Fair Wear’s labour-minute costing tools, and living wage estimates

How brands can calculate their share of living wage costs

For decades, we’ve known that workers need to earn more, but we still lack concrete systems for determining how this will happen. Much of the holdup is likely due to the looming question: who will pay for higher wages?

The fact that most brands share factories with other brands complicates matters. How can a brand know what its fair share is? To solve this, we have developed an innovative concept called Labour Minute Costing methodology (LMC).

Labour Minute Costing methodology

This methodology uses payroll data to calculate how much it would cost each year to raise wages to a living wage. This total annual cost is measured against data about the time (in minutes) required to make each garment in order to calculate a brand’s share of higher labour costs.

Thus, the various brands sourcing from the same factory can share the financial responsibility for higher wages. Provided that brands take the correct legal precautions to comply with competition law (Fair Wear also offers guidance on this), this makes it possible for brands to work together to address wages.

LMC makes it possible for each brand sourcing from a shared facility to pay its share of the higher
labour costs associated with living wages.

Labour-minute costing allows brands to take responsibility for their share of production at a shared facility. For example, a brand that places a small order of a simple t-shirt (which likely requires fewer total minutes to produce) would pay a smaller share of wage increases than a brand placing large orders of complicated styles (which require more minutes to produce). 

Guidance for living wage estimates to calculate brands’ living wage factor

To calculate a brand’s share, we must calculate the difference between current labour costs and those associated with paying a living wage.  But which living wage estimate (or ‘living wage benchmark’) should brands use to calculate this difference?