Tag Archives: Business Fights Poverty

Bean counters and the living wage

30 May

Colleagues at Business Fights Poverty have recently published a new report – The Case for Living Wages (https://businessfightspoverty.org/register-the-case-for-living-wages/ ). It shows that, for many companies, it makes sound business sense to pay a living wage rather than either a (lower) statutory minimum or whatever market conditions will let companies get away with. Offsetting a higher wage bill are benefits of higher productivity, lower turnover, greater loyalty and a potential sales uplift from socially aware consumers. It’s a good report.

But if it’s ‘good for business’, why don’t companies do it? For example, think of the UK Post Office, where paying low wages seems to trigger very high turnover (see https://morningstaronline.co.uk/article/b/royal-mail-plagued-by-disease-of-high-worker-turnover). Even worse, why do some companies do a “P & O” and end up with ferries they can’t operate and a hostile government and press?

So somehow companies seem to be paying sub-optimal wages – which benefit neither the business nor the employees. Searching for reasons, the drive to cut costs without thinking through the consequences looks likely to be high on the list. The dreaded bean counter with his red pencil may not be optimising his companies profitability at all.

There are a couple of points worth emphasising here. The first one is highlighted in the report – it is easier if there is a collective push towards a living wage rather than piecemeal implementation – as Julie Vallat from L’Oreal says, ‘I always convey the message internally and externally that we should not be competitive on this issue. We will not achieve anything alone, if we are working in isolation on a systemic endemic issue’.

The second issue isn’t touched on in the report, but is important – the interaction of living wages with the tax and benefits system. A key reason businesses can get away with not paying living wages is that they look to the state to bail them out via the social security system. But this creates a massive hit to public expenditure and creates all sorts of bad incentives. Time for businesses – and the consumers they serve – to pay the living wage.

Sen on Poverty – the tolerance of the intolerable

23 Jan

Amartya Sen


Amartya Sen was lecturing last night at the LSE on this topic – sold out, as you might expect (2,000 enquiries in the first hour, apparently). But you could also watch a live webcast which worked well – check the LSE video site – http://goo.gl/Kqs6w7 – for the replay

He looked at possible reasons for why we tolerate poverty – ignorance, a belief it is impossible to remove it, and self-centredness (“no obligation”) and found all of them lacking. Of most interest to me were his illustrations from India, and the contrasts between India and China.

I had three key takeaways. First, on ignorance: Sen described how the Indian media ignored extreme poverty because they were “controlled” by the middle classes, in the sense that they pandered to the interests and obsessions of the middle class to ensure their advertising income. Hence little reporting of extreme poverty in India. So my thoughts turned to William Wilberforce, the crusader against the slave trade. I realised, perhaps for the first time, that part of his greatness was to rub the noses of the society of his day into what slavery really meant so that the elite that made the laws could not simply ignore it. I suppose the modern equivalent is “Benefit Street” and forcing politicians to live rough for a bit.

Second, the need for “balanced growth” – not in the sense necessarily of balance between sectors, but in the sense of balance between public and private provision. You need to grow healthcare and education as much as business if your economy is to thrive. A malnourished workforce is not that productive.

Third – think quantitatively about poverty and policy. In the Q&A session, Sen dealt with an argument that “India’s greatest problem was employment subsidies” – and simply showed that this was unlikely given their small cost, and that the much greater cost of utility subsidies to the middle classes were much larger. Avoid dogma and stick to facts and reason was a good message to put across.




Post 2015 Africa: central planning or the market?

3 Oct

Diageo Ethiopia

Attended an excellent event last week at Standard Chartered in the City, sponsored by Business Fights Poverty (http://businessfightspoverty.org). It was a panel discussion on a new report – “A New Global Partnership with Business – Building a post-2015 development framework to achieve sustainable prosperity in Africa”. Despite the mouthful of a title (and the title slide for the presentation had no less than eight corporate sponsors – four at the top, four at the bottom), the report is actually a good read (download from here: http://goo.gl/SG8FOT).

The panel discussion was equally good. By the time it had finished, I was feeling quite sorry for Diageo, very ably represented by Ann McCormick. They are one of the case studies in the report, focusing on their acquisition of Meta Abo Brewery in Ethiopia and their efforts to source more malt & barley locally. Their partnership efforts were certainly impressive, spanning the top (a G8 pledge signed with Obama & Hilary Clinton watching), the Ethiopian government (via their Agricultural Transformation Agency) and local implementation via an NGO working with smallholder farmers (Farm Africa). But what struck me in discussion was Ann McCormick’s obvious concern as to what the newly enriched smallholders were actually doing with their extra cash.

Hardly a problem, one would think, when Diageo buys grain in the developed world, but probably a real enough issue in Ethiopia. And just one small example of the hurdles businesses have to jump through to be good corporate citizens in Africa.

So why the title? I recall a lecturer in Cambridge saying once: “When I visit Russia [this was the 1970s] I think – My God, how they would benefit from some market mechanisms. Then when I visit the States, I think: My God, a bit of central planning wouldn’t hurt.” At the time, I was too inexperienced to value the remark, but with the passage of time I see its truth. The market can’t solve everything in Africa (or elsewhere) – it needs other institutions, including government, to play their part. One invisible hand is all very well, but two hands are better.