Reacting to the Savar tragedy in Bangladesh, Nobel Laureate Prof. Muhammad Yunus made suggestions for the fixing of a minimum international wage for the industry and the formation of a Garment Workers Welfare Trust, which is not being received well by many labour activists and economists within Bangladesh. Though his perspective may not have gone down well with the critics, but it does rekindle the debate on Living Wage in wake of the recent tragedies in Asian countries, the problems related to it and the growing acceptance of minimum wages to be correlated to the living cost of the country.
According to Prof. Yunus, foreign buyers should mutually fix a minimum international wage for the industry raising it from 25 cents an hour to 50 cents, twice of what is typically found in Bangladesh. In addition, he also proposed the formation of a Grameen Garment Workers Welfare Trust in Bangladesh, by charging customers additional US $ 0.50 against per piece of garment manufactured to be used for worker welfare with regard to safety, work environment, pensions, healthcare, housing, their children’s health, education, childcare, retirement, old age and travel. However, critics believe that such an addition to the initial costs would amount to charity rather than worker empowerment, slamming the idea as ‘the business of begging’.
[bleft]Cost of nutritious low-cost diet
Cost of basic acceptable housing
Cost of clothing and footwear
Other costs for a decent life
Household size needing to be supported (4 most common)
Number of full-time equivalent workers in household (1 used in early 20th century; different numbers from 1 to 2 used now)
POSSIBLY ADD: Margin for discretionary expenditures, saving, or funds for sustainability for unseen events and emergencies[/bleft]
Asia offers the most competitive advantage in terms of scale of production, amount of workforce, accessibility to raw materials, growing technology and diversity of skills and labour cost. Poor working conditions of workers in the global garment supply chain has been a sore issue for decades now and Living Wage have been a key demand made to brands, by various labour activists in the garment industry for a long time with minor progress beyond rhetorical support.
According to the International Labour Organization (ILO), “The idea of a Living Wage is that workers and their families should be able to afford a basic, but decent lifestyle that is considered acceptable by the society at its current level of economic development. Workers and their families should be able to live above the poverty level, and be able to participate in social and cultural life.” In 2009, the rising consciousness for Living Wage brought together labour organizations from six garment producing countries across Asia to work together with trade unions, NGOs and activists in the EU and the US and launch a ground breaking new proposal for an Asia Floor Wage (AFW) which, based on the World Bank’s Purchasing Power Parity (PPP), proposes a wage in each country that allows workers to purchase the same set of goods and services that a US consumer can get for US $ 475. In 2011, the bar was raised to US $ 540 PPP.
The AFW is based on “the income required for a single earner to support a family of four (2 adults and 2 children) by working maximum for 48 hours in a week, excluding any payment for overtime or other allowances.” The AFW process has also opened up the possibility of a collective bargaining process for higher wages which is not restricted to a minimum wage alone.
[bleft]“Everyone has the right to a standard of living, adequate for the health and well-being of himself and of his family, including food, clothing, housing, medical care, necessary social services, and the right to security…”
– United Nations Universal Declaration of Human Rights Article 25.1[/bleft]
Till date, no brand or retailer is contributing to a Living Wage or has put together a systematic program of work that is likely to raise the wages to a level near to the AFW in the near future, mostly because higher wage payments might affect their profitability. An important reason why the concept of Living Wage is not widely applied is that there is neither a generally accepted definition of what a Living Wage is nor is there a methodology on how to measure it. Any attempt to demand a Living Wage at a national level results in relocation across the borders and therefore is punitive to national economies as well.
Most commonly, the retailers say that they have undertaken or are undertaking pilot projects to determine how to measure Living Wage and how to pay and afford a Living Wage possibly through increased productivity. “We are now trying to determine (through research) what the gap between these earnings and the Living Wage should be, and what the implications to our business are,” informs senior management at Laura Ashley. Some argue that the higher wages will result in workers from various other industries, switching their jobs to the garment industry, thereby leading to a collapse of welfare systems.
Others believe, owing to the economic downturn, customers do not wish to pay an additional amount for their clothing. However, Prof. Yunus believes that when consumers see that a well-known and trusted institution has taken responsibility to ensure both the present and the future of the workers who produce the garment, they wouldn’t mind paying 50 cents extra. “Consumers would be proud to support the product and the company, rather than feeling guilty about wearing a product made under harsh working conditions,” reasons Prof. Yunus.
Living Wages being equated to Minimum Wages
With no real definition of what a Living Wage is nor a proper monitoring system to ensure that addition payments made by retailers/brands are indeed paid to the workers, many western retailers believe that in all fairness minimum wages that they stress upon in their code of conduct should equate to a Living Wage and it is for the Governments, not companies, to ensure that the legal minimum wage is correlated to the living cost in the particular country. Levi Strauss & Co and Walmart are two major retailers who believe in the principle that wages and benefits for a standard work week should be sufficient to meet workers basic needs and provide some discretionary income. Where wages fail to keep workers above the poverty line, Governments should set minimum wages consistent with the cost of living, in consultation with representatives of workers and employers.
The debate on minimum wages as Living Wage is surrounded by various arguments which only confuse the issue more. Many believe that minimum wages which are set at unrealistically high levels can trigger inflation, unemployment and widespread non-compliance. On the other hand, wage floors that are too low are ineffective and leave many workers and their families in a life of poverty. A country’s minimum wage should be set at a level that can help both, the workers and their families to increase their level of consumption and attain a decent living standard.
It is imperative for the brands and retailers in collaboration with the Governments to take concrete action, as the financial stability of the buyers is ensured through the global garment chain, and sharing a negligible fraction of their profits could noticeably lift millions of workers and families out of poverty, avoiding repetition of the Bangladesh type of tragedy.
