Implementing the Living Wage ETI NGO vision of

Implementing the Living Wage ETI NGO vision of the way forward ETI NGO Caucus – implementing the Living Wage

Minimum wages & living wages in 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 approach B. 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

The project: in-factory The Problem Robust HR framework Aim Worker consultation Industrywide culture of long hours and low pay Production incentive scheme Improved IE and production planning Welfare: provident fund and improved ETI NGO Caucus – implementing the Living Wage free nutrition Sustainable funding of higher wages for fewer working hours

Where are we on the journey? Year 1 Year 2 • 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 Year 3

Making a difference to workers? Grade 7 (lowest paid) workers % change y-o-y OT hours % change y-o-y Take-home pay February 08 -57% -6% May 08 -36% +15% July 08 -46% +24% July Grade 7 average take-home pay Cost of improved lunch Value of package 2940 Taka 675 Taka 3615 Taka ETI NGO Caucus – implementing the Living Wage

Worker turnover 30% 25% 20% % Echo factory 15% 10% Worldwide benchmark 5% Bangladesh sector pt Se Ju ly ay M Ja n M ar ch ov N Se p 0% 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 negotiate 4. 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 Wage level 4 750 YTL F 2 Wage level 3 700 YTL F 1 F 4 Wage level 2 Wage level 1 F 3 650 YTL 600 YTL Prevailing 550 YTL Minimum 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) ETI NGO Caucus – implementing the Living Wage