Research identifies reasons for low garment sector wages

This text originally appeared on Ecotextile News and is written by Brett Mathews,  3.7.2017

GENEVA – Competitive pressures, low national minimum wages and a lack of cooperation by suppliers are three of the many reasons identified by new research for keeping garment worker wages depressed in global textile supply chains. Under the auspices of the ILO, researchers interviewed 14 apparel retailers and concluded that there are a range of deeply-ingrained and institutional factors which make it difficult to raise wages among garment workers – even if there is a great willingness to do so among buyers and brands.

paper

Led by Mark Starmanns of BSD Consulting, the research identified six core reasons why garment workers remain depressed – and are likely to do so for the foreseeable future. First and foremost, suggested the research, paying living wages in the supply chain is „not an issue of high priority,“ for brands and retailers. Says the paper: „The companies provided three main arguments why paying living wages was a low priority for them. First, increasing wages outside the national wage system is no comprehensive solution. Companies are more generally opposed to paying higher wages in their supply chain because they regard it as an ‚isolated solution‘ and not a good long-term solution. These companies argue that instead of raising wages through the value chain, an institutional solution at the national level is needed.“

Another point of note from the paper is that FOB prices do not allow suppliers to pay higher wages, with implementing ‚living wages‘ being viewed as too costly and the buyers‘ benefits „little known.“ Says the paper: „Calculating the local living wage benchmark for every production facility takes a lot of resources without generating a positive impact. Since many buyers represent only a small part of the capacities of their supply factories, they need to collaborate with other buyers to increase wages. But many regard the efforts and costs of this collaboration as too high. One example for this is a factory where a FWF brand has been piloting a living wage project and has been trying for very long to convince other buyers to join in. In this factory, four buyers pay their share of living wages, but they only share less than 5 per cent of the factories‘ capacity.“

The research found that most of the companies analysed, „do not systematically check whether their purchasing prices allow their suppliers to implement living wages.“ The paper suggests this is connected to the problem that most companies do not know how much a living wage should be, and therefore there is no basis for determining whether the FOB prices allow the factories to implement higher wages. The researchers also found that for many SMEs the power relationship in the supply chain is „turned upside-down,“ with buyers afraid that their small order volumes „do not allow them to ask their factories to pay higher wages.“

On a similar not, the researchers found during their interviews that one buyer tried to apply an open costing methodology in order to pay higher FOBs that allow the factory to pay higher wages, „but the company was lacking the power to receive the costing details from the supplier.“

Adds the paper: „As means of risk management, most companies try not to book too much of a factory’s capacity, and they usually set an absolute maximum value at around 20 to 30 per cent. This per se limits their power to implement higher wages.“

Full link to paper HERE.

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