European Conference on Living Wages

Toespraak | 25-11-2013

Your Excellencies, ladies and gentlemen,

I don’t usually like to appeal to authority to make my argument. But it’s tempting to stand on the shoulders of giants when talking about living wages.

The idea that wages should pay for the basic needs of workers and their families has a very long history and a very mixed group of supporters. Plato and Aristotle talked about it in ancient Greece. And I like to tease my current liberal coalition partners that their hero of the free market, Adam Smith, was a firm believer in living wages back in the eighteenth century. And what about Pope Leo the thirteenth and his open letter on capital and labour in 1891? Or Franklin D. Roosevelt and his Second Bill of Rights? Together with the unions and the International Labour Organization, surely this wonderfully diverse group cannot be wrong.

The United Nations recognised a living wage as a human right back in 1948. Two years ago it was included in the OECD Guidelines. Our theme for today is how to make the case for living wages in developing countries. It’s a theme close to my heart.

As you may know, over the last year I, together with others, have been working on structural improvements in the Bengal garment industry. In a moment I’ll be reporting on the progress being made there.

But before we turn our gaze to the other side of the world, I feel ̶ as a minister from a prosperous North European country ̶ that we should take a good hard look at ourselves. How are we doing, sixty-five years after the UN Declaration on living wages?

This is my answer: the fight for living wages is far from over and there is no guarantee that we will actually win. My colleague Lodewijk Asscher, the Minister of Social Affairs and Employment, recently put it like this: we are at a crossroads. One road is a freeway to the bottom. The free movement of workers within the European Union brought us great benefits. But there are also serious adverse effects. Dutch truck drivers earning a decent minimum wage are facing stiff competition from desperate workers from Poland and Romania. Some of those drivers or their bosses make use of every legal loophole they can find, or even resort to breaking the law. This poses a dilemma for Dutch transportation companies: either go broke or join that race to the bottom.

That is not the Europe we want. The labour rights we have fought so hard for over the last century are under threat. There is no need for despair, but there is an urgent need for action.

We must take that other road, the one to the top. Germany appears to be on that road now, with plans to put a statutory minimum wage in place. This would help greatly in the fight for a living wage.

Let’s turn our attention to the situation in developing countries – our theme for today. Bear with me, I have a few more words of gloom to heap upon you. Even in parts of the world that have made a lot of progress in recent years, the fruits of economic growth are not shared fairly. Large groups are disadvantaged. Three-quarters of the very poorest now live in middle-income countries. Hundreds of millions of workers in developing countries still earn less than two dollars a day.

But now, at last, let’s look at the bright side. The future in low and middle-income countries looks promising. Several recent developments make me think we have a real chance of success.

One important development is that there has been a major change in attitude among the more reputable part of the business community in the past few decades. Corporate social responsibility is growing strongly. It is on the rise for two reasons.

The first reason is that modern entrepreneurs consider it normal to pay a decent wage and provide proper working conditions. The second reason is pragmatic. If you don’t try to avoid abuses, your reputation can be ruined at the click of a mouse. Corporate social responsibility is now a business case. But it doesn’t happen by itself.

Companies have to realise that higher wage costs can be met from higher productivity, and that lower staff turnover and a better reputation feed through into higher sales and higher share prices.

The other promising development springs from the globalisation of trade. As you know, in my country I’m responsible for both foreign trade and development. So I head many trade missions to low and middle-income countries. I have seen with my own eyes the effect decent companies can have on an entire supply chain and even on governance.

Civil society organisations are vital in this area. They are watchdogs that bark when things go wrong. Strong unions are needed to protect workers’ rights and demand decent wages. That’s why the Netherlands supports the ILO’s Decent Work programme and all manner of local civil society organisations.

Their efforts, together with the change in business attitudes, the globalisation of trade and the rise of CSR, reinforce each other for the good of society.

I will give you an example of what this can lead to. Following the disaster at the Rana Plaza factory in Bangladesh earlier this year, I promised to press for structural improvements in the textile industry there.

Together with the ILO and other Western countries, the EU, trade unions, the Bangladeshi government, the Bangladeshi clothing industry and Western clothing companies, we have made agreements to increase the safety of factories and improve working conditions.

European countries can also make improvements at home, on our side of the supply chain. At my request, the Dutch textile industry associations have drawn up an action plan. They have also made agreements about living wages – a concept that has already been backed by the largest retailers. They want to sign longer contracts with suppliers in order to give them some breathing space and security. We are trying to shift the focus from cost to quality. For too long, cut-throat competition has led to poverty wages and dangerous working conditions. We are turning the race to the bottom, which we helped start, into a race to the top. I would like to see more fashion houses and retailers in Europe working together for living wages in the supply chain.

Most companies would like to see the same. But I have had to take some to task for failing in their duty. Competition needs to be based more on the quality of work, including better working conditions and higher wages. Living wages are a key aspect of this.

The Dutch embassy in Bangladesh commissioned the respected Centre for Policy Dialogue and the Dutch policy research bureau Berenschot to work out how much a monthly living wage was in Bangladesh. Earlier this year they concluded that 62 euros would be the first step towards a true living wage. The report’s author is with us here today. I look forward to hearing more from him.

Last week, the Minimum Board Wage in Bangladesh, consisting of representatives of the government, trade unions and the garment industry has come to an agreement on a statutory minimum wage. Their proposal is a monthly minimum wage of 50 euro’s, with an annual increase of five percent. This is a huge improvement from the current situation and I hope that this will soon be implemented.

However, this minimum wage of 50 euro’s still falls short of the living wage we strive for. So I do hope our businesses have taken note of the recommendation of the Center for Policy Dialogue. After all, real Corporate Social Responsibility asks for more than just abiding to local laws. A living wage of 62 euro’s should remain the longer term perspective.

Your Excellencies, ladies and gentlemen,

I will do all I can to argue the case of the living wage with all my contacts and in all the relevant forums: the EU, the ILO, the OECD, the UN and the World Trade Organization.

At the same time my colleagues in the Dutch government will keep a close eye on our own back yard, to make sure we don’t lose in Europe what we gain in other parts of the world. I am counting on you doing the same wherever you can. Together we can make a living wage a reality.

Thank you.