By Patrick Belser, ILO senior economist

 

 

 

 

Like many people, I like talking to my hairdresser while getting a haircut. Sometimes these conversations can be quite trivial, but what Yvan told me the other day really got me thinking.

Yvan works 43 hours a week but he can barely make ends meet. Mind you, he works as a hairdresser in a salon in Switzerland, a country not usually associated with any form of poverty.

But even in the wealthiest countries, there are those who struggle to get by on their wages.

Yvan told me he makes CHF 3,400 (US$ 3,600) gross per month. Three quarters of the income he generates goes to his employer.

He lives alone, with a small dog, and once he’s paid rent and other bills, he says he’s left with about CHF 1,000 (US$ 1,060). That’s just a little over CHF 30 (US$ 32) a day, which won’t get you very far in Geneva, one of the world’s most expensive cities.

He has asked for a raise, only to be told there are plenty of others who’d love to get his job, particularly residents of neighbouring  France – only a 15-minute bus ride away – where the cost of living is quite a bit lower.

Yvan’s case might sound rare, but it is not.

In Switzerland, 7.7 per cent of workers are considered “at risk of poverty; in the European Union, the figure is 8 per cent. And in the United States, the crisis has increased the share of “working poor” from almost 6 per cent in 2007 to over 7 per cent in 2011. In all, there are close to 30 million workers who struggle to make it to the end of the month in the rich world.

What can be done?

One important way to prevent low wages from translating into poverty is through social security and other transfers which support low-paid workers and also create an incentive for people like Yvan to keep working instead of going on welfare.

These benefits can take the form of tax credits or income support measures which kick in only if people work: total benefits first increase as people work more hours and then they decrease progressively as people get higher wages. France, the United Kingdom and the United States are among the countries that have such programmes.

But these types of benefits put a massive burden onto the state and the taxpayer. There is also a risk that companies look at the measures as a form of wage subsidy which allows them to shift their responsibility to pay decent living wages onto the public.

I was discussing the issue with a colleague. His take was: “Why should I pay the haircut from my wallet and the hairdresser’s salary from my taxes?” He has a point. In-work benefits should be seen as a complement and not a substitute for the living wages that enterprises should pay.

Decent living wages can be enforced through statutory minimum wages, whose levels take into account workers’ needs as well as economic factors, including the need to maintain a high level of employment.

Collective bargaining is even better but unfortunately the number of workers covered by collective agreements is diminishing. I did not ask him, but I’m pretty sure that Yvan is not one of them.