Promoting the industry-wide implementation of wages and working conditions that meet the basic needs of workers presents an opportunity for fashion brands to enhance the prosperity of the economies and people that interact with the value chain, including the formal, subcontracted and informal workers who contribute to goods manufacturing. A significant proportion of garment workers operate in the informal economy and face increased vulnerability, often due to the lack of labour protection and health support for factory workers. COVID-19 affected these workers in particular, as there were no forms of protection available to them. This calls for strong governance structures, compliance and social protection schemes as part of compensation packages.22, 23
Although most fashion brands do not set the wages of production workers, they have a role to play in promoting systemic change, which is needed due to institutional failings. Fashion brands can work with manufacturers to strengthen compliance and to create mechanisms for transparent recordkeeping and fair living wages. In partnership with manufacturers, fashion brands can further explore opportunities in areas such as training and digitalisation of payment systems.
Implementing improvements in wage systems for garment workers could not only improve the lives of workers and their families through health, safety and education, but also increase productivity and reduce employee attrition, raise the quality of output, improve the reliability of deliveries and foster employee-driven innovation based on elevated empowerment in the workplace.24 Fair wage systems can also contribute to garment workers’ wellbeing and reduce the occurrence of antisocial events or violence. Fairer and more transparent wage setting mechanisms – such as through fair negotiations with trade unions and worker representatives – can also reduce the number of strikes and labour unrest, resulting in reduced costs for factories and lowered risk of supply disruptions for brands.25 Such systemic change will not happen overnight. It requires unprecedented, pre-competitive collaboration between companies and other stakeholders. Lastly, it will require government efforts following the initial progress of several national responses from, e.g. Sweden, Spain and Belgium or the 2015 UK Modern Slavery Act26 that requires many businesses to at least disclose a slavery and human trafficking statement. At the European level, the forthcoming due diligence legislation is expected to have positive impacts on the quality of jobs, wages and work conditions, ending child labour in the value chain and increasing respect for human rights.27
The conversation about wages in the fashion industry has to overcome its sensitivity for wages to move away from a race to the bottom and to include additional benefits for workers such as support systems and healthcare. This emphasises the importance of equally fair wages supported by purchasing practices, ring-fencing labour costs and excluding them from price negotiations.
An overarching challenge is the current lack of a commonly agreed upon definition of a living wage,28 which is confounded further by the gap between legal minimum wages and varying conceptions of living wages in most garment-producing regions. For the broader fashion industry, research suggests that many factories fail to comply with applicable minimum wage laws and that, even when in compliance with minimum wages, the wages paid in some garment-producing countries remain too low to meet the basic needs of workers.29 Inadequate wages are often linked to broader issues, such as a lack of governance and institutional support mechanisms.30
COVID-19 risks wage systems to become secondary given its strong implications on securing jobs at a global scale. Factories and brands that have adhered to employment contracts, implemented employee protection schemes and employed more transparent pay mechanisms have experienced positive results in terms of resilience and performance.31
A holistic understanding of how wages should be measured and how systemic change towards better wage systems can be brought about needs to be developed. The lack of clear roadmaps or benchmarks, alongside a lack of transparency on wage data, remain significant obstacles.32 At present, only a minority of companies explain the wage estimates that they use to track and benchmark worker wages within their value chain, meet each worker’s needs and provide some discretionary income.33
Fashion brands need to ensure strong due diligence and supply chain strategies for compliance of their suppliers with local laws, international obligations and agreements. We encourage brands to explore how improvements in areas such as purchasing, productivity, training and data implementation can contribute to the establishment of improved wage systems and to investigate systems of wage setting, such as collective bargaining agreements. Brands can support the improvement of manufacturers’ compensation and working conditions, which in turn can lead to better working environments.34
In response to the pandemic, industry players and governments can support and extend wage and social protection schemes through the period of lockdown, carefully consult plans to reopen factories to prioritise the safety of workers and ensure that garment workers are paid wages that meet their needs post-crisis.35
Governments play a vital role in developing policy frameworks, facilitating multi-stakeholder dialogue and leading by example in public procurement practices.36 As part of the European Circular Economy Action Plan,37 forthcoming mandatory Green Public Procurement criteria and targets in sectoral legislation have been announced.
BETTER WORK PROGRAMME – DIGITAL WAGES FOR DECENT WORK
When COVID-19 broke out, workers across manufacturing hotspots became victims to delayed and, in some cases, lost wage payments. As part of its package to address the crisis, the Better Work programme, a partnership between the United Nation’s International Labour Organization (ILO) and the International Finance Corporation (IFC), is actively promoting the use of digital wage payments.
By introducing digital payment systems, occurrences of late and incorrect payments are significantly reduced, granting workers more control over their financial future, in turn acting as an important step for gender equity enabling women to manage their own finances via online banking and e-wallets. Digital wage payments also create an effective mechanism for workers to receive wage subsidies or income replacement payments.
In Jordan, Better Work is collaborating with the United Nations-based Better Than Cash Alliance, the German Development Cooperation (GIZ), and key Jordanian stakeholders to pilot digital wage payments for garment workers.
Following the large investment made by the Jordanian government and financial sector in digital payment technology, Jordanian workers were empowered to open e-wallets remotely enabling them to safely receive government aid and wages during the pandemic. As a result of these coordinated efforts, the number of e-wallets held by workers more than doubled between March and December 2020 reaching a total of 1,255,546 wallets with 1.3 million transactions made by the year end. Mobile money also facilitated access to governmental aid during the pandemic for more than 260,000 families who previously depended on cash.
Based on the successful pilot in Jordan, there are clear benefits for this effort to be scaled to other manufacturing countries, with work currently being explored in Indonesia, Cambodia, and Bangladesh. To learn more about how you can play a part in moving the garment industry toward wage digitisation, email firstname.lastname@example.org.