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3. Wage strategies and wage policies

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The question of wages cannot be limited to the observation of their evolution or their dispersion. It raises questions about the strategy of the actors, at least four groups: the employees themselves, the companies, the trade unions and the public authorities.

1. Wage strategy of individuals, families and public authorities: the qualification level

The wage strategy of individuals is complex to break down. It is at least a factor of:

  • the initial formation (educational system),
  • the experience in working and the possibility of continuing education.

Taking into account the initial endowment and its more or less active development by the individual (future) employee from early childhood, it capitalizes on the impact of several agents:

  • the family and local environment,
  • the educational offer that is itself dependent on public authorities or private institutions and the economic development level,
  • the general and local health supply,
  • the network of companies and public services,
  • the possible role of trade unions etc.

The following example in contemporary India illustrates the possible relation between level of economic development per capita and the level of literacy (Fig. 10).

PresentationFig10ENG

Paralleling of the two maps is simplified, the data being aggregated at Indian state level. However, it allows a certain matching of the level of qualification and the standard of living. The cartographic correlation is not optimal because it also depends on the absolute population of the State, its geographical position, its relative degree of rurality, etc.

It can be observed that states with the highest level of literacy (90%) such as Maharashtra (Bombay) or Kerala in the south-west also offer above-average living standards (in blue colour, between 1 and 1.5 Lakhs, or 100,000 to 150,000 Indian rupees).

Conversely, lower literacy states (60-70%), such as Uttar Pradesh or Bihar in the Ganges valley, also have below-average living standards (in red, below 50,000 IR).

 

2. Wage policies

National, federal or regional government intervention as a kind of “wage policy” is relatively present in most countries.

It takes many forms. Some are explicitly and directly related to wages: the fixing and evolution of civil servants' wages, the labour code as a whole and the degree to which it is respected, the definition of a minimum wage, the focus on the gender wage gap.

Some are more indirect and less explicit aspects such as: educational policy (level of diplomas in the labour force), health policy (general physical and moral condition of young people and manpower), political system, public order and respect for laws, respect for property rights etc.

All these actions have been the subject of an abundant literature, but the idea would be to take these analyses of policies together by examining their interactions.

PresentationFig11ENG

 

Let us take minimum wage policies as an example. The subject is rather controversial; for one part of expert opinion, the minimum wage creates a threshold effect that hinders hiring; for another part, it offers a guarantee of a decent standard of living, social inclusion and final consumption. We find on the one hand, the insistence on a wage seen as cost, and on the other hand, that of a wage seen as income, the wage being both at the same time.

Often part of the debate is distorted by the relative level of the minimum wage. In the United States, the minimum wage has existed since 1938, but it is very low. The following graph (Fig. 15) shows the diversity of minimum wage levels in the European Union for the year 2014.

The geographical proximity of these states and wage differentials can play in favour of migratory flows from countries with the lowest remuneration to countries with the highest remuneration. In fact, the movements are not as large as one might imagine due to differences in languages, labour codes, and health and social insurance systems.

If one adds the mixed reception given by the home population towards the labour arriving from other States, even from the same European zone, it is understandable why the wage differential, often absorbed by the price differential of the goods and services in the host country, does not develop larger intra-European demographic flows.

 

3. Wage strategies of companies

All companies have a “wage strategy”, but it is often induced, even implicit and unformulated: the entrepreneur, the boss or the management committee sets goals in relation to turnover, profitability, investment, marketing strategy etc. and the volume or evolution of wages are deducted as secondary objectives, taking into account wider parameters such as labour-related social charges, higher prices or the turnover of employees (increasing salaries to retain qualified individuals, for example).

Concerning the wage strategy of the company, the network welcomes papers on specific cases[1] or reflections on possible cooperation with companies or professional unions through individual interviews, management workshops (large companies or SMES), in different industrial and service sectors and in different regions.

In details, the wage or salary strategy of the company includes:

  • Its existence and its general appearance: conscious and deliberate or less programmed and more “passive” by default etc.
  • Its level of management in the companies: by the general manager only or by a directorial team; then the role of trade union representatives (depending on size and sector, etc.), taking into account the recommendations of the profession, of government, central bank or public authorities in general, the role of taxation and social charges etc./li>
  • Its type: type of recruitment and qualification of the workforce, more or less detailed presence of social benefits, internal and external communication on the subject (social responsibility of the company)
  • Its effectiveness: its relation with productivity, the collective working environment, effectiveness actually tested and examined or not, the role of accounting analysis, the allocation of bonuses, whether the unions are taken into account or not, the role of team leaders etc.

For an employer, economic performance and profitability are essential, but the question can remain about modes and volumes of remuneration, which are themselves a function of qualification, level of responsibility and apparent productivity (always difficult to define in monetary terms) of the employee.

An elementary approach would make it possible to distinguish:

  • Basic sectors with a large volume of insufficiently skilled labour, where the wage bill weighs heavily on costs (some metallurgical or textile branches),
  • Capital and innovation-intensive sectors with low wage volumes and skilled and well-paid labor (chemistry-pharmacy),
  • And services sectors with high added value (finance, consulting, surveys), which are very innovative and pay well for a highly skilled workforce that is likely to leave for competitors, but where the wage bill nevertheless represents half the costs.

One could imagine in order to deepen the analysis, to organise workshops (or interviews) with employers, HRDs and companies in general, local government decision-makers, trade unions, etc. The WAGE group is setting up a research programme on the wage strategy of companies and employees with professional unions and several companies located in the environment close to their members who are working on this topic.

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[1] For example Jimmyn Parc, “The Economic Profitability of Corporation, the Wages as Secondary Component: A Case Study of Korean Automobile Industry”, in: Wages and globalisation since the 1950s: convergence and disparities, M-P. Chelini, dir, Bern, Peter Lang, 2017 ou 2018

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