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.