As French tire maker Michelin closed its factories during the coronavirus pandemic, the company’s chief executive, Florent Menegaaux, took stock of the impact of the closures on employees worldwide. Thousands of workers in Asia, Europe and the United States living at the bottom of the company’s pay scale were barely making ends meet, an independent investigation has found. Michelin promised to do better.
Last week, the 134-year-old company, which employs 132,000 workers in 131 factories in 26 countries, announced that it would guarantee a “fair wage” to all of its employees anywhere in the world, as part of a broader social plan to ensure that none of its Workers have to struggle to make ends meet.
“When workers are just in survival mode, that’s a big problem,” Mr. Menegaux said in an interview. “If the distribution of wealth in a company is too unequal, that is also a problem.”
The announcement quickly sparked a debate in France about what exactly constitutes a fair wage and whether other French companies should follow suit. Unions warned that the Michelin promise would continue to cause hardship for some workers and that there was no guarantee against future layoffs or site closures.
Companies around the world strive to achieve environmental, social and governance goals. Many investors deviate from the ESG criteria, but some companies are registering as living wage employers, which require them to pay salaries that correspond to the costs of rent, food, transportation and child care in the regions where their Employees work live.
In France, cosmetics giant L’Oréal committed to a living wage and extended the pledge to its suppliers. Unilever is taking the same steps. According to the World Economic Forum, only four percent of the world’s most influential companies have made similar commitments.
Michelin’s pay promise caught the attention of French President Emmanuel Macron, who has said he wants companies to share more profits with workers. His government is facing a political storm as households grapple with a cost of living crisis. The proportion of workers earning the inflation-indexed gross minimum wage of 1,766 euros per month in France has risen to 17 percent from 13 percent a few years ago.
French Prime Minister Gabriel Attal has called for talks with trade groups and proposed tax changes to encourage companies to pay more than the minimum wage, which social organizations say is often not enough for workers to get by at the end of the month without government subsidies.
Mr. Menegaux declined to reveal how much the lowest-paid Michelin workers around the world earned, but said their wages were higher than the minimum wage where they lived, which he described as “not a fair salary.” He added that a living wage could help move workers “at the bottom of the career ladder up.”
He decided to take action, he said, when the closure of Michelin factories during the pandemic exposed weak social safety nets around the world. In France, the government protected workers from layoffs by paying companies to put them on partial furlough. However, in other countries this support either did not exist or was inadequate.
In determining its “decent wage,” the company, known for its rubbery Michelin Man mascot, referred to United Nations Global Compact standards: a salary that would allow a family of four to live a “decent” life in the city possible in which she works. This means that after basic costs are paid, you don’t run out of money before the end of the month and you are able to save some and spend some on goods or leisure activities, said Mr. Menegaux.
Michelin turned to the Fair Wage Network, a non-governmental organization based in Switzerland, to evaluate its salary structure. The resulting study found that 5 percent, or around 7,000 Michelin employees worldwide, were not earning enough.
In response, Michelin adjusted its pay scales to reflect the cost of living in the cities where its factories operated. In Beijing, the company increased the lowest wage level to 69,312 yuan per year, a little less than 9,000 euros. In Greenville, North Carolina, workers’ base wages rose to the equivalent of 40,000 euros per year.
In France, where the gross minimum wage is 21,203 euros per year, the company increased the salaries of its lowest paid workers to 39,638 euros in Paris and 25,356 euros in Clermont-Ferrand, where the company’s headquarters are located and where the cost of living is lower than in Paris.
But spending money on a living wage hasn’t worried Michelin shareholders. The company’s stock is at a five-year high. “They expect Michelin to deliver,” Mr. Menegaux said. “And we still deliver.”
The wage increases are not entirely positive: Michelin needs to improve its attractiveness and employee retention after fluctuation in its factories rose sharply in the wake of the pandemic lockdowns. And better pay would help boost productivity, Mr. Menegaux added.
“They will avenge it,” he said. “Because when people are paid decently, they are fully engaged and do better work.”
Louis Maurin, the director of the Observatoire des inégalités, a social watchdog organization, said Michelin’s promise of a living wage cast a moral spotlight on one of capitalism’s most sensitive issues.
“All companies should be asking themselves this question,” he said. “Those who own capital say work creates wealth. But the workers who create that value are often the lowest paid.”
In France, where half of all workers earn less than 2,100 euros after taxes per month, a worker with a monthly wage of 1,500 to 2,800 euros is considered middle class, according to Observatoire data; Employees are considered “rich” if they earn more than 3,900 euros per month.
Some French lawmakers want to cap executive salaries at 20 times the income of a company’s lowest-paid employee. French carmaker Stellantis sparked widespread outrage last month when it announced that its chief executive Carlos Tavares’ salary could reach 36.5 million euros in 2023, 365 times the average salary of Stellantis employees.
Mr Menegaaux requested that his salary be capped at 1.1 million euros in 2023; With performance shares, his total compensation amounted to 3.8 million euros.
The unions said the living wage measure fell short of what Michelin could afford. The company achieved a record operating profit of 3.57 billion euros in 2023, its most important profit metric, and a profit margin of 12.6 percent. Michelin spent 500 million euros on share buybacks last year.
“It’s nice advertising that hides other things,” Nicolas Robert, a representative of the Union syndicale Solidaires, one of France’s largest unions, said of Michelin’s wage promise. He said workers at the Clermont Ferrand factories who received the living wage increases earned around 1,700 euros a month after taxes – not enough to support a family of four without welfare.
“After you pay for your accommodation, food, energy and transport, there’s not much left,” Mr Robert said. “What they call a decent salary is far from reality: we have many workers who are in survival mode since inflation has exploded.”
Mr. Menegaux said the question of whether a company should accept lower margins or reduce share buybacks to devote more of the company’s assets to employee salaries is a critical debate.
“I firmly believe that what separates a good company from a company in trouble is the level of social cohesion it achieves,” he said. “I personally think that capitalism has gone a bit too far worldwide. I believe in capitalism, but I think it is a problem when the salary is not enough to support a person into the future.”
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2024-04-28 09:16:30
www.nytimes.com
