Tens of millions of workers who make our clothes are not paid a living wage for this work. The minimum wage in countries such as Bangladesh, Cambodia, Ethiopia, Indonesia and Myanmar, but also in Turkey or Romania is far from enough to cover basic needs such as food, clothing, housing, education or medical care.
This article has been translated from Dutch. To read the original Dutch article on the ASN Bank website, click here.
To earn a living wage, it is often necessary to double or triple a worker’s salary, but for many, that is out of reach. This is why many textile workers live in poverty and child labour is standard practice. How can they receive a fairer salary, and secure a better future? Who takes responsibility for this? Governments, employers, trade unions, clothing brands, banks or consumers; they all play an important role in achieving this.
The term living wage was first explicitly mentioned in the Peace Treaty of Versailles, just after the First World War in 1919, when the International Labour Organisation (ILO) was established. At the time, world leaders acknowledged that poor and unfair working conditions were a threat to world peace and that a living wage is a necessity. This was described in Article 427 as follows: ‘A wage that is sufficient for employees to be able to live reasonably in their country and time.’ After the Second World War, in 1948, the living wage was included in the Universal Declaration of Human Rights of the United Nations. In Article 23 (3) it states: ‘Everyone who performs work has the right to a just and favourable reward, which guarantees him and his family a decent life.’ ‘So, it’s a human right. That is why it is questionable that we are now a hundred years further and that millions of people who work in the clothing industry are still structurally underpaid,’ says Irina van der Sluijs, human rights expert at ASN Bank.
Today we define a living wage as a wage that is sufficient to meet the basic needs of the employee and his or her family. This concerns needs such as food, clothing, housing and other daily expenses, for example for school and medical assistance. ‘That does not mean that people can go on holiday three times a year. If you can send your children to school instead of having them work, then we are already a big step further,’ says Van der Sluijs.
Ruben Korevaar, policy advisor of FNV Mondiaal: ‘It is an elastic concept. It is linked to the cost of living in a specific country. It must in any case be a wage that a family can at least subsist of.’
Various foundations and organisations annually analyse how high the living wage in a country is. They do this by comparing the required income against the family size and local costs of living and housing, medical care, education, inflation and other indicators. The Global Living Wage Coalition (GLWC) keeps track of the living wage of 21 countries in Asia, Africa and Latin America. Fair Wear Foundation publishes reports on wages and working conditions in 11 textile-producing countries. From Indonesia to Turkey and from India to Romania. The Asia Floor Wage Alliance (AFWA) calculates the wages that are viable for all workers in the Asian clothing industry.
If you can send your kids to school instead of having them work, then we are a step further.
Irina van der Sluijs, ASN Bank human rights expert
How high a living wage is varies per country. How the living wage relates to the statutory minimum wage is also significant. In a country like Bangladesh, the minimum wage was increased in 2018 to 86 euros (8,000 Taka) per month, while the living wage should be between 146 euros (13,630 Taka) and 177 euros (16,460 Taka). The Asian Floor Wage even amounts to 407 euros (37,661 Taka). In Myanmar, the minimum wage increased from 2.13 euros 3600 (Kyat) to 2.85 euros (4800 Kyat) per day, while the living wage is double. ‘Moreover, that increase in the minimum wage was cancelled out by 20 to 30 percent inflation. Then you have nothing left,’ says Korevaar. In Ethiopia, most people earn no more than 37 euros (1200 Birr) per month. However, according to GLWC, the living wage is 104 euros (3367 Birr) per month. As a result, most workers live below the poverty line, while frequently working twelve-hour days.
No, most workers in the clothing industry earn the minimum wage or even less. Companies comply with the law, but employees cannot make ends meet. ‘Often the minimum wage in these countries is only 20 or 25 percent of the living wage,’ says living wage coordinator Anne van Lakerveld of Fair Wear Foundation. ‘In the majority of countries where our clothing is made, the minimum wage is not a living wage.’ Korevaar of Mondiaal FNV also sees that. ‘The problem is huge. In the majority of textile-producing countries, no living wage is paid,’ he notes. Van der Sluijs: ‘It is a quiet catastrophe. A problem that is not seen as a problem. We do not want to see the people who make our T-shirts being underpaid.’
Western countries have passed laws to prevent the worst exploitation in poor countries. Great Britain introduced the ‘Modern Slavery Act’ in 2015 . It requires companies to report annually what they do against child labour and modern slavery. The ‘Loi Vigilance’ that France introduced in 2017 aims for the same thing. In the Netherlands, the Child Care Duty to Care Act has been in force since May 2019 . It requires companies to detect, prevent and, if necessary, tackle child labour in their value chains. The UN has already declared 2021 the year that will see the elimination of child labour.
That may tackle the worst cases, but does not yet lead to an increase in minimum wages to a living wage. The weak economic position of many clothing-producing countries makes that difficult. Moreover, they are afraid of competition from other low-wage countries. ‘For example, the Bangladeshi government fears that the country will lose a large proportion of its income if it raises its minimum wage because international companies will then have their clothing produced elsewhere,” says Van Lakerveld. ‘This creates the crazy situation in which clothing companies benefit from the fact that human rights are not being respected. If that happens, they will leave for another country. “
FNV sees that the strong economic growth in the so-called Asian tigers such as China and Vietnam did not lead to significantly higher wages in the clothing industry. ‘Because 30 to 40 percent of the cost of making in this sector is in wage costs, countries are very scared that companies will go to the neighbours,’ says Korevaar. ‘But that image is nuanced, because moving production is difficult. A country like Ethiopia, for example, still lacks the infrastructure needed to deliver high-quality clothing. This type of country is still too great a risk and that is why we do not think that companies will relocate their production there on a large scale.’
In the Netherlands, too, we benefit from child labour and the exploitation of people on the other side of the world.
Irina van der Sluijs, ASN Bank human rights expert
The problem actually lies in the entire supply chain that traps pants, a shirt or a blouse between production and the shelves here in the West. Asia Floor Wage has calculated that of the price paid for an average item of clothing, only 0.5 to 3 percent goes to the worker who made it. With a T-shirt of 8 euros, that is around 24 cents. The rest goes to the factory, transportation, overhead, marketing and the retailer who ultimately sells it. ‘The distribution of money in the sector is completely out of step,’ says Korevaar. According to Fair Wear, it’s a vicious cycle. ‘The clothing industry is highly competitive and has many suppliers,’ says Van Lakerveld. ‘The price is the leading factor. If clothing brands do not participate in the race, they will go bankrupt. You also see the same competition at the factory level. If they cannot produce for 5 euros, the customer goes to someone else that can. Governments often turn a blind eye, afraid of seeing companies disappear. The consumer is also complicit. As long as we ignore this fact, the problem will persist. “
How do you solve such a problem? By trying to improve the situation step by step. ASN Bank and Fair Wear do this through the clothing brands themselves. Brands do not pay the salaries in the factories, but because of their position at the top of the supply chain they do have significant influence. Van Lakerveld: ‘They can influence wages through the prices they pay, such as by including all costs in it. It is also important that they sign longer term contracts, which gives manufacturers more certainty. Six months in this sector is sometimes long-term.’
A bank, too, does not pay the salaries of employees, but can exert influence through financing and investing in certain companies. For example, ASN Bank excludes companies that are involved with fossil fuels or weapons, but also if they violate human rights . Since 2016, the bank has been taking the lead in bringing living wages for textile workers to the attention of many. ‘Through our lobbying, we try to make clothing brands stand up for living wages in those countries,” Van der Sluijs explains.
The price is the leading factor. If clothing brands do not participate in the race, they will go bankrupt.
Anne van Lakerveld, Fair Wear Living Wage Coordinator
As a senior human rights advisor at ASN Bank, Van der Sluijs is the initiator of the ‘Living Wage Financials Platform’ (PLWF), for which the bank took the lead in 2018, together with pension manager MN and Triodos Investment Management. Twelve financial institutions such as ING, ABN AMRO, Amundi, Triodos IM, Achmea IM and Robeco are now committed to improving working conditions and wages in the clothing industry. The investor coalition collectively has more than 2,500 billion euros (2.5 trillion) in managed assets and uses its influence within the companies in which it invests.
The platform has selected around 14 international clothing brands that ASN Bank sets every year, according to a methodology developed by ASN Bank with accountancy firm Mazars, and based on United Nations Guiding Principles on Business and Human Rights .
These are large listed companies such as Adidas, H&M, Marks & Spencer, Esprit and Puma. The results are validated by international accountants. In this way, they can earn points if they strive for a living wage with their producers, identify what is needed for this and consult with employers, trade unions and other stakeholders. ‘We do not only rely on data provided by the companies, but also conduct research ourselves. That way we can measure and see if they are slowly making progress,’ says Van der Sluijs.
Yes. The platform published its second report in October 2019. It shows that since 2018, the clothing brands have taken steps in the right direction. No brand is in the ’embryonic phase’ anymore, where it hardly recognises the importance of a living wage. All companies now recognise that, and a majority even make a point of this with their suppliers. However, that is not yet a guarantee that living wages are being paid in the workplace. The report makes it clear that there is still a long way to go. According to Van der Sluijs, the fact that companies are not individually measured by all their positive and negative points is a conscious choice. ‘Our companies are the early adopters. We like ‘naming & faming’ more than ‘naming and shaming’. We want to help the companies that are doing well,’ she explains. The goal of ASN Bank is that by 2030, the clothing sector will have implemented all the necessary processes to make a living wage possible for employees in the supply chain. At these thirteen companies, at least.
Van Lakerveld endorses that approach. Fair Wear Foundation – which is in partnership with ASN – has more than 130 small and medium-sized clothing brands that are committed to a living wage. These brands are also measured by specific benchmarks, with Fair Wear looking at where they have their clothing made, how they deal with suppliers and whether they are making efforts for a living wage. An annual score is published and compared with the other brands. ”’Naming and faming” is much more effective. We show what is going well and give recommendations. But if a brand shows no progress two years in a row and the score is insufficient, we say goodbye,’ she says.
Because wage levels are often the result of negotiations between government, employers and employees, trade unions play an important role. FNV Mondiaal follows a two-track policy in this regard. It supports local trade union actions in countries such as India, Indonesia, Myanmar, Ethiopia and Bangladesh and teaches colleagues in those countries how to negotiate and establish a good collective bargaining agreement. This way they can raise minimum wages towards living wages. ‘In Myanmar, for example, we are working together with the unions to compare the cost of living and wages in different regions. This way we get an objective picture of purchasing power,’ says Korevaar. ‘We use that data for the discussion between government, trade unions and employers.’ At the same time, FNV Mondiaal informs clothing brands in the Netherlands about rights abuses in the producing countries. They try to hold brands accountable for this through legal agreements. Korevaar: ‘They can say, “we do not employ people, we only negotiate the price,” but they do have a responsibility.’
They can say, “we do not employ people, we only negotiate the price,” but they do have a responsibility.
Ruben Korevaar, Mondiaal FNV Policy Advisor
There are many more initiatives that are committed to better working conditions and higher wages in the clothing industry. Covenants are agreed upon within international corporate social responsibility (IMVO). The companies and organisations that have signed the Sustainable Clothing and Textile Covenant are committed to identifying and combating discrimination, child labour and forced labour. One of the first steps is to have their production locations screened. For example, in September 2019, covenant companies Schijvens Corporate Fashion and Zeeman Textielsupers (both members of Fair Wear) started a supply chain partnership for paying living wages at a Pakistani textile factory.
The Research Foundation for Multinational Enterprises (SOMO) conducts research into working conditions in the textile and clothing industry and analyses business models and practices that lead to violations of labour and human rights. SOMO then lobbies within organisations and networks for improvement.
ASN Bank also supports, for example, the Fair Labor Association (FLA) project in collecting and comparing better data on living wages per country.
Do the bank, trade union and foundation think that all of this brings us closer to a solution? Korevaar: ‘With covenants you can set a good example together and say: we ensure that people get paid properly. But in order to really solve the problem, the entire business model in the clothing industry would have to change. Countries and companies cannot do this alone. The margins are too low and the consumer still opts for the lowest price.’
Van Lakerveld: ‘You could also check more strictly for compliance with and ratification of ILO conventions . But at the end of the day, you need the entire sector to raise wages. Consumers must also become more aware of what they are doing.’
Van der Sluijs: ‘As a bank we try to do our bit, but we cannot do this alone. We need companies, governments in all those countries and the EU. For example, the EU should no longer allow products from countries where exploitation or child labour takes place. We must enter into dialogue with all those parties.’
