Investors to lobby companies to pay a fair wage

Wage inequality could lead to social unrest and economic volatility, say experts

Investors will up pressure on companies to pay a living wage in 2019, after the issue climbed the agenda at international government summits and conferences in recent months.

That’s the prediction from Professor Daniel Vaughan-Whitehead, in a report published in the 2019 Sustainability Yearbook by fund group Robeco SAM. The professor warned growing wage inequality could impact social stability and lead to economic volatility.

“The debate on the living wage that is gaining attention in Europe and around the globe is a continuation of this wave of concern for workers’ well-being,” he said. “In 2017, 9 million work days were lost due to employee strikes or lockouts, worldwide.”

Vaughan-Whitehead’s comments come just months after a similar warning from Hermes Investment Management’s Andrew Parry, who told ESG Clarity that widespread inequality was bad for business. He said basic economics show that commerce is about increasing demand, and that becomes difficult if a large amount of people have no money.

In the latest report, Vaughan-Whitehead said many cities across Europe are lacking in employment opportunities that pay workers a fair income and warned that increasing wage inequality is leading to worker discontent and social unrest.

The professor said that government initiatives to enact minimum wages, while welcome, have failed to ensure that families have enough money on which to live.

“Over the past two decades, minimum wage policy has proven to be less effective than originally intended,” he said.

“The low minimum wage in the United Kingdom led, in fact, to the living wage campaign initiated and coordinated by the UK Living Wage Foundation. The campaign called for a much higher threshold than the minimum wage to better protect workers and their families.”

Fund selectors can read the full report here.