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When the French tire maker Michelin closed its factories during the coronavirus pandemic, Florent Menegaux, the company\u2019s chief executive, took stock of the closures\u2019 impact on employees worldwide. Thousands of workers in Asia, Europe and the United States at the lower end of the company\u2019s pay scales could barely get by, an independent review showed. Michelin vowed to do better.<\/p>\n
Last week, the 134-year-old company, which has 132,000 workers at 131 factories in 26 countries, announced<\/a> that it would guarantee all of its employees a \u201cdecent wage\u201d wherever they were in the world, part of a broader social plan intended to ensure that none of its workers would have to struggle to make ends meet.<\/p>\n \u201cIf workers are just in survival mode, it\u2019s a big problem,\u201d Mr. Menegaux said in an interview. \u201cWhen the wealth distribution in a company is too unequal, that\u2019s a problem, too.\u201d<\/p>\n The announcement quickly ignited a debate in France over what exactly constitutes a decent wage and whether more French corporations should follow suit. Unions warned that the Michelin pledge would still leave some workers struggling and that it did not come with a guarantee against future layoffs or site closures.<\/p>\n<\/div>\n<\/div>\n Corporations worldwide are looking to meet environmental, social and governance targets. A lot of investors are backing away from E.S.G. criteria<\/a>, but some companies are signing up to become living-wage employers<\/a>, which commits them to pay salaries that correspond to the costs of rent, food, transportation and child care in the regions where their workers live.<\/p>\n In France, the cosmetics giant L\u2019Oreal<\/a> committed to a living wage and extended the pledge to its suppliers. Unilever<\/a> is taking the same steps. Only 4 percent<\/a> of the world\u2019s most influential companies have made similar commitments, according to the World Economic Forum.<\/p>\n Michelin\u2019s salary pledge caught the attention of President Emmanuel Macron of France, who had said he wanted companies to share more profits with workers. His government is facing a political storm as households struggle with a cost-of-living crisis. The share of workers who earn France\u2019s gross monthly minimum wage of 1,766 euros, which is indexed to inflation, has surged to 17 percent of the work force from 13 percent just a few years ago.<\/p>\n<\/div>\n<\/div>\n The French prime minister, Gabriel Attal, has called for talks with trade groups and proposed tax changes to encourage businesses to pay more than the minimum wage, which social organizations say is often not enough for workers to get to the end of the month without government subsidies.<\/p>\n<\/div>\n<\/div>\n Mr. Menegaux declined to divulge how much Michelin\u2019s lowest-paid workers around the world had been earning, but said their pay was higher than the minimum wage where they lived, which he described as \u201cnot a decent salary.\u201d He added that a living wage was a way to help move employees \u201cat the bottom of the ladder up.\u201d<\/p>\n He decided to take action, he said, when the closure of Michelin\u2019s factories<\/a> during the pandemic revealed weak social safety nets worldwide. In France, the government shielded workers from layoffs by paying companies to put them on partial furlough. But in other countries, such support either did not exist or was insufficient.<\/p>\n In creating its \u201cdecent wage,\u201d the company, known for its rubbery Michelin Man mascot, referred to standards set by the United Nations Global Compact<\/a>: a salary enabling a family of four to live \u201cdecently\u201d 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, Mr. Menegaux said.<\/p>\n<\/div>\n<\/div>\n Michelin turned to the Fair Wage Network<\/a>, a nongovernmental organization based in Switzerland, to assess its salary structure. The resulting study found that 5 percent, or around 7,000, of Michelin\u2019s employees worldwide were not earning enough.<\/p>\n<\/div>\n<\/div>\n In response, Michelin adapted its salary scales to the cost of living in cities where its factories operated. In Beijing, the group increased the lowest pay level to 69,312 yuan per year, or a little less than \u20ac9,000. In Greenville, S.C., workers\u2019 base pay rose to the equivalent of \u20ac40,000 per year.<\/p>\n In France, where the gross minimum wage is \u20ac21,203 per year, the company lifted the salaries of its lowest-paid workers to \u20ac39,638 in Paris and \u20ac25,356 in Clermont-Ferrand, where the company\u2019s headquarters are and where the cost of living is lower than Paris\u2019s.<\/p>\n But spending money on a living wage has not worried Michelin\u2019s shareholders. The company\u2019s stock is at a five-year high. \u201cThey expect Michelin to deliver,\u201d Mr. Menegaux said. \u201cAnd we are still delivering.\u201d<\/p>\n The wage increases are not totally benevolent: Michelin needs to improve its attractiveness and employee loyalty after worker turnover at its factories soared in the wake of pandemic lockdowns. And paying better would help improve productivity, Mr. Menegaux added.<\/p>\n \u201cYou will have payback,\u201d he said. \u201cBecause when people are paid decently, they are fully engaged and they do better work.\u201d<\/p>\n<\/div>\n<\/div>\n Louis Maurin, the director of Observatoire des in\u00e9galit\u00e9s,<\/a> a social watchdog organization, said Michelin\u2019s living wage pledge had shined a moral spotlight on one of the thorniest issues in capitalism.<\/p>\n \u201cAll enterprises should be asking themselves this question,\u201d he said. \u201cThose who hold the capital say work creates wealth. But the workers creating that value are often the least paid.\u201d<\/p>\n In France, where half of all workers earn less than \u20ac2,100 after taxes per month, a worker is considered middle class with monthly pay of \u20ac1,500 to \u20ac2,800, according to the Observatoire\u2019s data; workers are considered \u201crich\u201d if they earn more than \u20ac3,900 a month.<\/p>\n Some French lawmakers are seeking to cap executive pay at 20 times the earnings of a company\u2019s lowest-paid employee. The French carmaker Stellantis stoked widespread indignation when it announced last month that the 2023 salary of its chief executive, Carlos Tavares, could reach \u20ac36.5 million, 365 times the average compensation of Stellantis employees<\/a>.<\/p>\n<\/div>\n<\/div>\n Mr. Menegaux asked that his 2023 salary be capped at \u20ac1.1 million; with performance shares, his total compensation reached \u20ac3.8 million. <\/p>\n<\/div>\n<\/div>\n Unions said the living wage measure fell short of what Michelin could afford to do. The company posted record operating income, its main profit metric, of \u20ac3.57 billion in 2023 and a 12.6 percent profit margin. Michelin spent \u20ac500 million on share buybacks last year.<\/p>\n \u201cIt\u2019s nice publicity that hides other things,\u201d Nicolas Robert, a representative for the Union syndicale Solidaires, one of France\u2019s biggest labor organizations, said of Michelin\u2019s wage pledge. He said workers at the Clermont Ferrand factories who got the living-wage increases earned around \u20ac1,700 a month after taxes \u2014 not enough to support a family of four without welfare supplements.<\/p>\n \u201cAfter you pay your housing, food, energy and transport, not much is left,\u201d Mr. Robert said. \u201cWhat they call a decent salary is far from reality: We have many workers who have been in survival mode since inflation exploded.\u201d<\/p>\n Mr. Menegaux said the question of whether a company should accept lower margins or reduce share buybacks to dedicate more of a company\u2019s wealth to workers\u2019 salaries was a critical debate.<\/p>\n \u201cI strongly believe that what makes a good corporation versus a corporation in difficulty is the level of social cohesion it achieves,\u201d he said. \u201cPersonally, I think that globally, capitalism has gone a little bit too far. I believe in capitalism, but I think that when a salary doesn\u2019t pay enough for one person to project himself or herself into the future, it\u2019s a problem.\u201d<\/p>\n<\/div>\n<\/div>\n