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Environnment: a global minimum wage 

could succeed where the COPs have failed     

FIGARO ECONOMICS  by Francis JOURNOT  june 2018 

Xvm4f5a917a 0c18 11e8 9bc2 6afb2a70ff2cLe Figaro/Tribune - Francis Journot notes the failure of the COPs, which have failed to stem the devastating effects of the globalisation of trade on the climate. According to him, the introduction of a global minimum wage would reduce the environmental damage of the "disposable" crop. 

COPs: Reaching an Impasse   

Climate imbalance appears to be undeniable, but is it a natural cyclical process of warming that we can do nothing to prevent, or is it, on the contrary, a direct consequence of industrialization over the past 200 years, which the punitive environmentalism advocated by the COPs (Conferences of Parties) aim to fight against?

Torn between ideology and scientific uncertainty, everyone seems to have made up their own minds. Despite disagreements, 154 heads of state smiled for the world’s cameras during the 21st climate conference, held in Paris in 2015. But two years later, the second phase of negotiations attracted fewer than two dozen of them to COP 23 in Bonn.

Emerging and developing nations don’t want brakes applied to their economies, and the heads of state of developed nations worry that new regulations and taxes on businesses and individuals will weaken theirs (the USA is not pleased about its $375.2 billion trade deficit in goods with China in 2017). 

An accumulation of taxes is not an environmental policy

Can we seriously want more free trade, and at the same time affirm that we are fighting to preserve the environment? In the space of a few decades, humanity has done more damage to the natural environment than in the preceding two millennia. If one agrees with the COPs’ postulate that climate change is incumbent upon us as well, it seems like a rationalization of free trade might be more efficient than carbon taxes or energy transition.

The latter’s impact is essentially on the tail end of the chain: the budget of drivers who want little more than to be able to go to work; moderate-income households that consume the disposable – and endlessly renewed – products that globalization pours into their shopping basket; fuel bills for people who can’t always afford to heat their homes properly in winter; and the bottom line of the last manufacturers in developed nations, who will wind up relocating production of consumer goods to countries that don’t apply a carbon tax… thereby increasing the emission of carbon and other toxic gases due to transportation.

Piling on taxes and ineffective environmental regulations, avoiding global economic considerations and attempting to arbitrate responsibilities and duties for each country according to criteria that are more dogmatic than pragmatic displays profound cynicism and may seem like a kind of fiscal racketeering… more importantly, they do not a real, effective environmental policy make.

In February, 1992, European heads of state in Maastricht signed the founding treaty of the European Union – which, in accordance with its treaties, has since become the free-trade zone that is most open to importations – then in June of that same year, at the Earth Summit in Rio, recommended managing our planet’s resources better. By now, 90,000 cargo ships crisscross the seas, spewing 1 billion tons of CO2 a year into the atmosphere.

Similarly, the WTO included protecting the environment among its fundamental goals, but eliminated quotas on textile importations in 2005. Since then, the textile industry has moved up to second place amongst sectors producing the most pollutants – right behind the oil industry. According to a report “by the Ellen MacArthur Foundation” published on November 28, 2017 called “A New Textiles Economy: Redesigning fashion's future”, the equivalent of a garbage truck loaded with textiles is incinerated or thrown away every second. The waste in barely-worn clothes is close to $500 billion a year, and the 500,000 tons of microfiber waste that winds up in the sea each year is the equivalent of 50 billion plastic bottles.

The most-recent COPs have requested annual funding of $100 billion, which will supposedly enable actions in favor of slowing down global warming. At the One Planet Summit, the European Commissioner Valdis Dombrovskis upped the ante even more: “to limit global warming to well below 2 degrees Celsius,” he declared, “Europe needs an estimated €180 billion in additional yearly investment over the next decade.” That program, which strings together new fiscal measures in favor of the climate, and the flourishing green-bond market might strike tax-payers as example of wild over-financialization, leading to the risk of a "green bubble” rather than a concrete, concerted effort to protect the environment.

The low-cost illusion

The low-cost economy constitutes an ecological, economic and humanitarian anomaly. Entire populations are pauperized while others are subjected to work conditions bordering on slavery. When a garment worker paid a few dozen or even a hundred euros assembles several hundred or thousand items of clothing, the cost ranges from a euro for a t-shirt to a few euros for other items of clothing, or a little more, depending on the brand’s market position. But the over-exploitation of resources, and lack of respect for safety norms that then requires river-cleanup, reforestation, reintroducing endangered species and medical care for sick workers.  

Pairing the “consume less but better” precept to an economic mechanism                         

The current challenge, which consists in slowing down the perfect storm of excess consumerism can be taken on by acting on modes of consumption and production. Granted, we need to learn new ways of consuming, but we can assume that the recommendation to “consume less, but better” won’t be enough. Consumers don’t always have a choice, and often have to settle for the low-cost, disposable offer with built-in obsolescence that is imposed by brands and warehouse stores. 

The best way to re-achieve equilibrium is to have an impact at the beginning of the consumer chain. We need to come up with economic mechanisms that will, in the long term, produce the desired effect.

Before the massive outsourcing of the manufacturing of consumer goods, the low coefficients applied to calculating production costs were fairly standard within each profession. Taking into account both a minimum wage and traditionally fairly high production quality, the final sales price was reasonably close to the actual cost of the item, and consumerism was essentially self-regulating. 

Nowadays, sales prices are determined by the market’s psychological price (the amount consumers are willing to spend). It is no longer unusual to pay 10 to 20 times an item’s production cost. Granted, import duties used to participate in moderating global production, and it must be acknowledged that it would now be almost impossible to restore the former transparency and equilibrium into the current free-trade context. It would, however, be possible to aim in that direction by nudging businesses towards properly re-pricing products, which would then lead to considerable decreases in waste and over-consumption. 

When labor costs are very low, industrials tend to pay less attention to the quality of item’s design and production, meaning they are subsequently fairly flimsy. The often find a purchaser nevertheless, and if not, they are destroyed. A global minimum wage would encourage reducing the production of disposables. The wage would have to apply specifically to the manufacturing of items for exportation, and countries would be classified by average-wage category. Heads of state of emerging nations would be aware of the human and philosophical dimensions, in addition to the economic one. The advantages and benefits of a decent salary – a source of new tax revenue and of financial development funded by increased contributions from the purchasers (retailers, rather than consumers) – would be very convincing.

In the long term, a global minimum wage would generate a positive macro-economic effect on the standard of living of entire populations. Nevertheless, considering what a small fraction of the final price workers’ salaries represent, the price to consumers would barely change.  

An international convention for a global minimum wage by groups of countries and specific to exportation

In virtue of the principle of legitimacy and a hierarchy of priorities, the International Convention for a Global Minimum Wage – which could also have been named the International Convention for Human Dignity and the Preservation of the Planet, would override international business and free-trade treaties. Organized under the aegis of the two largest consumer markets (the USA and the EU), it would, in order to ensure its efficiency, be independent of existent bodies.  If one considers the failure of the 1928 convention and other attempts, the International Labor Organization (ILO) has not, over the past 90 years, shown a capacity for introducing and successfully implementing a global minimum-wage project.

Currently, many nations close their eyes to working conditions, believing they are serving their national interest, but those improper salaries actually keep whole populations in poverty and whole countries under-developed.

The idea would be to link exporting towards the USA and the EU to a commitment by heads of states, via the International Convention for a Global Minimum Wage, to then initiate legislation in their respective countries in support of a global minimum wage for workers producing goods and services intended for those large consumer markets.

Each government would then be responsible for making sure those new rights were respected both by local sub-contractors and by foreign businesses implanted on their soil. Wronged employees would have recourse to a dedicated international body for soliciting assistance. In case of repeated infringements, penalties would be applied before eventually calling into question importations from that country.

To begin with, the global minimum wage could be applied to only the 2 or 3 industrial sectors whose production and transportation needs count among the most polluting ones. In a similar vein, increasing salaries would be spread over 2 or 3 years or even 5 or 6 years when they are very low (e.g. $40 in Ethiopia), in order to allow the changes to take place in an orderly manner. Negotiations for a specific minimum wage for agriculture, i.e. concerning unprocessed products, would also take place. They would take into account the reduced margin differential in that sector. The new agricultural salary (as long as it is not below the minimum wage already in effect in the country) could fall somewhere between the median salary and the manufacturing minimum wage for exportations for the same category. The agricultural salary could also cover mining activities.

Nations’ economies and wages are sometimes interdependent, it would be essential to be sure not to accentuate economic unrest. For example: a 30% increase in the salary of a Chinese factory worker in the export sector would also contribute to preserving equally reevaluated jobs held at the sub-contracting factories that are becoming more numerous on every continent. 

Low risk of inflation or economic destabilization     

Rising inflation rates in emergent or developing economies could turn out to be limited because the wage increase would not concern people working for local production. Therefore, it should have very little impact on local prices. In any case, social and economic progress would be spread out over time (several years), naturally and more or less progressively depending on each country’s structure. The risk of losing industries is also minimal. Major chains would have no reason to suddenly leave Bangladesh, Ethiopia or Vietnam if wages would have increased elsewhere as well. It is also highly unlikely that labor-intensive industries would suddenly return to countries that have lost their manufacturing know-how and capacity.

The minimum wage wouldn’t make prices rise excessively in western commerce, because, on the one hand, they have to take into account consumers’ purchasing power, and on the other, they face fierce competition. In the clothing sector, more than 40% of clothing is currently sold at sale or discounted prices. The largest impact would be on the weekly pace of "fast fashion" collections, recurrent advertising campaigns, and the number and size of the mega-stores on the world’s most prestigious shopping streets. A minimum wage applied to only part of a country’s active population is a concept that has almost never been tried, so there are no representative examples.

So we can instead refer to the implementation of a minimum wage in France, which was agreed to at the Grenelle negotiations in 1968. It represented an overall rise of 35%: the minimum agricultural income grew by 55% and other wages saw their remuneration increase by 100% or more over the following months and years, yet the inflation rate stayed fairly stable until the 1973 oil crisis.

If one examines the more-recent case that China represents, even though we need to take dumping into account, we can observe that multiplying the average wage by 300% in less than 10 years did not generate a sudden rise in the price of the products exported and sold on the shelves of western retail chains.  

Francis JOURNOT - International Convention for a global minimum wage 


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