Fashion Roundtable's Policy Paper on Living Wage in the Garment and Manufacturing Industry
By Johanna Ramaer
The textile and clothing industry is one of the most globalized sectors, providing employment opportunities to more than 60 million workers worldwide, mainly women and unskilled workers. Over the years strong competition has pushed retailers to move production offshore and to outsource manufacturing in search of low-cost labour and production opportunities. This outsourcing predominantly takes place in Asian countries such as China, Bangladesh and Pakistan but has recently also moved to African countries such as Ethiopia and Morocco. Brands choose these countries because of their low production costs and weak regulations. Subsequently, the outsourcing shifts to whatever country is the cheapest/most efficient. Because of these geographically dispersed supply chains and the many different actors, production in the clothing industry is very complex to manage. This makes cooperation on the international level crucial in order to effectively improve the labour conditions. With the recent Brexit developments it is therefore of vital importance for the UK to keep operating at the global level to design and implement effective policies to manage the complex supply chains in the garment industry.
Competition is felt hardest at the supplier level and the 2008 economic crisis has caused around 8000 textiles, clothing and footwear production units to close. This resulted in a loss of 11 million jobs. While there are currently signs of growth, the global economy is not yet growing at a pace that will restore, let alone improve, wages and job security. As a result, the competition in the garment industry is sharper than ever pushing the labour conditions down to its very minimum. This has severe consequences for the wages paid to garment workers. According to a 2019 report by the University of Sheffield, low pay continues to be the status quo in the garment industry. The legal minimum wages in manufacturing countries are often extremely low and do not come close to an actual living wage. A living wage is different from a minimum wage in that it ensures garment workers a wage with which they are able to live a decent life. Such a living wage is, in fact, a human right. The UN Economic, Social and Cultural Rights Covenant states that workers’ wages should deliver ‘a decent living for themselves and their families’, while the UN’s Universal Declaration of Human Rights calls for wages that ensure ‘an existence worthy of human dignity.’ In addition to these and many other international agreements, there has been an immense rise in Corporate Social Responsibility (CSR) initiatives to guarantee a living wage. One very recent example of a voluntary initiative is the Kering Fashion Pact in which 32 leading companies from the fashion and textile industry have committed to a set of shared objectives. The 2019 Sheffield study found that many brands outsource their living wage commitments to such extern CSR initiatives. However, despite the recognition of living wage as a human right, it has proven to be difficult to actually guarantee this right to all. This is due to a number of issues that prevent such agreements and initiatives from actually guaranteeing a living wage for garment workers:
- Most of them are voluntary and not legally binding and as a result not enforceable. Reports such as Fashion Focus: the fundamental right to a living wage and The Tailored Wages have demonstrated that voluntary codes have very little or no impact on the improvement of living wages.
- All of these agreements/initiatives use different meanings of a living wage. Most of them do not actually mention the term ‘living wage’ but instead use terms such as minimum, adequate, decent or favourable wages. As a result, there is no universal definition and usage of the term ‘living wage’.
- These initiatives and agreements do not put the responsibility with the corporations. Corporations often outsource their living wage commitments to multiple CSR initiatives. Each initiative, however, takes a different approach to achieve a living wage. This decreases transparency with respect to what companies are actually committing to in terms of living wages.
As a result of these issues, we see that brands in the garment industry are struggling to provide a living wage to garment workers. It is not so much that brands are unwilling to pay a living wage, but the high competition in the industry and the lack of universal rules make it difficult for brands to guarantee a living wage within their supply chain. Some alternatives to these issues have already been designed:
- Tools to calculate and define a living wage
o Asia Floor wage
The Asia Floor Wage Alliance (AFWA) is an international alliance of trade unions and labour rights activists who developed the Asia Floor Wage calculation, as a way to calculate a living wage for payment across Asia. It uses a market-based methodology to calculate a living wage in key garment producing countries in Asia. These calculations are based on a family defined as either (1) two adult dependents; (2) one adult dependent and two children; or (3) four children. They also include food, housing, travel costs, education, health costs, and discretionary income. These calculations are country specific and are expressed in World Bank ‘Purchasing Power Parity’ in order to compare the living wages globally.
o Global Living Wage Coalition
This is another alliance that aims to develop living wage benchmark estimates in many countries based on a single definition and methodology to calculate a living wage.
The definition they have formulated is: The remuneration received for a standard workweek by a worker in a particular place sufficient to afford a decent standard of living for the worker and her or his family. Elements of a decent standard of living include food, water, housing, education, health care, transportation, clothing, and other essential needs including provision for unexpected events.
To calculate a living wage they make use of the Anker methodology which makes use of the calculations you see in figure 1:
Both these tools provide a useful definition and calculation for a living wage. However, because the Asia floor wage only calculates the living wage for Asian countries, we would recommend to adopt the definition and calculation of the Global Living Wage Coalition.
In addition to these alternatives, there are some legal proposals that put more legal liability with brands. These are:
o 2017 French corporate duty of vigilance law
This law establishes a legally binding obligation for parent companies to identify and prevent adverse human rights and environmental impact resulting from their own activities, from activities of companies they control, and from activities of their subcontractors and suppliers. This law only applies to the largest French companies but it does require these companies to actually implement a vigilance plan instead of just reporting on it. This shows that respect for human rights and the environment can be legally mandated into business activities. It does not, however, specifically mention living wage. But it has been the most effective in setting a legal mandate for corporate responsibility so far. Within the EU and the UN there have been many initiatives and directives to regulate the clothing industry more efficiently but none of them has managed to enhance legal standards of responsibility for human rights abuses. The next step would be to give this law a more global reach through working together with other countries to implement a similar regulation that operates across borders.
o The Circle’s proposal for a legal framework on living wage.
The idea is that the EU should adopt a Regulation that importers of garments from developing countries must comply with. That Regulation would have an Annex that lists all countries that did not have a minimum wage sufficient to meet basic living costs. The Commission would determine a formula for the living wage to determine whether or not the country should be on the Annex. If brands import from any of the countries on the Annex, the importer would have to sign a form stating that it had or had not taken all reasonable steps to verify that the goods had been produced by workers paid a living wage. This means that there is no prohibition on importing goods without carrying out such a verification. But it would require brands to be more transparent about the payment of a living wage. With the Brexit going on, the UK would not be part of such a legal framework at the EU level. Therefore, the UK should make sure to either keep up with the initiatives that take place at the EU level and/or work together with other countries outside the EU to promote a new legal framework that guarantees a living wage.
The Circle’s legal framework is not as far reaching as the French Corporate Duty of Vigilance Law in terms of a legal requirement to respect human rights. The problem with the French law, however, is that it only applies to French corporations. In order to make this law applicable to the whole industry, countries should come together and harmonize their newly implemented national standards on living wage. The Eurasian Conformity Marking (EAC) is an example of a legally binding framework that operates across nations. All products entering the Eurasian custom union have to comply with the EAC regulations.
Based on the barriers that current policies provide for guaranteeing a living wage, and the alternatives that have already been designed, Fashion Roundtable/the APPG for Textiles and Fashion recommends the UK government to do the following:
- Adopt a universal definition of living wage using the Anker methodology.
- Implement a similar law as the French corporate duty of vigilance law with specific mentioning of the human right to a living wage. Such a law would substitute all the different initiatives and puts the responsibility with the brands, making the process of guaranteeing a living wage much more transparent. In addition we also recommend the UK to work together with other countries in implementing a regulation on Living Wage similar to the EAC. And finally, as laid out in our work on VISA regulation, it could also help to change visa requirement in order to foster local production. This can in turn allow for better monitoring and regulation of labour conditions.