ETI NGO Caucus – implementing the Living Wage

Implementing the Living Wage

ETI NGO vision of the way forward

ETI NGO Caucus – implementing the Living Wage

Minimum wages & living wagesin some countries

Source: Miller, Doug and Peter Williams (2009) 'What Price a Living Wage: Implementation Issues in the Quest for Decent Wages in the Apparel Sector,' Global Social Policy 9(1): 99-125.

ETI NGO Caucus – implementing the Living Wage

Approaches

A. One-country approachB. Sharing Productivity gains C. Purchasing practices

ETI NGO Caucus – implementing the Living Wage

A: One-country approach

• Brands identify common suppliers • Negotiate pay scales with unions/workers• Transitional negotiations over increases

in product price if necessary• Preferential status for participating

suppliers (normal competition maintained)

ETI NGO Caucus – implementing the Living Wage

B: Sharing Productivity gains

• Brand support to ‘model supplier’• Efficiency gains ring-fenced to benefit workers• New Look (case study):

– Factory: production planning, HR systems, incentive scheme, welfare, worker consultation

– New Look: Forecasting (information and confirmed future orders), resources

• Wages raised (towards LW) while hours reduced

ETI NGO Caucus – implementing the Living Wage

Industry-wide

culture of long hours

and low pay

The Problem

Sustainable funding of

higher wages for

fewer working

hours

AimRobust HR framework

Worker consultation

Production incentive scheme

Improved IE and production planning

Welfare: provident fund and improved free nutrition

The project: in-factory

ETI NGO Caucus – implementing the Living Wage

Where are we on the journey?

Year 1 Year 2 Year 3

•Improved HR•Worker consultation•Workers committee•IE and planning•Production bonus•Trial lines•Improved welfare•Improved purchasing

•Roll-out incentives•Improve target setting•Formalise training facilities•Tackle overtime blips•Improve critical path•Improve purchasing

ETI NGO Caucus – implementing the Living Wage

Making a difference to workers?

Grade 7 (lowest paid) workers

% change y-o-yOT hours

% change y-o-yTake-home pay

February 08 -57% -6%May 08 -36% +15%July 08 -46% +24%

July Grade 7 average take-home pay 2940 Taka

Cost of improved lunch 675 Taka

Value of package 3615 Taka

ETI NGO Caucus – implementing the Living Wage

Worker turnover

ETI NGO Caucus – implementing the Living Wage

C: Purchasing practices – 4 point plan

1. Ensure informal workers paid Minimum Wage+– Impact on lowest paid workers (likely to be women)– Attenuate pressures for informalisation

2. Identify Living Wage benchmarks and monitor actual wages against benchmark(s)

– Audit basic pay of lowest paid (women) workers

3. Ensure workers at suppliers can negotiate4. Make wages a key factor in selection of suppliers

ETI NGO Caucus – implementing the Living Wage

Challenges

• Living Wage benchmarks

• Informalisation• Product cost• Sharing risk with

employer

ETI NGO Caucus – implementing the Living Wage

Facing the challenges I• Living Wage

benchmarks• Informalisation• Product cost• Sharing risk with

employer

…Stop arguing about how high the moon and raise wages!

• Must involve workers/ unions (& NGOs)

• Share information SAI,companies,NGOs

• Use all available benchmarks …JO-IN Wages Ladder

ETI NGO Caucus – implementing the Living Wage

JO-IN Wages Ladder

F2

F1F4

F3

Wage level 3

Wage level 2

Wage level 1

Prevailing

Minimum

Wage level 4 750 YTL

700 YTL

650 YTL

600 YTL

550 YTL

500 YTL

ETI NGO Caucus – implementing the Living Wage

Facing the challenges II• Living Wage benchmarks• Informalisation• Product cost• Sharing risk with

employer

…because raising wages raises pressure for informal work

• Start by ensuring informal workers paid at least MW– informal workers prevalent

eg Turkey Ecuador– Impact on women workers – ETI Homeworker

Guidelines etc

ETI NGO Caucus – implementing the Living Wage

Facing the challenges III

• Living Wage benchmarks

• Informalisation• Product cost• Sharing risk with

employer

• Labour small % of cost, modest impact

• Total Product Cost• Efficiencies

– manufacturer – in-house (eg sampling)

ETI NGO Caucus – implementing the Living Wage

Facing the challenges IV

• Living Wage benchmarks

• Informalisation• Product cost• Sharing risk with

employer

• Risk for supplier must be matched by ethical sourcing policy– Preferred supplier

status– Wages central to

selection of supplier

ETI NGO Caucus – implementing the Living Wage

Any questions?

ETI NGO Caucus – implementing the Living Wage

Impact on price – hypothetical case

Source: What Price a Living Wage, Miller and Williams, Journal of Global Social Policy (2009)