When French tire maker Michelin closed its factories during the coronavirus pandemic, Florent Menegaux, the company’s chief executive, took stock of the impact of the closures on employees around the world. Thousands of workers in Asia, Europe and the United States at the bottom end of the company’s pay scale were barely scraping by, an independent review showed. Michelin promised to do better.
Last week, the 134-year-old company, which has 132,000 workers in 131 factories in 26 countries, announced that it would guarantee all its employees a “decent wage” anywhere in the world, as part of a broader social plan aimed at to ensure that none of their workers had to struggle to make ends meet.
“If workers are just in survival mode, it’s a big problem,” Menegaux said in an interview. “When the distribution of wealth in a company is too unequal, that is also a problem.”
The announcement quickly ignited a debate in France about what exactly constitutes a decent wage and whether more French corporations should follow suit. Unions warned that Michelin’s commitment would still leave some workers struggling and did not include a guarantee against future layoffs or plant closures.
Corporations around the world seek to meet environmental, social and governance objectives. Many investors are moving away from ESG criteria, but some companies are signing up to become living wage employers, committing them to paying wages that correspond to the costs of rent, food, transportation and childcare in regions where their workers work. live.
In France, cosmetics giant L’Oréal committed to a living wage and extended the commitment to its suppliers. Unilever is taking the same measures. According to the World Economic Forum, only 4 percent of the world’s most influential companies have made similar commitments.
Michelin’s wage promise caught the attention of President Emmanuel Macron of France, who had said he wanted companies to share more profits with workers. His administration faces a political storm as households struggle with a cost-of-living crisis. The proportion of workers earning France’s gross monthly minimum wage of 1,766 euros, which is indexed to inflation, has risen to 17 percent of the workforce from 13 percent just a few years ago.
French Prime Minister Gabriel Attal has called for talks with business groups and proposed tax changes to encourage companies to pay more than the minimum wage, which social organizations say is often not enough for workers to make ends meet. month without the government. subsidies.
Menegaux declined to reveal how much Michelin’s lowest-paid workers earned around the world, but said their pay was above the local minimum wage, which he described as “not a decent wage.” He added that a living wage was a way to help employees “who were at the bottom of the ladder move up.”
He decided to take action, he said, when the closure of Michelin factories during the pandemic revealed the weakness of social safety nets around the world. In France, the government protected workers from layoffs by paying companies to grant them partial furlough. But in other countries this support did not exist or was insufficient.
In creating its “living wage,” the company, known for its gummy Michelin Man mascot, referred to standards set by the United Nations Global Compact: a wage that allows a family of four to live “decently” in the city where they work. That means not running out of money before the end of the month after paying basic expenses and being able to save and spend modestly on goods or leisure activities, Menegaux said.
Michelin turned to the Fair Wage Network, a non-governmental organization based in Switzerland, to evaluate its pay structure. The resulting study found that 5 percent, or about 7,000, of Michelin employees worldwide did not earn enough.
In response, Michelin adapted its pay scales to the cost of living in the cities where its factories operated. In Beijing, the group raised the lowest salary level to 69,312 yuan a year, or just under 9,000 euros. In Greenville, North Carolina, the base salary of workers increased to the equivalent of 40,000 euros per year.
In France, where the gross minimum wage is 21,203 euros per year, the company raised the salaries of its lowest-paid workers to 39,638 euros in Paris and to 25,356 euros in Clermont-Ferrand, where the company is headquartered and where the cost of life is lower than that of Paris.
But spending money on a living wage hasn’t worried Michelin shareholders. The company’s stock is at a five-year high. “They expect Michelin to comply,” Menegaux said. “And we are still complying.”
The pay increases are not entirely benevolent: Michelin needs to improve its appeal and employee loyalty after worker turnover at its factories soared in the wake of pandemic shutdowns. And paying better would help improve productivity, Menegaux added.
“You will have revenge,” he said. “Because when people receive a decent salary, they are fully engaged and do their jobs better.”
Louis Maurin, director of the Observatoire des inégalités, a social watchdog organization, said Michelin’s promise of a living wage had shed moral light on one of capitalism’s thorniest issues.
“All companies should ask themselves this question,” he said. “Those who own capital say that work creates wealth. But the workers who create that value are usually the lowest paid.”
In France, where half of workers earn less than 2,100 euros a month after taxes, a worker is considered middle class with a monthly salary of 1,500 to 2,800 euros, according to Observatory data; Workers are considered “rich” if they earn more than 3,900 euros per month.
Some French lawmakers are trying to limit executive pay to 20 times the earnings of a company’s lowest-paid employee. French automaker Stellantis sparked widespread outrage when it announced last month that its CEO Carlos Tavares’ salary in 2023 could reach €36.5 million, 365 times the average compensation of Stellantis employees.
Menegaux asked that his salary for 2023 be capped at €1.1 million; With performance shares, his total remuneration reached 3.8 million euros.
Unions said the living wage measure fell short of what Michelin could afford to do. The company reported record operating income, its main profit metric, of €3.57 billion in 2023 and a profit margin of 12.6 percent. Michelin spent 500 million euros on share buybacks last year.
“It’s good publicity that hides other things,” Nicolas Robert, a representative of the Union syndicale Solidaires, one of France’s largest labor organizations, said of Michelin’s wage commitment. He said Clermont Ferrand factory workers who received living wage increases earned around 1,700 euros a month after taxes, insufficient to support a family of four without social supplements.
“After paying for housing, food, energy and transportation, there’s not much left,” Robert said. “What they call a decent wage is far from reality: we have many workers who have been in survival mode since inflation soared.”
Menegaux said the question of whether a company should accept lower margins or reduce share buybacks to devote more of its wealth to worker wages was a critical debate.
“I firmly believe that what distinguishes a good company from a struggling company is the level of social cohesion it achieves,” he said. “Personally, I think that globally capitalism has gone too far. I believe in capitalism, but I believe that when a salary is not enough for a person to project themselves into the future, it is a problem.”