Time for an international minimum wage

It’s not just Americans who are struggling, and here’s an interesting update on what’s happening with our outsourced industry:

Millions of Americans barely scraped by this holiday season, stuck in poverty-wage jobs or mired in unemployment. But the latest retail sector reports show that we did manage to shop a little more, perhaps because people are resorting to the material comforts of consumption to make up for the misery they’ve suffered as workers.

And it’s that appetite for consumer goods that has shaped the holiday wishlist of struggling workers on the other side of the world, who are growing increasingly impatient in their demands for a decent standard of living.

In China, local minimum-wage standards are rising incrementally as factory workers are increasingly eager to get a piece of the modified-capitalist pie. Beijing just announced a 21-percent boost starting in 2011, following a similar pay hike last summer, and several other provinces, like the trade hub Guangdong, have followed this trend in their recent wage reforms (though thisdoesn’t necessarily mean that the laws will be followed).

Raising the wage floor is partially an effort to stimulate economic growth via consumption. But perhaps more importantly, it reflects the governent’s concerns about escalating labor unrest, along with the private sector’s anxieties about retaining workers and staving off rebellion.

The spontaneous strikes that rippled through China’s auto industry over the past year alarmed both officials and employers, and resulted in modest gains for workers at multinational companies like Toyota and Honda, which openly capitalize on the country’s absurdly low labor costs.

Employers, not surprisingly, claim that pushing up wages would impose an undue burden on their bottom line. And there are legitimate fears that rising labor costs, combined with arbitrary tax policies, could drive factories to simply move to cheaper regions, according to the Hong Kong-based China Labour Bulletin. That’s not to let employers off the hook, though. The main obstacle to achieving wage equity, CLB argues, is the lack of a truly democratic collective-bargaining system, which neither employers nor party officials have much interest in establishing:

So far however, the government has only used administrative means, raising the minimum wage, and coercion/persuasion when intervening in strikes and protests. What it has so far failed to do is to encourage employers and to empower employees to engage in collective bargaining that could establish decent and affordable wage levels and working conditions and practices that are acceptable to both management and labour.

There’s a realistic solution to this, proposed years ago by Dick Gephardt (back when he was running for president, and before he became a high-priced lobbyist): An international minimum wage.

He never really pushed the details, and stopped talking about it a few months into the campaign. (Did someone explain to him how unlikely he was to get campaign contributions?) But here’s one proposal I found online:

This proposal involves several factors of establishing minimums.

  • Set a macroeconomic global minimum of 25% of the global average yearly income and a 40-hour work week. Currently the global average income is about $5300. That would set the global minimum wage to about $0.69/hour. Less than 5% of the world would be affected by this very conservative minimum.
  • In addition to global macroeconomic minimums, set a local minimum wage using a PPP index. We should add many basic commodities to the index. For example, 5 cubic meters of clean water per hour. This is about $3.50 in the U.S., $7.50 in Germany and as low as $1/hour in many nations. In some countries, this would be near zero, such as in Norway. However these countries would fall back on the other minimums.
  • Finally, a third minimum would be the local, national minimum set to 25% of the average national income, based on 48×40 hour work-weeks. In the U.S. this would be $5 per hour.
  • Phase in the minimum. Start the minimum wage in each country at the average wage of the poorest 20% of the population of that country and raise it by 5% each year until it reaches the global minimum wage.
  • Raise the minimums. Over time, the minimums can be raised as education improves and labor becomes more evenly distributed due to technological advances.
  • Enforce the minimums. One method of enforcement would be to tax imports from countries that fail to agree to the minimums, and then spend all the money on education and reform of the working poor in the same country.

Now, you know there’s not a snowball’s chance that any big name will push this. But it sure would fix a whole lot of problems, wouldn’t it?

4 thoughts on “Time for an international minimum wage

  1. the big problem would be enforcement. assuming each country is charged with enforcing the global minimum wage within its borders, there would be a huge incentive to be lax about it and then enjoy the benefits of all the foreign investment flowing in by multinationals looking for the cheapest labor pool.

    i’m not sure how you can get around the incentive to race to the bottom

  2. The US minimum wage laws aren’t fully honored in our country, so why would we expect other nations to comply?

  3. Also check out the Clean Clothes Campaign, which is trying to establish an “Asia Floor Wage” for the garment industry.

    The living wage is calculated by doubling what it would cost to provide 3,000 calories per day for 3 people (or 2 adults and 2 children). So half the wage would go for food, compared to the West where people spend something less than 10% of their income on food. Yet even that would be a big advance.

    I hope for a day when *everything* for sale is “fair trade”.

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