How to implement living wages?

The CCC reports that over 68.000 garment workers in Cambodia started a week-long strike for a living wage on Monday. Workers are criticizing the national minimum wage (MW) fails to meet basic needs. This is why workers are calling for implementing a living wage of $93 per month. Generally, many brands argue that living wages cannot be implemented and that governments are responsible for setting proper wages.

Doug Miller and Peter Williams recently wrote the article „What price a living wage?“ in which they suggest how a living wage can be implemented. The article achknowledges that implementing living wages is essential, but that it confronts companies and their stakeholders with a number of challenges. It discusses these challenges and a range of implementation mechanisms that would allow the proper implementation of living wages.

Here are some of their arguments:

• In the apparel industry workers are largely determined by MW fixing at a national level. However, these wages usually present a political compromise, which does not suffice the workers’ basic needs (p.101).
• Addressing living wages requires attention to the unit labour cost of a particular garment. This requires ‚open book costing’ from the producers (i.e. transparency about the costs of production) to calculate the labour minute value, which has to be multiplied by „whatever standard (industry) time is allocated to actually assemble the garment in question“ (p.103f). The Swiss brand Triumph uses the GSD to calculate standard time.
• There is a general consensus in the apparel industry that sewing (i.e. unit labour costs) is fractional as input for any given garment, even if margins are included into the calcuation; increasing unit labour costs by 100% would result in a modest increase in the retail price (one calculation says 9%) – „from the viewpoint of the final consumer … relatively inconsequential“ (p. 104f, compare table from Miller & Williams p. 105)
• As an example of „public initiatives“ to solve the living wage problem, the article describes how the Cambodian government intervened during national wage negotiations in 2006 at the first ever national bargaining round in the sector, where it “promulgated the minimum wage at the $50 rate“ – which was far from the apired $82 (p.107).
• How to pay? Miller & Williams (p. 109ff) present at least three voluntary private sector ways in „which a buying firm can finance enhancement of wages up to a living wage“ (p. 112): (1) passing the marginal costs on to the consumer (e.g. via a Fairtrade initiative), (2) seeking supply chain efficiencies or reductions in other budgets (e.g. marketing), (3) passing the responsibility over to the supplier to seek productivity gains. However, they argue that all of these three voluntary options pose a number of serious implementation questions (p. 112f). They argue that in the current global apparel industry, transparent, flexible and meaningful wage bargaining are non-existant – and that „tight performance targets may bet he reason for workers not achieving minimum wages“ (p. 115f).
• Some further ideas on how to implement: (1) Choose a supplier with a long-standing relationship and where you buy the majority of output, (2) achieve consensus around a living wage benchmark (also regional variations and with other buyers), (3) calculate how the FOB price needs to be increased.
• „Buying companies will need to not only monitor wages in their supply chains against available living wage benchmarks and engage in price negotiations based on a unit labour cost that is compatible with paying decent wages, they will also need to create an environment in which the core rights of FoA and collective bargaining can be observed. This will require … proactively directing orders towards suppliers with better labour conditions, and a degree of buyer collaboration not yet seen in the sector.“ (p.119)

On 29/9/2010 there is a discussion about living wages in Zurich, hosted by the CCC Switzerland. Two representatives from India will participate, who were involved in calculating the living wages of the Asian Floor Wage (AFW) Campaign.