Dutch workwear brand Schijvens managed to establish a living wage at their supplier in Turkey. They learned some valuable lessons during the process, including figuring out the needs of local workers and the importance of raising all salaries (not just the lowest ones) to maintain wage differences that reflect workers’ skills and experience.
In FWF’s newest discussion paper, we examine the application of human rights due diligence in the area of wages. You can read the full report here.
In order for wage compliance to be achieved and for wages to improve, both a greater transparency in cost price negotiations between apparel buyers and their suppliers, and a precise determination of the labour component must take place.
In the area of labour costing, four main areas require discussion:
- the mandatory wage elements payable to a worker including employer wage related on-costs
- the total of direct and indirect labour costs divided by the available capacity minutes
- the standard allowed minutes agreed for the apparel item in question
- and a factory’s efficiency.
‘Is Productivity the key to funding Living Wages?’ That is the main question in FWF’s latest discussion paper, designed to explore the relationships between productivity, efficiency and living wages.
Stakeholders working with FWF often identify productivity or efficiency increases at factories as ‘the solution’ to living wages: if factory productivity is increased, there will be enough money to improve wages.
FWF is proud to introduce its new Labour Minute Calculator for Bangladesh – the latest addition to the FWF Living Wage toolbox. Bangladesh recently approved a 51-percent increase (for Grade 7) in the statutory minimum wage, effective as of December 1, 2018.
With the higher cost of labour comes the responsibility for brands to revisit their pricing levels. The Labour Minute Calculator enables suppliers and buyers to determine the cost of one minute of labour in a factory and makes components such as bonuses and insurance visible. The new FWF tool offers enough flexibility to accommodate for exchange rate fluctuations and real overtime hours.
FWF experts Doug Miller and Klaus Hohenegger have published a comprehensive article entitled ‘Who pays for a higher wage for garment workers?‘ in industry publication Just-Style.
Focused on statutory minimum wage increases expected in several countries, the articles highlights the importance of calculating the minute cost of labour and making the wage component of garment prices visible during buyer-supplier negotiations to ensure workers are paid what they are legally due.
FWF experts Klaus Hohenegger and Doug Miller visited Bangladesh and Myanmar in October 2018, accompanied by FWF country manager Koen Oosterom. The FWF team conducted training workshops with managers of factories supplying FWF member brands and trade unionists and labour support organisations to promote the costing methodology and costing sheets developed by FWF. These tools make it possible for manufacturers and buyers to isolate the labour component of production costs.
FWF’s Workplace Education Programme (WEP) aims to help workers develop the skills and confidence to speak up and discuss wage conditions in their place of work. One of the key principles underpinning the work carried out by FWF is the notion that the best wage is a negotiated wage. FWF member brands work toward ensuring that their suppliers pay workers living wages to enable them to enjoy decent living standards. To see this change, workers and their representatives must be involved in this process to make it sustainable.
Oxfam Australia recently produced a striking report that makes an important contribution to the growing global debate on living wages in the garment industry.
The study, entitled What she makes: Power and Poverty in the Fashion Industry, highlights the difficult living conditions of the (80 per cent female) workers who are paid very low wages to produce clothing in Bangladesh, Indonesia, Vietnam or China for Australian and international retailers. Read more
In January 2016, FWF brand Continental Clothing launched its new FAIR SHARE range of T-shirts and sweatshirts, which carries a small price premium to enhance workers’ wages. Continental received the 2016 FWF Best Practice Award for this inspiring project.
Thanks to a modest increase in the retail cost of the clothing produced at its supplier factory in India, Continental was able to raise the wages of the poorest workers by 50 percent. The British company took care to ensure that additional cost at the point of sale of 10p (0.14€) per T-shirt and 54p (0.71€) per hoody is passed on in its entirety to the workers, avoiding additional markups as the clothes move along the value chain.
In this Best Practice video (here you can find the long version), FWF follows Continental’s Mariusz Stojach as he visits the factory in Tirupur, talks to the workers about their needs and assesses the project with the NGO SAVE, a partner in the project. As he charts the history of the project, he discusses the challenges of increasing costs and the benefits of close cooperation with suppliers.
Since FAIR SHARE was launched, all workers at the factory in India receive a regular bonus, which has boosted their income, even if it still falls short of a proper Living Wage. The company now plans to extend the project further, to reach all levels of its supply chain.
Overtime and Living Wages are two issues that go hand in hand. One cannot be addressed without considering the other.
In various garment-producing countries, overtime-as-the-norm is depressing regular/base wage rates. If we consider the prevalence of hefty overtime taking place consistently, it is clear that workers have come to rely on working very long hours in order to earn enough to live on. A look at wage ladders in China, for example, shows that wages only hover around living wages estimates when regular wages and overtime wages are considered together. Read more
More than a dozen FWF brands have joined the FWF Living Wage Incubator. Since January 2017, these leading brands have experimented with cutting-edge approaches to raising wages within their supply chains.
The Incubator is designed to explore various methods for ensuring higher wages for workers. In most garment supply chains, this is not straightforward, since brands often source from dozens of factories, and factories often source to many brands. How can we calculate what any given brand should pay to cover their share of higher wages?
Or: what is the most appropriate living wage benchmark to use in a particular factory or region? How can brands in a shared facility collaborate to raise wages while strictly adhering to competition law? How can we ensure all of the money paid actually reaches workers? And a critical question for all projects is: How can we most effectively integrate trade unions and workers into this process?
Meet Thet Thet Zon. She has been working as a sewing operator for two years, 6 days per week, 11 hours a day. She earns 125 dollars per month. What does she have left at the end of the month?
Salaries are currently a topical issue in Myanmar, where the minimum wage is up for review. With the high inflations and rising costs of living, unions and Myanmar’s low-wage garment workers are making the case again for better wages.
As part of the Living Wage Incubator, a group of innovative FWF brands is taking action to increase wages for the workers who make their products. Where do they need to start?
1. Success factors for selecting pilot project locations
A SOLID SOURCING RELATIONSHIP
- Both the factory and the brand are committed to a long-term working relationship.
- Select a partner factory that fosters mutual trust and openness.
STRONG WORKER-MANAGEMENT DIALOGUe
- Ideally, trade unions are active and there is a history of collective bargaining.
- If trade unions are not present: are there worker committees that are elected by workers?
- At a minimum, FWF advises its brands to partner with factories where the WEP training programme has been rolled out.
SHARED COMMITMENT FROM OTHER SOURCING BRANDS
- Pilot projects will be more effective if other brands share the commitment and help cover the costs of increased wages.
FWF is very happy to launch Living Wages: An Explorer’s Notebook, the next step forward in figuring out the routes brands and factories can take to achieve payment of living wages. The innovative guide offers concrete advice, based on real-life experience.
The Notebook defines nine obstacles that stand in the way of living wages, and offers some solutions for overcoming them. ‘For the first time, garment brands can access real life examples and concrete guidance on implementing higher wages,’ explains FWF’s Associate Director Sophie Koers. ‘For example on how to select a factory partner, collaborate with other brands and set the target wage.’
‘Start paying higher wages. Now. Analyse what worked and what didn’t. And then keep going.’
This sentence summarises FWF’s advice to brands that seek to make real strides towards living wages in their supply chains. And it offers more concrete advice on how to do this in Living Wages: An Explorer’s Notebook.
Use the tools below to further support efforts to raise wages in your supply chain.
FWF has published Labour Minute Costing, a new report that provides guidance to brands, factories and trade unions on the practical steps necessary to create wage floors in factories. Based on real-world examples, the report covers three main topics:
- How to calculate the total cost of bringing a factory’s lowest-paid workers up to any given living wage benchmark – e.g. creating a wage ‘floor’ in a factory.
- How to incorporate the increase in wages into normal product costing systems, in a transparent and verifiable manner.
- How to ensure that increased costs can be shared fairly among all of a factory’s customers, without violating EU competition law.
The report was written by by Doug Miller, Emeritus Professor of Worker Rights in Fashion at the University of Northumbria, and Klaus Hohenegger, director of Sourc!ng Solut!ons GmbH. It is based in on pilot work conducted by FWF in Macedonia, with the support of CNV Internationaal.
At first glance, living wage discussions seem to have little to do with competition law. Yet garment brands’ concerns about potential violations of competition law have blocked efforts to collectively raise wages in factories that supply multiple brands. But the fact is, as long as companies take some key precautions, their efforts to raise wages collectively do not present a serious legal risk.
The country context has a great deal of influence on the wage situation in any given factory. We sat down with FWF’s Associate Director Margreet Vrieling, to get a better sense of the wage situation in Turkey.
When I visited Bangladesh in 2014, one year after Rana Plaza collapsed, hope was blowing through the air. Hope, that after so many years of repression against trade unions, positive development was possible.
This Portal is designed to grow.
A guest blog by Doug Miller, emeritus professor Worker Rights in Fashion, University of Northumbria
Hats off to Fair Wear Foundation for really doing the necessary groundwork (wage ladders/labour costing/living wage cost engineering/seeking clarification on the Anti-Trust-competition in respect of buyer collaboration). All this helps us get closer to mechanisms for eradicating poverty wages in the global apparel industry. We are I think now at the cusp of nailing the implementation questions when it come to a ‘living wage’. For me there are a number of key realisations in this debate.
A guest blog by Jenny Holdcroft, Policy Director at IndustriALL Global Union
The Bangladesh Accord has seen an unprecedented level of cooperation between global brands and trade unions which has enabled comprehensive, industry-wide solutions to be applied to fire and building safety in Bangladesh’s garment factories. This experience has opened up possibilities for new solutions to be found to other entrenched supply chain rights challenges, including the struggle for a living wage.
There is a strong relationship between wages and pricing. As FWF’s Margreet Vrieling explains, ‘Wages are often the first place that factories look to cut costs in order to keep prices low.’ So constant calls from brands for lower prices result in real pressure on workers’ wage levels.
A guest blog by Oxfam GB’s Ethical Trade manager Rachel Wilshaw
One of the initiatives highlighted in Oxfam’s new briefing paper Steps towards a living wage in global supply chains is that of the UK living wage campaign. This was started by parents in the East End of London, whose long working hours on the minimum wage meant they had little time to spend with their families. The Living Wage Foundation was established in 2011 to develop and promote a scheme which accredits employers who pay £7.85 per hour (£9.15 in London) compared with a national minimum wage of £6.50.
Clearly productivity needs to be part of the living wage discussion. But how does this work in the garment industry? How can workers produce more garments per hour?
The vast majority of garment workers – in some regions as many as 95% – are women. Women are found in the lowest-paid jobs in garment factories, and are much less likely than men to work in better-paid supervisory or managerial roles. Women are low-paid: they and their families stand to gain most from a living wage in the apparel sector, and in future blogs I will explore the reasons why.
Most discussion around retail costs of living wages has centred on the idea that the living wage premium (i.e. the additional per item cost that would be paid for living wages) would be passed on to the consumer.
As explained in our post, ‘How much more would living wages cost consumers?,’ our research of selected outdoor products found that, if we assume the cost of wage increases can be transferred directly to consumers, retail prices would increase from less than one percent to 7%, depending on the product and the size of the wage increase. This is to say that consumers could cover the cost of living wages by paying several cents to less than $5 USD more for our hypothetical items, which ranged in price from $45 to $1,000.
A blog by FWF’s Kees Gootjes.
In 2003, an attempt at regulating some of the excesses of corporate governance had the unintentional effect of creating a ‘race to the top’ in top level salaries. While causing public outcry, there are some important lessons the millions of underpaid garment workers worldwide can learn from what happened in The Netherlands – with a little help from FWF’s new and improved Wage Ladder tool.
For more than a decade, discussions about living wages often end in stalemate, as various actors disagree about exactly how to measure living wages. While exact methodologies are important, FWF believes that issues other than measurement are the key to unlocking living wages.
Together with its stakeholders, FWF developed the FWF Wage Ladder, which allows us to leapfrog past the wage measurement debate and start working on improving workers’ wages today.
In 2013, FWF member Switcher embarked on an experimental project to implement living wages in a portion of its supply chain. FWF recently interviewed Switcher’s Gilles Dana to learn more about the process.
FWF’s research on costs for brands and consumers and development of costing sheets and other tools represent real strides in helping brands and factories answer the critical question: How much more do wages costs?
It is also important to gauge the corollary costs of living wage implementation. In addition to increased production costs, what changes, if any, will there be to monitoring fees or taxes and duties? Or where training is required (e.g. through FWF’s Workplace Education Programme), how much does that cost?
The story of FWF member brand Mayerline and one of its suppliers, the first Turkish knitwear company with a Collective Bargaining Agreement
Effective collective bargaining is the most sustainable way to improve working conditions and help secure living wages for workers in the garment sector. Brand involvement can be crucial in creating an enabling environment. This is clearly shown by the Collective Bargaining Agreement (CBA) signed in December 2013 between the Textile, Knitting and Clothing Workers’ Union of Turkey (Teksif) and a supplier of FWF member brand Mayerline.
Workers sit at the core of all of this work. FWF’s approach is designed to integrate workers wherever possible. Examples include our worker-focused interview methodology; the inclusion of worker representatives in monitoring and remediation discussions when possible; worker complaint and training programmes; and worker surveys.
‘Ultimately, it is not up to outsiders to decide what a living wage should be,’ explains FWF’s Sophie Koers. ‘It is up to the workers and unions and local collective bargaining processes.’
FWF maintains that there are structurally-integrated practices in the garment industry that will need to be addressed if there is any hope of making living wage implementation scalable. One such practice pertains to the way factories calculate factory margins.
In December 2014, Oxfam International published its policy paper Steps Towards a Living Wage in Global Supply Chains. The paper outlines some compelling reasons for responsible companies to act now for living wages and examines positive developments on wages.
In the FWF Code of Labour Practices, a living wage is defined as a wage paid for a standard working week that meets the basic needs of workers and their families and provides some discretionary income. ‘Basic needs’ further includes costs like housing (with basic facilities including electricity), nutrition, clothing, healthcare, education, drinking water, childcare, transport, and savings.
But how can this be translated into a specific amount?
Consumers want products made by people who are treated fairly and receive a wage they can live on.
As FWF’s Associate Director Sophie Koers explains: ‘Various marketing studies and consumer surveys indicate that a significant number of consumers will pay a premium to buy clothes that are made fairly. We know the demand is there. Our focus now is on building solid models for delivering living wages to reliably meet that demand.’
It is a fair question. In principle, minimum wage standards should be set at a level that covers basic needs. In principle, legal minimum wage levels are set through balanced, democratically supported social dialogue processes. The reality, however, is different.
The FWF approach to living wages is pretty simple:
At FWF we are doing all three of these in tandem. Of course, of these three tranches of work, the third is the most important for workers. And to take effective action on wages, FWF members and stakeholders need tools. To this end, tool development continues.
In this 16 minute video, Ivo Spauwen methodically walks us through the various components of FWF’s Living Wage approach.