Issue: minimum & living wages?

NYC Rally To Raise The Minimum Wage

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As well as safety in the workplace, the Rana Plaza collapse and the Accord on Fire & Building Safety in Bangladesh seem to have re-invigorated discussions about garment workers’ wages being low because of corporations’ ability to shift the location of manufacture to minimise costs. As a recent article in the Business of Fashion has argued, one way to respond to this ‘race to the bottom’ is a global minimum wage. Here’s an extract explaining the argument:

Apparel is one of the world’s oldest, largest and most global export industries. In a world where robots are used to automate many types of manufacturing, garments are still made by hands-on human toil. But fashion and apparel, as an industry, is failing the vast majority of its workers. The scale of the failure can be seen in the 1,134 deaths at Rana Plaza in Bangladesh, the five garment workers recently shot dead in Cambodia and the thousands of workers eeking out a living, all but enslaved in a South Korean factory complex built on the site of the Chambert Post Prison Camp in Haiti. As a result, Bangladesh, Cambodia and Haiti have all been buffeted by recent protests staged by impoverished garment workers, who have gone on strike, fought pitched street battles with police and burned factories. In each country, their demands are the same: better wages and better working conditions. Yet, across the board, the protestors have been accused of being traitors, bringing disrepute to their countries, jeopardising the garment manufacturing industries that have taken root there and causing foreign investment to flee.

Raymond Vernon, in 1979, coined the term “global scanning” to describe the process by which large multi-national companies systematically search the globe for the most advantageous conditions for their production facilities. Often, this means looking for (and bolstering) governments that crack down heavily on dissent, prevent wage rises and oppose the growth of trade unions, as seen in Indonesia, Myanmar and Haiti. What’s more, if factors like rising wages or the expansion of unions threaten profits, companies can simply source their labour elsewhere. For workers, this constant threat of replacement makes fighting for higher standards risky because if things do shift, companies just up and leave for other locations. South Korean firm Sae-A (which operates some of the largest garment production facilities in countries including Indonesia, Vietnam, Nicaragua, Cambodia, Myanmar and Costa Rica) used to have factories in Guatemala, until a battle with union workers prompted the company to pull out of the country and shift operations to Haiti.

A global minimum wage would help to change these dynamics by ensuring that wages cannot drop below a certain level.

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But there’s a difference between a minimum and living wage. What can workers do with those wages, where they live? We have blogged about this before. Here are a useful set of definitions:

The Centre for Reflection, Education and Action Inc (CREA) defines four levels of wages according to the categories of ‘survival wage’, ‘wage allowing for short-term planning’ and ‘sustainable living wage’.

In the first category, the marginal survival wage is not enough to cover the adequate basic needs. Even though it is enough to avoid hunger, it can lead to malnutrition, illnesses and probably early death.

Secondly, there is the basic survival wage, enough to meet immediate needs, including basic food, second-hand clothing, minimum shelter and energy to cook, but little else.

Thirdly, is a wage allowing for short-term planning, covering basic survival needs as well as the possibility of a small surplus income that allows for minimum planning. Such minimum planning allows improvement of survival, only from the payday until the next wage. Occasionally, it is possible to buy other basic products.

Fourthly, is the sustainable living wage, which allows workers to cover satisfactorily all their basic needs: food, clothes, housing, energy, transport, health services and education. It also allows the participation in cultural activities such as births and other religious festivals: celebration of First Communion, weddings, christenings, funerals, etc. With this wage, it is possible to save a small amount to plan future purchases of other products and the fulfilment of other needs that may arise.

Additionally, a sustainable living wage allows enough “discretional income” so that the worker can participate in the establishment of small businesses or activities in their communities, contributing also to the development of cultural and civic activities. In this sense, the level of wage makes long-term planning possible. 

So, the question is, why not argue for a global living wage? Garment industry NGO Labour behind the label have outlined their ‘Top 10 excuses for not paying a living wage’. 2 and 4 are really interesting:

Consumers don’t want to pay more for their shirts
It is true that consumers have become used to paying only a very small amount for their clothing. It is worth noting however that a garment workers’ wage is only 1-3% of the total cost of most garments. If a consumer is paying 8 euros for a shirt, the worker who made it is receiving only 24 cents at most. To double this wage would only be another 24 cents. The consumer will barely notice this type of increase, and if a consumer won’t notice it, a company probably won’t notice it that much either. These types of costs could be absorbed into company profit margins who make millions of euros per annum in profits. …

Low-income countries would lose their competitive advantage if wages were higher
The first and most obvious point to make here is that labour costs represent such a small proportion of the cost breakdown of a garment that even doubling them would make only a small difference. The labour costs in a typical piece of clothing make up 1-3% of its retail price.On top of this, it’s not just the cheap labour that entices production to other countries. China is popular in part because of its cheap workforce, but in part because its industry is very efficient and productive, and it can offer ‘back-linked industries’ right the way from cotton production to finished garment that most other countries cannot.Wage increases have been shown to improve workforce morale and productivity, and to reduce absenteeism and employee turnover, so paying a living wage could even improve quality and flexibility, allowing enlightened suppliers to retain a competitive edge

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This is another issue that we’ll have to understand for our Grand Challenge…

[PS ‘living wage’ is a live issue in 2013-4, with Exeter students playing an active role in calling for it to be paid to all University staff: see this then this]

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