the living wage was not up to what Michelin could pay. In 2023, the company recorded its main profit indicators, operating profit of 3.57 billion euros and a profit margin of 12.6%, the highest ever. Michelin spent 500 million euros on share buybacks last year.

Nicolas Robert, president of the Union Syndicale Solidaire, one of France’s biggest labor groups, said of Michelin’s wage pledge: “It’s great advertising to hide other things.” He said workers at the Clermont-Ferrand factory who received the living wage increase earn around 1,700 euros after tax, which is not enough to support a family of four without welfare subsidies.

“After paying for housing, food, energy and transportation, there is very little left,” Robert said. “What they say is a decent salary is far from reality. There are a lot of workers who are in survival mode since inflation exploded.”

Menego said the question of whether companies should accept lower profit margins or reduce share buybacks in order to use more of their wealth to pay employees is an important debate.

“I strongly believe that what separates good companies from struggling companies is the level of social cohesion they achieve,” he says. “Personally, I think that globally, capitalism has gone a little too far. I believe in capitalism, but not one person is paid enough to project themselves into the future. I think that’s a problem.

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