In search of a living wage
"Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing, medical care, necessary social services, and the right to security..." - United Nations Universal Declaration of Human Rights Article 25.1
What is a living wage? Labour Behind the Label defines a living wage as one that enables workers to meet their needs for nutritious food and clean water, shelter, clothes, education, health care and transport, as well as providing a discretionary income. It should be enough to provide for the basic needs of workers and their families, to allow them to participate fully in society and live with dignity. It should take into account the cost of living, social security benefits and the standard of living of others nearby. Finally, it should be based on a standard working week, before overtime, and should apply after any deductions. The most common response from companies to our inquiries about living wages was to point out that there is no universally agreed definition of a living wage. This is not entirely true. While some elements of our definition might be disputed, three are common across almost all definitions formulated by trade unions, campaigners, academics and companies. This consensus seems to be that a living wage should: - Cover basic needs
- Include a small amount for savings or discretionary income
- Cater for dependents.
The following pages explain more about how and who decides what a living wage should be, what a living wage means to workers and what companies are (or more often not) doing to ensure workers in their supply chains are paid the wages they deserve. How are living wages calculated? How living wages are calculated is a matter of some discussion, although methods have been developed and applied by a number of organisations including Social Accountability International, the body whose SA8000 factory accreditation many companies use, and the Greater London Authority. Using these methods in collaboration with locally-based organisations, it is quite possible to come up with an estimate of a living wage for individual countries. Debates about how to calculate and measure a living wage can be avoided by allowing workers and their managers to set wages through bargaining between themselves.. This not only avoids arguments over definitions, it also empowers workers to take their working conditions into their own hands. That's why we also demand that companies ensure workers are able to form and join trade unions.
The major disadvantages of this approach are that it does not guarantee that brands or retailers will be willing to pay the new rates, and that most garment workers do not have access to their right to bargain collectively. With most companies' purchasing practices set up to ensure low costs and maximise profits there is a real risk that companies will simply move somewhere else if higher wages mean buyers or retailers have to pay more for their goods.
This is why the only way wages can really be addressed is on a sector-wide level. Only by working together can the brands end the downward spiral in prices that they have started and on which their competitiveness depends. Only then will suppliers have the confidence to negotiate prices that factor in a living wage, and to set meaningful minimum wages. Bottom up: how workers see it Because of the fact that wages are so low and the cost of living so high, she finds it very hard to make ends meet. At 18, she is the only earning member of her family of three. She is an only child and both her parents are jobless. She spends almost 40% of her income on the rent of her one bedroom house. When told that companies check that workers should get at least the minimum wage set by the government, which they all do, she said that “if they think this wage is enough they should all try to live on this amount for a month and decide if it is OK.” - interview with a Pakistani worker In many countries those who can get jobs in factories considered lucky, and young girls leave their families in rural areas to travel hundreds of miles in search of them. Yet the reality when they arrive is tough. We work until 2 am or 3 am during the peak season. We always have to work a double shift. Although we are very exhausted, we have no choice. We cannot refuse overtime work, because our standard wages are so low.- Thai worker These are not the extreme examples: this is the norm. The pay that an average worker in the garment industry takes home is often well below the national poverty line, itself short of what can be reasonably defined as a living wage.
Minimum wages, usually defined by governments, are set in the context of ferocious competition between countries for clothing trade and consequently and often fall well below these governments' own poverty thresholds. Worse still, the responses from companies to our survey indicate that many suppliers do not even pay this legal minimum. set by governments, are often set at levels well below living wage levels.
An additional problem exists for the millions of piece-rate workers and homeworkers in the global garment industry. Paid by the number of garments they produce, not the number of hours they work, the rate per piece often makes it impossible to earn a living wage in a normal working week, but when the issue is raised, managers will simply argue that they should work faster. Employed informally and further removed from the brands, they are more vulnerable to seasonal variations in work.
It's not just garment workers themselves who suffer, but their families too. Young people who have traveled from the country often need to send back money to unemployed or poor parents before they can look after themselves in the city. The garment workforce is 80% female, and those who are not looking after their parents often have children to support. Top-down: how companies see it While a few companies, for example H&M, Laura Ashley and Matalan, make no reference to a living wage in their published codes of conduct, most make an in-principle commitment to living wages in their codes of conduct. Many say something like: "national legal standards or industry benchmark standards, whichever is higher. In any event wages should always be enough to meet basic needs and to provide some discretionary income," which is similar to the phase used in the ETI base code: The difficulty with this statement is that neither national legal standards nor industry benchmark standards come close to meeting basic needs. Companies we wrote to largely with us on this, but how they dealt with this issue varied.
Some do not believe that they are obliged to do anything to implement it. Arcadia told us, while a living wage is aspirational, until there is a universally agreed alternative we rely on a solid benchmark specified by an ILO convention, and that is the minimum wage set by law in the appropriate country.
Plenty of these respondents acknowledge that minimum wages aren't sufficient, but then tried to wriggle out of it, as Pentland do here: the minimum wage is not a living wage in any country. However in many countries it is subject to a tri-partite negotiation between employers, trade unions and government and we need to respect this process.
Asda typified the most common position when it told us that it could not apply the living wage because there was no 'clear definition' of it, and that instead: Governments should set their minimum wage at levels that are linked to the country's cost of living and local requirements.
Not all brands agreed though. Tesco, for example, said that: "In Bangladesh it has estimated a living wage value of 3000 Taka, three times higher than the minimum wage”.
NEXT acknowledged that: "achieving compliance to the living wage within our supply base is one of our biggest challenges."
Levi Strauss & Co said that: “we do not feel that we have all the information we need to be able to responsibly implement and enforce a living wage requirement... We have assembled an internal working group on the issue and have proposed participating in and funding a research project with the multi-stakeholder organization, ETI.”
New Look and John Lewis were the only companies to specifically mention collective bargaining agreements as tools to establish a living wage.
Gap and H&M were the only companies to draw a link between wages and their own purchasing practices towards suppliers.
Puncturing the myths So three arguments arise against paying a living wage. Let's address them in turn: Myth 1: Paying a living wage is impossible because there is no consensus on how to calculate it From the workers' perspective, there is little sense in this argument. It sounds much more like an excuse than a policy. To make this argument with any credibility a company needs to demonstrate that it is taking at least some steps to raise wages above the basic minimum that most acknowledge is too low, and in the long-term be working towards develop a living wage policy.. The ETI recommends that companies should: consult widely with the local community about the appropriate level of the living wage, then negotiate the precise amount with representatives of the workforce in a manner consistent with the freedom of association and right to collective bargaining provisions of the ETI base code (ILO Conventions 87 and 98). In situations where the negotiating power of the local workforce is weak ...the responsibility of the company to arrive at an adequate measure of the living wage (through study and consultation) is proportionately greater. Six years later, no companies, whether in the ETI or not, have made any progress on this beyond participation in a few working groups, and few appear to be planning to do so in the near future. Myth 2: Governments, not companies, need to set reasonable minimum wages While it's true that minimum wages set by governments (often negotiated with local business and trade unions) should ideally be reasonable, there is a clear reason why they aren't. Governments have to think about their international competitiveness, and are all too aware that multinational fashion buyers will move elsewhere if labour costs become too high. It's down to the multinational companies who dominate garment supply chains to show that they are willing to absorb the small increases in production costs that might occur, in order to give governments the confidence to raise minimum wages in the first place. Myth 3: Low-income countries would lose their competitive advantage if wages were higher The first and most obvious point to make here is that labour costs represent such a small proportion of the cost breakdown of a garment that even doubling them would make only a small difference. The labour costs in a typical piece of clothing make up two to four percent of its retail price. For example, the labour cost for an £8 T-shirt sewn in Bangalore, India, is around 15 pence. Philip Green, owner of Britain's fourth biggest clothing retailer, Arcadia group, took home a £1.2bn share dividend at the end of 2005. At £30 per month, it is hard to imagine that providing a living wage for workers in Bangladesh would break the bank. On top of this, it's not just the cheap labour that entices production to other countries. China is popular in part because of its cheap workforce, but in part because its industry is very efficient and productive, and because it can offer the 'back-linked industries' right the way from cotton production to finished garment that most other countries cannot. Also its currency, the Yuan, is undervalued against other currencies. Wage increases have been shown to improve workforce morale and productivity, and to reduce absenteeism and employee turnover, so paying a living wage could even improve quality and flexibility, allowing enlightened suppliers to retain a competitive edge. What should fashion brands do? Most companies seem to think that ensuring payment of a minimum wage is sufficient to have discharged their responsibilities, or at least an adequate stop-gap measure. But a stop-gap for what? Brands and retailers at the top of the supply chain aren't powerless in the face of global trade. When they work together, they control the industry. They don't have to relocate to chase the cheapest labour. They could take responsibility for their actions, commit to paying a living wage, and absorb the small increase in costs this might create. Whether a living wage is defined by a formula or by collective bargaining, it requires that companies address the root problems of the conflicting messages they send to factory managements, and the way they purchase. This means finding solutions that work on a country-wide, supply chain-wide and ultimately industry-wide level. Companies deserve credit for working actively to find industry-wide solutions to the difficulty, but not simply for signing up and then doing nothing. This means that buyers need to, - Develop strategies to improve wages, above and beyond minimum wages, in their supplier base.
- Engage in good-faith negotiations with factories to ensure that a living wage can be paid out of prices paid to the factory. Accept that this may increase the cost they pay to suppliers.
- Make it clear to suppliers that they expect workers to be paid a living wage.
- Make it clear to suppliers that negotiating wages via a functioning collective bargaining agreement will not come at the expense of their custom.
- Ensure that local trade unions, who are better placed to get information from workers, and know the local cost of living, are involved in supplier audits.
- Work with other companies, trade unions and governments on a national and industry-wide level to develop strategies to raise wages, through active participation in a multi-stakeholder initiative.
|