Raising wages: an urgent imperative

A wage that allows a worker to provide for him or herself and family; to buy essential medicines, send children to school and save for the future - what's not to like?

In the past decade, retailers and brands have made some progress in getting their suppliers to pay their workers their statutory entitlements - in other words, the prevailing minimum wage plus any pension contributions, sickness or holiday pay they are entitled to.

But in many countries, government-set minimum wages fall far short of what many estimate to be a living wage.

The reality is that the vast majority of the people making the products we consume struggle to survive on wages that are barely enough to cover their daily subsistence needs.

In many countries, the situation is actually getting worse. Prices of basic staples like rice and bread have risen dramatically in recent years, meaning that wages are actually falling in real terms. In Cambodia, for example, it is estimated that 70% of an average garment worker's monthly wages is currently spent on food.

And the global recession, which is driving retailers to keep an even tighter lid on costs, isn't helping.

When retailers push their suppliers to lower their prices, the result for workers is longer hours, poorer diets, declining health, and growing indebtedness, not to mention emotional and psychological problems.

There's a clear need for urgent action to ratchet up wages in global supply chains.

Frequently asked questions

What is a ‘living wage'?

The ETI Base Code says that ‘wages should always be enough to meet basic needs and to provide some discretionary income'.

There are different approaches to working out what wages should be in different countries and regions. Some propose the use of a formula based on costs of feeding, clothing and housing a family, while in many countries, local trade unions and labour rights organisations have made estimates.

It's important that companies don't allow the challenge of how to calculate a living wage to distract them from getting on with raising wages. In many countries the minimum wage falls so far below any living wage estimations that even significant increases in pay are unlikely to exceed a living wage.

How low are wages in the garment industry?

Wages are still appallingly low in many countries. For example, in Bangladesh, the government-set minimum wage is currently 1660 taka (about £13). This falls far short of what most of those involved in the Bangladeshi garment industry would consider a living wage.
There is still a huge amount of work to be done to ensure that workers are paid a wage that they and their families can live on without having to work excessive hours.

Is the situation getting any better?

There are some hopeful signs. After a three-year evaluation of the impact of ETI members' ethical trade activities, the Institute of Development Studies in 2006 reported that half of the sites studied ‘encouraged payment of at least the minimum wage for certain workers' and that in some cases, the provision of social insurance and pension funds for workers had increased.

But despite these signs of progress, recent rises in the price of food and fuel in many countries mean that real wages for many workers have actually been falling.

What can retailers do?

The starting point for retailers has to be to get suppliers to make sure they pay the government-set minimum wage for a standard working week, and any overtime payments and work-related social security benefits that are due. Some of the other practical steps they can take are to:

• Look for ways of rewarding suppliers for increasing wages - for example, by advising them on how to increase productivity.
• Make sure living wage costs are accounted for within their business models.
• Signal to governments in sourcing countries that they prefer buying from countries where conditions and pay for workers are improving.

Who else needs to be involved?

Retailers cannot implement a living wage for workers in their supply chains on their own. Collaboration between retailers and brands, governments, suppliers, trade unions and other local organisations in sourcing countries is essential to achieving widespread, lasting change.

For example, calculating and agreeing what a living wage would amount to in each country and region requires negotiation between appropriate workers' representatives, trade unions where they exist - and employers' associations.

What is ETI doing to increase wages?

To date, we have provided a forum for innovative partnerships between business, trade unions and NGOs to start to tackle the living wage issue. And a number of our members have done work with their suppliers that has resulted in increased wages and reduced working hours. We are committed to doing much more, including:

• Facilitating collaborative action by our members, starting with a pioneering project in Bangladesh. This project aims to test an approach to raising wages with a group of member companies' suppliers in Bangladesh. We will record the results as a model for others to follow on how to improve wages for garment workers.
• Working with our members to develop tools to assess what represents a living wage in global supply chains.
• Continuing to engage with other alliances such as the Asia Floor Wage in initiatives to drive up wages.
• Documenting and broadly disseminating lessons learned by our member companies in their own projects to raise wages.