The labor costs in a typical piece of clothing make up 1 to 3 percent of its retail price.On top of this, it’s not just the cheap labor that entices production to other countries. China is popular not just because of its cheap workforce but also because its industry is very efficient and productive from cotton production to finished garment. Wage increases have been shown to improve workforce morale and productivity, as well as reduce absenteeism and employee turnover. Paying a living wage could therefore improve quality and flexibility, allowing enlightened suppliers to retain—or even gain—a competitive edge.
1. CALCULATING FAIR AND BALANCED WAGE IS IMPOSSIBLE
From the workers’ perspective, there is little sense in this argument. The problem of low wages is obvious to workers and many companies alike, yet because companies can’t agree on a figure, many refuse to try raising wages.
The problem of low wages is obvious, yet because companies can’t agree on a figure, many refuse to raise wages.
Although this dilemma has existed for years, little attempt has been made by companies to reach a consensus, and when multi-stakeholder initiatives have tried, negotiations have failed. It isn’t the case that this consensus is impossible, its just that companies don’t want to find it.
In 2009, the Asia Floor Wage Alliance—an alliance of 80-plus garment workers’ unions, worker representatives, and non-governmental organizations from six Asian garment-producing countries—did all the hard work and calculated a figure for a living wage for garment workers: $283, more than four times the average monthly salary in Cambodia.
The number was based on what was needed to buy a food basket for a worker and her dependent family, as well as any additional costs she would have to pay to survive. The buying power of this figure was suggested to companies as a solution to the dilemma. Although many companies agreed that it was an interesting idea, none of them have, to date, officially used this figure as a living-wage benchmark.
2. CONSUMERS DON’T WANT TO PAY MORE FOR THEIR SHIRTS
It’s true that consumers have become used to paying only a very small amount for their apparel. It’s worth noting, however, that a garment worker’s wage is only 1 to 3 percent of the total cost of most clothing.
A garment worker’s wage is only 1 to 3 percent of the total cost of most clothing.
If a consumer is paying €8 ($10) 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 would 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.
3. GOVERNMENTS, NOT COMPANIES, NEED TO SET MINIMUM WAGES
While it’s true that minimum wages set by governments (often negotiated with business organizations and trade unions) should ideally be reasonable, there’s a clear reason why they aren’t. Governments have to think about their international competitiveness, and they’re all too aware that multinational fashion buyers will move elsewhere if labor costs become too high.
Governments are all too aware that multinational fashion buyers will move elsewhere if labor costs become too high.
The multinational fashion buyers hold the power in the situation, not the country governments. It’s down to the multinational companies who dominate garment-supply chains to show that they are willing to absorb the small increases in production costs that might occur, in order to give governments the confidence to raise minimum wages in the first place.
Fashion brands will need to work both across their entire supply base in different countries, and with other brands buying from each country, to move the wage issue forward.