Work life | Michelin will increase its salaries

(Paris) When Michelin closed its factories during the coronavirus pandemic, CEO Florent Menegaux realized the impact of these closures on its employees around the world. According to an independent study, the tire manufacturer’s low earners in Asia, Europe and the United States were barely surviving. Michelin promised to do better.

On April 17, the 134-year-old company, which employs 132,000 people in 131 factories in 26 countries, announced that it would guarantee all its employees a “living wage” no matter where they are in the world, in part of a vast social plan aimed at ensuring that no employee struggles to make ends meet.

If workers are just surviving, that’s a big problem. If the distribution of wealth within a company is too unequal, that’s a problem too.

Florent Menegaux, CEO of the multinational Michelin

The announcement sparked a debate in France. What exactly is a decent salary? Which other French companies should do the same? Unions warned that Michelin’s commitment left workers in the lurch and that there was no guarantee against future layoffs or closures.

Decent wage = living wage

Companies everywhere have environmental, social and governance (ESG) goals. Many investors are moving away from the ESG model, but some employers are committing to paying the “living wage” – wages that cover rent, food, transportation and childcare in the areas where their employees live.

In France, cosmetics giant L’Oréal has committed to paying the living wage and demands the same from its suppliers, as has Unilever. According to the World Economic Forum, only 4% of the world’s most influential companies have done the same.

The salary commitment from Michelin – whose mascot Bibendum is known throughout the world – was welcomed by President Emmanuel Macron, who had already called for better sharing of profits with employees. His government is going through a political storm, among other things because of inflation, which is depleting households. The share of workers earning the monthly minimum wage (1766 euros, or 2587 Canadian dollars), increased from 12% in 2021 to 17% of the active population.

Prime Minister Gabriel Attal wants to meet with employers and has proposed tax incentives encouraging them to pay more than the minimum wage, which is often not enough to make ends meet without government assistance, according to social support organizations.

Mr Menegaux refuses to disclose the salaries of the lowest paid Michelin employees in the world, but he says they are paid better than the minimum wage in their country, which “is not a decent wage”, he says. he. The Michelin salary helps employees “at the bottom of the ladder” to rise.

He decided to act, he says, when the closure of Michelin factories during the pandemic revealed the weakness of the social safety net around the world. In France, the state protected workers from layoffs by paying companies, which put them on partial unemployment. But in other countries, this aid was non-existent or insufficient.

A living wage defined by the UN

To define its “living wage”, Michelin followed the standards of the UN Global Compact, says Mr. Menegaux.

The UN Global Compact defines the “living wage” as allowing a family of four to live “decently” where employment is found: not running out of money after basic monthly expenses and being able to save and spend modestly on goods or leisure activities.

Michelin called on the Swiss NGO Fair Wage Network to evaluate its salary structure. Verdict: 5% of Michelin employees worldwide – around 7,000 people – did not earn enough.

Michelin has therefore adapted its salary scales to the cost of living in the cities where its factories are located. In Beijing, the lowest salary was raised to 69,312 yuan per year (C$13,080). In Greenville, North Carolina, workers’ base pay increased to the equivalent of $58,600 per year.

In France, where the minimum wage is 21,203 euros per year (C$31,050), Michelin increased the pay of its lowest-paid employees to 39,638 euros (C$58,045) in Paris and to 25,356 euros ($37,130 CAN) in Clermont-Ferrand – the company’s headquarters – where the cost of living is lower than in Paris.


A factory worker in Clermont-Ferrand, where Michelin’s headquarters are also located

These increases do not seem to worry shareholders: Michelin’s shares ended the trading day at 36.32 euros on the Paris Stock Exchange, up 24.8% over one year. The stock lost ground on April 24 when the company reported quarterly revenue down 4.6%, but has since regained it. “Shareholders expect us to deliver, and we deliver. “, says Mr. Menegaux.

Raises are not purely ethical. Michelin must improve its attractiveness and retain its employees, having lost a lot of staff after the closures and the pandemic. In addition, better salaries would improve productivity, believes Mr. Menegaux.

“It will be profitable. When people are paid decently, they are fully engaged and work better,” he says.

According to Louis Maurin, director of the Observatory of Inequalities in Paris, Michelin’s salary commitment sheds moral light on one of the thorniest issues of capitalism.

“All businesses should ask themselves this question,” he said. Those who own capital claim that work creates wealth. But the workers who create this value are often the lowest paid. »

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