How the Fair Labor Association promotes a living wage for workers
In today’s globalized economy, large companies are increasingly outsourcing their production to factories that they do not own or operate. Outsourcing can significantly reduce production costs, while also benefiting low-wage workers, many of whom migrate from farms to cities in search of predictable income and a better quality of life. Over the past 40 years, this model has helped lift billions of people out of extreme poverty, especially in East and South Asia.
But too many workers doing contract manufacturing are not earning a living wage and are struggling to make ends meet. In her “What she does” campaign, Oxfam Canada has found that the minimum wage for garment workers in Bangladesh, Vietnam, China and Cambodia is between 46 and 74 percent of what workers need to achieve a decent standard of living for themselves and their families. In many developing countries, declining sales and outright order cancellations caused by the Covid-19 pandemic have resulted in lower wages after years of steady progress. In Bangladesh, for example, where the average wage for textile workers increased significantly during the 2010s, wages fell by 289 Bangladeshi taka (US $ 3.4), or about 3% in 2020. In Vietnam, the situation is even worse, with average wages falling. 388,896 Vietnamese dong (16.85 USD), or about 7% in 2020.
Especially in the wake of the pandemic, all brands and global retailers must do more to address the glaring gaps in wages and other forms of compensation for workers in their supply chains that are critical to their financial success. This is forcing big companies to take a close look at what factory workers earn and find ways to increase their wages. I chair the board of directors of the Fair Labor Association, an organization that has brought together over 50 sportswear and footwear companies like adidas, Patagonia, Hanes, Nike and Uniqlo with human rights groups. and labor and universities, to promote workers’ rights and improve working conditions in factories. We’ve been promoting living wages for a decade and have learned that there are three important ways to get ahead:
The first step is to recognize the challenge and take responsibility for meeting it. In 2011, FLA participants recognized that every worker has the right to fair pay. As a starting point, we looked at the definition of a living wage proposed by Richard and Martha Anker, co-founders of the Global Living Wage Coalition. This definition aims to ensure that workers can afford decent housing, meet their basic needs and those of their families, and accumulate savings, all without working overtime. All 50 FLA companies are committed to realizing this right over the next decade in partnership with their suppliers around the world.
The next step is to understand the compensation that workers actually receive and develop a common system to determine, define and measure it. Compensation systems in contract factories are notoriously complex and vary from region to region. Some workers are paid by the piece, while others have to meet various production targets; few are paid simply an hourly or daily wage. One thing we’ve learned is that workers constantly have to rely on overtime to help support their families and close the gap between their base pay and what they need. While overtime is often paid at an increased rate of 1.5 or 2 times the regular wage, workers should not have to work very long hours just to meet their basic needs.
Confusion over measurement and methodology has long pushed companies, governments and civil society organizations to get bogged down in unproductive debates or to give up altogether. To help companies manage this complexity, the FLA has developed a scalable methodology, aligned with the Ankers definition, which measures what workers in a given plant earn throughout the year and taking into account the highs. and downs in the production cycle. Then it took FLA companies to start collecting this data. By using a consistent methodology to measure workers’ compensation compensation, we now have a baseline to understand how far we need to go to achieve a living wage.
Finally, the FLA adopted innovative methods to collect and apply the data. Pearson’s Law holds that “what gets measured gets better. What is measured and reported improves exponentially. Standardizing the collection of compensation data will push companies to find solutions. Using the FLA’s Fair Compensation Dashboard, companies can download wage data and automatically compare it to region-specific vital wage standards, including those of the Global Living Wage Coalition, as well as than the demands of workers and unions. Once companies have this data, they can use it to communicate with their suppliers, identify first steps, and dig into longer-term solutions.
Companies like Patagonia and adidas have contributed to the development of this tool and now use the FLA dashboard. Some, like New Era Cap Company, are already finding ways to improve workers’ compensation. The recent FLA case study documents three cases in which significant increases in net wages – ranging from 29% to 57% over a three-year period – have enabled factory workers in China and Vietnam to earn wages. decent without working overtime. For example, New Era and its supplier in Jiangsu, China, began to talk more regularly about the plant’s production capacity and New Era’s forecast for upcoming orders. This type of communication, which often doesn’t happen in a supplier-buyer relationship, meant both companies could plan better to avoid harmful and costly overtime. The factory also adopted a higher base wage (replacing an hourly wage) and invested in new machinery to simplify production. In two years, the monthly net wages of workers increased by 57 percent.
Going forward, more needs to be done to engage workers and ensure that global companies change the way they do business. Recently, the FLA’s Fair Pay program was recognized as the winner of the 2021 Classy Award for Social Innovation. The award recognizes the FLA’s Salary Data Collection Toolkit and Fair Compensation Dashboard as an innovative way to calculate the gap between real and living wages and measure progress over time .
Because these problems are complex, it is easy to give in to paralysis. Today, innovative approaches like the FLA program are advancing the debate. We all need to recognize the value of the people who make the products we use and wear every day. As Nobel Laureate Robert Solow observed, “the labor market is both a social and an economic institution, and the interaction between human beings cannot be interpreted in the same way as the labor market. and the demand for dead fish ”.