Responsible Investing

Living wage in the retail sector

The way we shop has changed radically over the past decade. The growth of low-cost online retailers has put unprecedented pressure on the margins of high street stores.
March 2020

The way we shop has changed radically over the past decade. The growth of low-cost online retailers has put unprecedented pressure on the margins of high street stores. Many have had to respond by cutting costs to stay in business, which can mean squeezing the wages of workers and of those in their supply chains.

The short-term alleged cost benefits of a low-wage strategy need to be weighed against longer-term costs. Poor wages can result in higher worker attrition and lost productivity, not only from depleted morale but also a constant need to train new starters.1 This in turn can lead to a decline of the in-store shopping experience, further damaging the business prospects for high street retailers.

Our engagement on living wages has sought to bring companies’ attention to these less immediate issues and encourage them to take a progressive long-term strategic approach to human capital management, which recognizes the benefits of a stable and motivated workforce. This engagement supports various sustainable development goals (SDGs), the strongest links relating to SDG 1 — No Poverty; and, in particular, target 1.2, which relates to halving families living in poverty; and SDG 8 — Decent Work and Economic Growth, within which target 8.5 focuses on decent and productive work for all. In addition, given that women are often disproportionately represented in low wage jobs, engagement on living wages also supports SDG 5 — Gender Equality.

Our engagement on living wages has sought to encourage companies to take a progressive long-term strategic approach to human capital management.

Companies engaged


Our engagement focused on ten large (>50,000 employees) retailers, chosen to represent five we judged as leaders on ESG and five laggards, based on an initial analysis of public information. This approach resulted in ten companies to focus on: Costco, Dollar General, Dollar Tree, Sysco, Walmart (all U.S.), Tesco (UK), Fast Retailing (Japan), George Weston and Loblaw (Canada) and CECONOMY (Germany).

In total, these companies employ approximately 3.7 million people.

Engagement expectations

Our engagement with these ten focus companies commenced at the beginning of 2019. Our strategy has been to start with a focus on raising awareness on the living wage, understanding of companies’ positions on wage levels in their own operations and encouraging enhanced disclosure on wage levels.

As the engagement progresses, we plan to ask for time-bound plans for adjustments in wage levels and benefits and for companies to consider wage levels in their supply chains.

Ultimately, our aspiration is that all engaged companies have set time-bound plans and have adjusted wage levels to living wage for applicable scopes of employees.

If, during the engagement process, we judge that a company is responding well and on track to deliver a good living wage strategy, we may remove them from the engagement and initiate dialogue with another company.

Our 2019 engagement dialogue focused on the following:

  • Raising awareness about the concept of a living wage and the benefits it provides to employees, as well as for the business as a whole
  • Encouraging companies to consider how workers’ wage levels are relevant to long-term business success
  • Asking whether, and how, companies assess the financial consequences of a wage level adjustment across their operations
  • Asking for enhanced disclosure on (a) average wage levels per business section and region; (b) a list of benefits and to which employees they apply; and (c) wider workforce issues, through the Workforce Disclosure Initiative survey

Observations, challenges and best practice

Seven out of the ten focus companies were responsive to our engagement. Despite several follow-ups, Walmart, George Weston and CECONOMY did not respond to our outreach efforts.4

With the responsive companies, we spoke at a range of different levels. At one we spoke with the CEO; at others, our dialogue took place with representatives including the head of HR, head of Compensation and Benefits, sustainability experts, as well as Investor Relations.

Most discussions were open, though the information provided was limited overall, with one very positive exception: Tesco. All companies highlighted the need to pay appropriate wages, though interpretation varied as to what this meant in practice. Only one company, again Tesco, had pilots running for living wage payments in their supply chain. In addition, for their own staff, their new 2019 payment scheme — when combining base pay and other benefits — was forecast to reach UK living wage levels.

While all companies assured us that they regularly assess wage levels, they also made it clear that the main criteria for pay decisions were inflation and pay rates at competitors. There was no information from any company that they would include social considerations — such as retention rates, health implications or customer satisfaction — in their methodologies.

Some of the companies we spoke with perform regular employee surveys, which include questions on overall satisfaction with pay and benefits packages. None of the companies disclose the results, even in an aggregated manner. We will continue to push for regular and transparent employee engagement surveys, which help detect areas and themes of dissatisfaction.

The current overall level of workforce disclosure by the retailers we engaged was very poor. Enhanced disclosure on workforce aspects, including wage level data, is needed to allow us to compare bestpractice, frame engagement asks in a more targeted way and take better informed investment decisions.

Living Wage — disclosure and jurisdictional availability


We will continue in 2020 to engage the focus companies on their attitude to paying a living wage and on enhanced workforce data disclosure. We will also start asking for targets for adjustments in remuneration and social benefits.

In addition, to build the case for action, we are working with a group of companies, NGOs and an agency for international development cooperation to develop and pilot a methodology for ‘social opportunities scenario analysis,’ which would help companies to consider the trade-offs between short-term cost management and long-term employee satisfaction and performance in a more structured way.




3 There are various methodologies to measure local and regional living wage. Among them are ISEAL Alliance — A Shared Approach to Estimating Living Wages (the Anker methodology), MIT’s Living Wage Calculator, Centre for Policy Dialogue Bangladesh and Berenschot.

4 As of December 19, 2019.

5 The Platform Living Wage Financials is an alliance of investors that encourages and monitors investee companies to address the non-payment of living wage in global supply chains. The Platform’s rating methodology is aligned with the UN Guiding Principles on Business and Human Rights and has eight overarching categories covering various aspects of best practice. We used this methodology to score companies, using publicly available information, i.e. the company’s annual and sustainability reports as well as their websites. Scores cover own operations and supply chains, and have been weighted and rounded to one decimal place.

6 The Workforce Disclosure Initiative (WDI) is a project run by UK-based NGO ShareAction that aims at improving data from listed companies on how they manage workers in their direct operations and supply chains. The survey covers themes including human rights, diversity, pay ratios to overall wage levels, turnover rates, training, occupational health and safety, freedom of association, whistleblowing, structure of the company’s supply chain as well as sourcing procedures. An ESG Insight on our WDI-related engagement from November 2019 can be found here:

7 Award submissions are marked against a range of criteria including; clear identification of sustainable objectives including environmental, ethical and ESG investment objectives, performance, experience in sector, communication to investors, transparency, reputation and compliance, levels of ongoing service and support, overall quality of submission. The awards may also include an element of online voting. Along with submissions, the first round of judging is based on a mixture of quantitative and qualitative analysis using resources from third party providers. The second round of judging consists of a panel debate to determine finalists in each category. From the finalists, the judging panel will decide on the winning and highly commended entries.

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.
Past performance should not be seen as an indication of future performance. The value of investments and income derived from them can go down as well as up as a result of market or currency movements and investors may not get back the original amount invested.
The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time. Foreign investing involves special risks due to factors such as increased volatility, currency fluctuation and political uncertainties. Investing in emerging markets can be riskier than investing in well established foreign markets.
All rights reserved. BMO Global Asset Management is a trading name of BMO Asset Management Limited, which is authorized and regulated Financial Conduct Authority; in the EU by BMO Asset Management Netherlands B.V., which is regulated by the Dutch Authority for the Financial Markets (AFM); and in Switzerland by BMO Global Asset Management (Swiss) GmbH, which is authorized and regulated by the Swiss Financial Market Supervisory Authority (FINMA). 835115_G19-2751 (11/19).
BMO Global Asset Management is the brand name for various affiliated entities of BMO Financial Group that provide investment management and trust and custody services. Certain of the products and services offered under the brand name BMO Global Asset Management are designed specifically for various categories of investors in a number of different countries and regions and may not be available to all investors. Products and services are only offered to such investors in those countries and regions in accordance with applicable laws and regulations. BMO Financial Group is a service mark of Bank of Montreal (BMO). BMO Asset Management Corp., F&C Management Limited and F&C Investment Business Limited are affiliates of the Bank of Montreal.
© 2020 BMO Financial Corp.

Related articles

No posts matching your criteria