Four pillars of a good living wages initiative

Paying garment workers a living wage will not be a piece of cake. It must be done in a sustainable and commercially viable manner: we recognise that companies must make a profit (we might, however, dispute how much). It must take account of the fact that retailers rarely have the luxury of complete influence over their suppliers - though garment manufacture remains a buyer's market, with terms and conditions largely dictated by the brands and retailers. This is why a sustainable approach to implementing living wages needs to be on a country-wide or industry-wide basis.

And no-one expects it to happen overnight. In fact, a common problem in our research work is explaining the concept of a living wage to garment workers, who find it hard enough to imagine a survival wage, never mind one that meets all their basic needs.

That's why Labour Behind the Label and our partners have been calling for urgent increases in wages – especially in this time of food crisis – as a stop-gap measure while more robust methodologies are developed. A framework to do this exists, called the wage ladder approach. This approach involves mapping the different wage levels – poverty lines, outcomes of collective bargaining agreements, floor wages, calculated figures, and so on – that can be used as benchmarks on the way towards a living wage. There is no need to let the minutiae of defining a living wage stall progress in increasing wages. Given the gulf between actual and living wages, it is certainly unlikely that stop-gap wage increases will exceed an eventual living wage value.

In 2008, companies seem to be hearing this argument, and have begun to experiment with projects that aim to increase wages, rather than getting hung up on definitions. But this can be dangerous, if it means that they lose sight of the ultimate goal of a living wage. A true living wage project must be exactly that, unambiguously and ambitiously.

LBL believes that all living wages initiatives should be built on four pillars:

1. A collaborative, multi-stakeholder approach

"Sainsbury's feel the best way to progress this is through the multi stakeholder ETI, where other retailers, NGOs and Trade Unions can agree a common approach, and potentially have a more significant and meaningful impact." - Sainsbury's

"We do not believe, however, that industry initiatives excuse us from carrying out our own research and action, when appropriate, especially when it is unclear when such initiatives will bear fruit." - Tesco

Collaboration with other companies is the only way that a project can be truly sustainable, except for wholly owned suppliers, of whom there are very few. This is not to say that projects can only take place where the participating company or companies represent 100% of a supplier's output: there are creative solutions where this is not the case.

More significantly, living wages cannot effectively be imposed from the top down: they must be designed from the bottom up, working with the workers they are supposed to benefit. And that requires institutionalised collaboration with trade unions and labour rights groups.

In 2008, the Ethical Trading Initiative is the only forum through which these two requirements can be effectively achieved by UK brands and retailers - although it is how a brand takes advantage of this framework, not the fact of its membership, that is the measure of its commitment.

Of the companies with some plans to work on living wages:

• Sainsbury's and Tesco were the only companies that did not have their own pilot projects to increase wages, but which were leaving the issue to the ETI project.

• Primark, Next, and Asda said that, in addition to their participation in the ETI project, they also had their own projects underway or planned: these projects were of variable quality (Tesco was doing research but had no project as such).

• M&S, Monsoon, Gap and New Look did not mention any involvement in the ETI project or any other multi-stakeholder living wages project, although all are ETI members. Monsoon and Gap are working from the ETI project’s terms of reference, citing practical difficulties with the project’s focus on Bangladesh.

• Arcadia is not an ETI member but is collaborating with Next.

2. Worker organising and participation

Ensuring meaningful worker representation at factory level is a prerequisite. This is because:

• A bargained approach to the living wage is preferable to one that is calculated.

• Workers' representatives must be involved in the design and implementation of the project.

• An organised workforce represents the most effective way of ensuring that the benefits of increased productivity or higher prices are passed on to workers.

• Freedom of association and collective bargaining are in themselves fundamental rights.

Trade unions are the gold standard of worker representation, but cannot be imposed from above: workers should have all the options set out to them clearly by someone they can trust, including their legal rights and the benefits and drawbacks of each form of representation. They should be allowed to choose freely, and management must not only be educated but also been given a strong steer from clients that it has a responsibility to support, respect and engage with that choice.

Asda, Arcadia, Primark and Next made no mention of worker organising in connection with their wages projects.

New Look's project involved worker organising, but explicitly focused on workers' committees rather than trade unions.

M&S and Gap's projects involve worker organising.

Monsoon's project places a strong emphasis on collective bargaining.

3. Examining commercial factors throughout the whole supply chain

”'Why can’t retailers pay factories more for their products, and in that way workers would be paid more?' Unfortunately, the solution does not appear to be that simple.” - Asda

"We accept the principle that increasing wages may require us to pay higher prices” - Tesco

"Monsoon Accessorize will negotiate a new price, inclusive of the Unit Labour Costs based on new wage scales.” - Monsoon Accessorize

If wages can be raised by improving a factory's effectiveness and productivity, it is right and proper that companies examine this and make improvements, so that the factories they work with remain competitive at the end of the project. Productivity should not, however, be the sole or even the main focus of a living wage project: we examine the reasons why this is the case later on.

But brands must look at another set of commercial factors too: their own purchasing practices. In particular:

• Living wage projects must take place in the framework of a long-term, secure purchasing arrangement. Suppliers need to know that the client(s) who are interested in wages are not going to disappear within a few months, but are prepared to stay for the long haul to improve wages.

• They should include an examination of the prices paid to suppliers. Reaching a living wage should be a collaboration between buyer and supplier, and that means buyers must be prepared to do their bit where it becomes clear that this is necessary to achieve a living wage.

Gap, New Look and Monsoon specifically said they would examine prices paid to suppliers (New Look said “commercial terms” and Gap “price points”)

M&S, Asda, Next, Tesco and Primark did not, although Tesco said it would "accept the principle."

4. A clear route-map to implementing the living wage for all workers

It is not enough to increase wages without an end point in sight. In parallel with steps to increase wages, projects must explicitly set out to arrive at and implement a living wage figure. This could be through,

• national, regional or local bargaining between representatives of the garment workforce and industry

• factory-level bargaining

• research-based calculation of basic needs, in a multi-stakeholder context

Any project needs to develop effective, reliable ways of monitoring the wages that workers receive. A wealth of evidence indicates that wage slips, accounts sheets, and all but the most carefully executed worker interviews tend to over-report wage levels.

It should look at wages earned beyond the factory, by homeworkers and other types of informal workers. Projects need to accept that such work is a significant part of the garment industry, and can be a positive choice for the women and men who perform it. They should resist the temptation to ignore it or try to eliminate, simply because it creates an added layer of complexity.

All of this must be based on the standard parameters of wage calculation:

• covers basic needs with a small amount for discretionary income

• based on regular working hours, not including overtime¹

• calculations should support workers' dependants

• starts from the lowest-paid workers

• must cover workers employed by subcontractors and those on a piece-rate, short-term contract, temporary or homework basis.

M&S, New Look, Asda, Next and limited their ambition only to improving wages, not to attaining living wages as a stated end point . Primark's plans were not clear.

Monsoon and Gap's projects are designed to implement living wages as a clear goal.