An international minimum wage, whether based on a percentage of the median country wage or on a rate set by international committees, could be destructive to emerging economies (A way to start healing the huge wound that Savar left, 13 May). Not only would such an initiative be costly to administer, but increased costs resulting from a higher minimum wage, and the corresponding incentive among producers to lower costs through automation, would reduce overall demand for labour in emerging economies. Not surprisingly, in the context of prevailing macroeconomic conditions and pent-up demand for low-cost production, the prospect of black market sweatshops becomes all too real.
The problem could be addressed at the other end of the supply chain. Western retailers should be required to display details of their full supply chain to consumers and invest in monitoring conditions at all stages. The “fair trade” concept could then be applied to all types of industries, allowing consumers the choice of paying a small premium on products produced in acceptable working conditions.
Piers Sanders, Vanina El-Khoury, David Faye, Cui Hailiang and Samsoo Oh
Cambridge Judge Business School