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Climbing the wage ladder

Climbing the wage ladder
27 July 2011

Code-bound organisations and multi-stakeholder initiatives (MSIs) are increasingly emphasising activities that encourage payment of higher wages above and beyond legal minimum wages.

The immediate impetus in many instances has been recognition that the dramatic recent increases in basic living costs have outpaced minimum wage levels, while price pressures faced by retailers and suppliers threaten to squeeze labour costs further.

New developments

Among MSIs, the new 2011 Fair Labor Association (FLA) Code, has moved on from a minimum wage standard and now requires employers ‘to take appropriate actions that seek to progressively realize a level of compensation that meets basic needs and provides some discretionary income' while Social Accountability International (SAI) has developed further guidance on its basic needs wage approach. The Ethical Trading Initiative (ETI) too recently held a well-attended roundtable seminar to explore new wage initiatives.

Standing out from among a group of companies focused on wage challenges, the UK retailer Marks & Spencer has committed itself to ‘Implement a process to ensure our clothing suppliers are able to pay workers a fair living wage in the least developed countries we source from, starting with Bangladesh, India and Sri Lanka by 2015' and is looking to do this by:

  • ensuring prices paid to suppliers are adequate and
  • helping suppliers to implement productivity improvements to fund improved wages - an approach also being adopted by several other major brands.

How wage ladders can help

Ladders can be a comparative tool to promote discussion about moving forward incrementally rather than getting bogged down in polarised debates about what exactly constitutes a living wage level

Key tools in such approaches are (1) methods that identify the wage element of cost prices (in order to assess how adequate these are already), and (2) methods to assess what a more adequate wage might be. Among the latter, wage ladders are increasingly being used to demonstrate the variability that often exists between poverty levels, actual wages, minimum wages and various living wage benchmarks provided by unions, NGOs or official bodies. The idea is that ladders can be a comparative tool to promote discussion about moving forward incrementally rather than getting bogged down in polarised debates about what exactly constitutes a living wage level.

The concept of a wage ladder was pioneered by the JO-IN initiative in the early 2000s, but it has been taken up in a number of different forums. The Dutch Fair Wear Foundation, a multi-stakeholder initiative, is developing wage ladders for major sourcing counties in order to support its Living Wage Policy.

Initiatives in the agricultural sector

The wage ladder approach is not limited to the apparel sector. The World Banana Forum is developing a wage ladder methodology as part of its work on distribution of value through the value chain. Ergon has constructed ladders as part of our research for an ongoing project on understanding wages in tea plucking, being carried out for a multistakeholder coalition including Oxfam Novib, the Ethical Tea Partnership and various certification bodies. The technique may spread further given that living wage commitments are becoming more prevalent in the agricultural sector. The Roundtables on Sustainable Palm Oil and Cocoa have living wage standards, and recently tobacco company Philip Morris International announced that its new in-house agricultural labour practice standard included a living wage commitment.
Of course, wage ladders are not an end in themselves, but they can be powerful ways of visualising the disparities between benchmarks - particularly living wage benchmarks - and actual pay, and thus a useful tool for getting round-table buy-in on the need to take action on wage levels. The debate can then move onto what actions to take and how improvements should be funded - no mean challenges in themselves.