The Question of Wages

Analysis of economic globalization and work for corporate responsibility can be
carried out from various starting points. The 1999 International Conference on the Principles for Global Accountability has been organized on an industry basis and uses that framework for analysis and discussion. However, it is also essential to consider significant issues that affect workers and their communities across industries, worldwide. One major issue that cuts across industries is wages. The purpose of this paper is to assist in developing effective public conversation about wages and the conditions in which workers live and work around the world.

In structuring this presentation, we are going to look at how wages are talked about in six frameworks:
-  wages as a legal issue,
-  wages as an ethical issue,
-  wages as a moral issue,
-  wages as a justice issue,
-  wages as a corporate responsibility issue,
-  wages as social justice issue.

1. Legal: In conversations with corporations, the question of legal minimum wage is often part of the dialogue. Legal minimum wage means no more than what companies can pay without violating the law of the country. Legal minimum wages are not predicated on nutritional needs, or any other needs workers have on an on-going basis. Often, they are based on the need to attract businesses to a country or a region within a country in order to create jobs. When this happens, workers' wages become a competitive advantage or disadvantage, depending upon one's viewpoint. Corporations seek production sites where wages are kept as low as possible by the legal standards, so that the corporation itself may become more "profitable." We see this reflected in the numerous codes of conduct which individual corporations and industries are producing. These public corporate standards assert that what the company is doing is legal, that the company adheres to the minimum wage laws of the countries in which it operates. The legal minimum wage then becomes normative, despite the negative effect on workers.

Unions and legislative bodies are also actors in the establishment of minimum wage laws. Where workers are able to organize independently and effectively, they can be positive agents of change in their negotiations with companies. Where legislative bodies are responsive to the needs of citizens, they can create laws that raise the minimum wage.

2. Ethical: Leaving aside the philosophical discussion of the meaning of ethics, it is important to recognize that business ethics, medical ethics, etc., have become colloquially understood as

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behavior which is acceptable within a particular group or industry. This is also the dictionary definition of ethics. Therefore, business ethics, or the ethics within a particular business segment, can be understood as the self-defined and self-accepted standard of practice of that industry or business segment. In other words, what the industry says about itself as acceptable practice becomes the accepted public standard.   We also see this reflected in codes of conduct in which the company states that its wages are "the prevailing industry wage." This ethical standard for workers' wages is, then, based on the wages that keep the corporation competitive.

At the opposite poles of corporate organization, we see CEO salaries increasing at incredible rates while workers at the bottom of the corporate structure are often forced
by the system to compete in a race to the bottom. The CEO and top management salaries are also determined within the industry to be ethical, since the Boards of Directors in the industry say they are necessary to attract the best talent and the best management for the company.

3. Moral: The moral dimension of actions pertains to the established standards of goodness and badness of behavior. It implies that the standards arise from human conscience. When we raise moral questions about wages, we are immediately forced to raise the question as to the purpose of wages. As a moral standard, the wages of the workers should reflect the contributions they make to the corporations in which they are employed. Likewise, workers should be able to meet their own needs and the needs of their dependents. It is important in this context to define need, not as "bare minimum" but as those needs which allow the worker and his/her family to be productive, contributing members of their communities.

From a religious perspective, moral questions regarding wages proceed from the belief that each and all human beings are made in the image and likeness of their God. Human beings are not to be seen as machines, which need a minimum of fuel and maintenance in order to produce. From a humanistic perspective, to be a human being means to be both an individual person and a person in relationship. Therefore, the demands of work for the wages should take into consideration the time needed for these relationships, such as significant time to spend with one's family, and a work -day short enough for people to serve their communities. Wage levels themselves should be sufficient to contribute not only to the needs of the individual and his/her family, but also to the sustainable growth of human communities.

4. Just: When we raise questions about wages in terms of justice, we need to raise the question of the distribution of benefits resulting from the production and sale of products and services by any corporation. Justice requires that we raise the issue of the ongoing concentration of wealth throughout the world in the hands of the few within each country, and in the hands of some countries more than others. The unequal concentration of wealth in the hands of a few deprives the vast majority of persons the benefit of those resources.

5. Corporate Responsibility: In public conversation about corporate responsibility regarding wages, we need to be very careful to define our terminology and to use terms that that accurately reflect what we are trying to say and to accomplish. Are we asking that corporations do what is legal? What is ethical? What is moral? Or what is just? Often, the various participants in a dialogue about corporate responsibility have different meanings for the term "corporate responsibility", especially in the area of wages.

Within faith communities, is not part of our role to move conversation regarding corporate responsibility and wages from standards of legality and corporate ethics to the standards of moral and just wages?

6. Social Justice: When the dimension of social justice is added to the standard of corporate responsibility, wages are examined not only as a measure of compensation for individual workers, but also as a measure of the goods and services coming into and leaving a community because of corporate activity. Will the community be sustainable because the ripple effect of the worker's wages benefits other community members and contributes to the development of the community? Is there a spreading out of the benefits resulting from the production and sale of products and services by the corporation rather than a concentration of wealth in the hands of the few? Or will the community suffer as diminished wages result in diminished resources for other community activities and development, and increasing concentration of wealth?

In this age of concern regarding sustainability, economic sustainability requires that we look at wages and the benefits of the use of those wages as key elements within both our discussions and our operations. In discussions regarding sustainability, again it is important to examine the perspective from which the discussion starts and the related impact on wages that that starting place has.

 

METHODOLOGICAL FRAMEWORK

Any methodological framework to inform both the discussion of wages and the struggle for just wages for workers needs to have several components and meet certain criteria. For information regarding wages to be helpful and useful in an on-going basis:

a)  The framework needs to allow comparison over time. Because the inflation rates in many countries are a serious factor in the affordability of goods and services for everyone, the framework needs to not apply a "one time" set of numbers over an extended period of time whether it be months or years.

b)  The framework needs to allow comparison from place to place. Within countries, prices vary between city and rural areas as well as from city to city. Prices vary between traditional markets and established stores. The methodology needs to take into consideration these variations and be able to place them within the context of the work done.

c)  The framework needs to allow comparison between countries without using the currency of one country as a standard for other countries. For example, it is not helpful to talk of prices in any country in terms of US currency. The effects of using the dollar or some other currency standard outside the country about which you are speaking is to artificially mask the expensiveness of everyday commodities for workers. What seems relatively cheap for someone from the US earning US dollars but purchasing something in Salvador is extremely expensive for someone earning colones in Salvador or rupiah in Indonesia.

d)  The framework needs to avoid using percentages. Most people do not understand that a percentage of a percentage is a lower number, even if the percentage increases. (The only exception would be, of course, when the percentage is more than 100%.) In addition, percentage methodologies (i.e. what percentage of income is spent on something) are predicated on the idea that some "expert" has the moral right to decide how someone should spend the resources they have. I usually refer to this as the "if you are poor, you have no right to buy your child a candy bar" morality. It also infers that the poor would be okay if they made better choices as to how they spend their money.

PROPOSING A METHODOLOGY:  THE PURCHASING POWER INDEX

The Purchasing Power Index (PPI) is a methodology that meets the criteria presented above. In addition it is a clear methodology understandable by anyone, any place.

The Purchasing Power Index provides data regarding the ability of workers anywhere in the world to meet their own needs and those of their families. It accurately measures the intersection of prices, wages, and inflation, while providing data that allows for comparison:

a)  Trans-temporally: Purchasing power can be compared over time for a given group of workers;
b)  Trans-culturally: Purchasing power can be compared for different groups of workers within a given area, region or country; and
c)  Trans-nationally: Purchasing power can be compared for workers doing the same work in different countries.

 

ADVANTAGES OF THE PURCHASING POWER INDEX

  1. The PPI establishes a basis of comparison over time. For example, how many minutes of work are required (at a given wage level) to purchase a kilogram (2.2 lb.) of rice in April 1999. The PPI also allows us to compare purchasing power after

three months or six months as a way of determining the effects of inflation, currency re-valuation and/or new contracts.

2.  It establishes a basis of comparison between one location and another. Different locations can be any combination of different free trade zone areas within a country, different countries, or urban, suburban and rural locations.

3.   It allows for the assessment of wage levels without the need to price every item a person might ever need to purchase. By knowing the purchasing power, in minutes of work necessary to provide basic commodities as well as household expenses, the possibility of meeting basic needs through the normal workweek can be assessed.

4.   It removes the question of judgment normally involved in decisions as to how one spends one's money. The PPI states what is possible in terms of the purchasing power that accrues as a result of the normal workweek. Questions as to whether a person spends money in a manner that another person might consider "frivolous" is no longer relevant.  What is affordable is emphasized. With 60 minutes in an hour and approximately 40 hours in an average workweek, any person, at any wage level, earns 2400 minutes of purchasing power each week. (50 hours = 3000 minutes)

What changes are the "prices in purchasing power minutes" or the "cost in work minutes" according to the varied wage levels?

5.  The PPI creates the ability to compare the effects of earned purchasing power at different wage levels.

 

 

WAGES, PRICES AND LOCATIONS

Analysis and discussion of wages and benefits can be misleading if they are not set within the context of prices at any particular time and in given places. For example, if wages increase at the same time that prices increase, the overall effect of wage increases if often non-existent. For persons living in any particular place, items are cheaper only if a) wages increase while prices remain the same or b) wages remain the same while prices decrease. Similarly, if an exchange rate changes, persons using the currency that has increased in comparative value will experience the items being purchased in another country as being "cheaper". The person earning the lesser-valued currency experiences the same items as being more expensive.

What will be seen as beneficial to one stakeholder within a community can often be harmful, or at least not beneficial, to another stakeholder in the same community at the same time. By using minutes of purchasing power (minPP) required for purchase, the question moves from "what is cheaper or more expensive and for whom?" to the real question: "What is affordable and for whom?"

 

RELATIONSHIP BETWEEN WAGES, DEVELOPMENT AND/OR INDUSTRIALIZATION

Using Haiti as an example, the relationship between wages and the ability of both individuals and communities to shape their own future becomes clearer. This segment of the paper is taken primarily from the study In Whose Interest? Using the Purchasing Power Index to Analyze Plans, Program and Policies of Industrialization and Development in Haiti, published by CREA, Inc. in January 1996. (The same questions could, and should, be asked for any country.)

Following the return of President Jean Bertrand Aristide to Haiti in 1994, the focus of many persons and organizations who had been involved in opposing the military dictatorship turned to the issues of reconstruction, economics and development. What was not obvious was the way in which this economic development should be done.

Although the terminology being used in discussions regarding development, investment and economic planning seems to be identical, at least five underlying perspectives are discernible, all under the umbrella of economics and development. These include:

A) The industrialization of Haiti: The establishment of an expanded industrial sector in Haiti. Discussion and planning examines whether this industrial sector

1) will be for assembly and export and/or whether it

 2) will include the ability to supply Haiti with the light and heavy industry needed to meet the needs of the country itself as well as produce articles for export and therefore income for the country. 

B) Development for Haiti: The establishment of social and physical infrastructure throughout the country of Haiti as well as the construction of an economic base to serve the needs of the Haitian people.

 

 

C) Industrialization rather than development: The establishment and expansion of industry, most probably assembly industry, rather than the establishment of the physical and social infrastructure as well as a comprehensive and varied economic base for the country.

D) Planning and industrialization/development from the perspective of
outside investors: The marketing of Haiti by both the U.S. Department of Commerce and the Haitian government as a place where money can be made by investors. The question remained whether the jobs created would enable workers to meet their needs and regain control over their own lives and that of their community.

E) Planning and industrialization/development from the perspective of the poor:

1)  The establishment of a commercial sector that will allow for the creation of sufficient jobs paying sustainable community level wages

2) The establishment of a commercial section that allows both the decision-making and the profits to accrue to the Haitian people, their communities and their country.

3) The creation of jobs that reflect the resources of the Haitian people, their culture and creativity.

4) The expansion of micro-enterprise that will allow the movement of those dependent on the informal to the formal employment sector.

Each approach listed above reveals a vision for Haiti, of Haiti and for/of the Haitian people. Ideally, each should be analyzed in terms of who will benefit and who will be harmed. The issue of long-term development has to be addressed. In addition, there should be serious discussion, by all affected parties, of the following questions:

(1) What type of development and/or industrialization is desired by the people of Haiti (or any country or region)?

(2) Who is determining what development and/or industrialization should occur?

(3) What is the source of the right or authority to make those decisions?
(For clarification of the terms used in this paper, the following explanations of "industrialization", and "development" represent the understanding of the author.)                                                                               

 

INDUSTRIALIZATION

 

Industrialization is the setting up of any industries that will do the following:

  1. allow for the creation of goods which are then marketed,
  2. provide centers for creating these goods,
  3. hire workers.

 

This industrialization has the following consequences:

1) workers congregate in the area of the industrial center,
2) requiring the development of systems of physical infrastructure
such as housing, sanitation, roads, electricity, etc.,
3) and the development of systems of social infrastructure such as schools,   medical facilities, religious facilities, etc.

The problem is that what is required is not necessarily provided or, if provided, is not necessarily adequate.

Because the marketing of the products of industrialization usually does not occur at the center of production, decisions have to be made regarding the distribution of the benefits, profits, and costs of the industrialization:

(a) Where are the profits to be made?
(b) Where will the benefits of the profits accrue?
(c) How will the distribution of the benefits of the industrialization affect the lives of the workers and their communities, especially if wages do not allow adequate purchasing power?

 

DEVELOPMENT

Development is the establishment of a commercial base, including industry but not solely dependent upon it, where the purposeful design of the interrelationship between labor, management, resources, energy, products, marketing, land use, costs, profits, physical infrastructure, social infrastructure, etc. is for the benefit of the people, the communities, and the country.

The purpose of development is the empowerment of the people, communities and country over their own future, not the creating of a self-perpetuating system of dependency on outside funding which must eventually, and at great price, be paid back with interest.

 

Measuring The Effects Of Industrialization And Development           

The Purchasing Power Index developed by the author and used in this study provides a method of measuring the effects of industrialization and/or development on the lives of the working people of Haiti. By applying the Purchasing Power Index to each part of any industrialization and/or development program, practice and policy, a comparable measure can be determined. The data presented in this paper presents formulations of the PPI for the past. Application of the PPI to planning and enactment of programs in the future will provide a means of measurement for analysis of the planned and actual effects when programs are in place.

Using the comparative data that the Purchasing Power Index can provide, the design and construction of any socioeconomic model for a country will lead to specific programs, policies and practices. It is our hope that these will have as their coordinated aim the possibility for people and communities to meet their own needs in the future.

 

In Conclusion

This paper has provided both a framework for public conversation regarding wages. It has called attention to the need for clarification of participants understanding of wages, whether this understanding is in terms of wages as legal, ethical, moral or just. It further and calls for explication of the meanings of corporate responsibility and social justice. The Purchasing Power Index Study has been presented as an objective, trans-cultural, trans-temporal, transnational tool to make clear the effects of wage levels on the lives of persons and communities. CREA's use of the PPI in the Haiti study reveals how the PPI can provide the fundamental information required for dialogue about wages, and how these wages affect the lives of individuals, communities, and countries.

In conclusion, I offer the following quote from a presentation by Peter Henriot, SJ, a respected and influential U.S. social analyst who has lived for the past decade in Zambia, Africa.

Something that Justin Kilcullen said last week in the United States during the debt conference we both were participating in has stayed with me. At one moment when we church-types were possibly curbing our positions (or holding our tongues!) in order to stay civil and reach consensus with the representatives of the banking and government communities, Justin reminded us of the need to stay prophetic and, like Jesus in the temple (John 2:13-1 7), become angry at the injustices and exploitations around us.

Perhaps this conference, or my own presentation, has not been marked with anger. But it is there with me, believe me, in the reality of what I will return to in a few days in Zambia! To give the actual answer today to the question: "Adjusting in Africa: For Whose Benefit?" cannot help but stir anger. To give a different, alternative ... (and just) ... answer for tomorrow, cannot but stir hope. Please, be with me - let's turn our anger into hope!