The realities that undermine wage improvements

What Fair Wear’s living wage approach is designed to address

For wage improvements that lead to sustainable living wages, we first need to understand the realities of the garment industry and how these stand in the way. Only once we focus on the complexity of the industry, can we find solutions that are both intuitive and effective.

Realities that undermine wage increases

1. Lack of binding global human rights protections

The first key reality that shapes Fair Wear’s work is the fact that brands are operating at the global level without proper regulation. Most garments are made in ‘supply chains’ where the worker who makes the product and the consumer who buys it are based in different countries, under different legal systems. There is no overarching set of laws or regulations that applies to everyone involved from the time the garment is conceptualised to the time it is purchased and used. 

This is a consequence of globalised production. In the past, it was not uncommon for manufacturers, retailers, consumers and workers to all be bound by a common legal framework, which made it more straightforward for all actors to know and uphold their respective responsibilities to each other. Initiatives like Fair Wear were initially formed to help plug the gap and hold different players accountable in the absence of global regulations.

2. Workers’ freedom of association and right to collective bargaining (in basic terms, their right to have a voice) are limited 

Insufficient regulation becomes a bigger problem once you consider some fundamental features of the garment industry. Clothes are normally made in countries where workers are poor and in need of work, and where they have limited ability to join unions and/or stand up for their rights. This ability is known as ‘freedom of association’ and ‘the right to collective bargaining’. If these rights are restricted either by law or in practice, workers have little voice or opportunity to speak out, even when the industry puts more and more pressure on them.

3. In a highly competitive global industry, who is accountable?

The global economic nature of the garment industry also plays a role. The industry is notoriously competitive—on price and delivery time. Consumers have come to expect cheap and ever-changing clothing selection. This increases the strain on all the players that make up the garment supply chain. And these chains are long and complicated. Just think of all the people who are involved in making a single item of clothing: from the cotton farmer, to the woman who dyes the fabric, to the worker who sews on the buttons, to the truck driver and shipping staff across continents, to the brand’s marketing team, to the retailer, and that’s just a fraction of it! This strain is magnified by the lack of trust that typically accompanies such distance and disconnection. Some brands spread production over one hundred or more factories in a given season. Such production relationships tend to be short-lived, as brands scramble to meet demand for new styles while constantly seeking the highest profit margin. What’s more, most contracts between brands and production facilities are limited to orders per season or run. Long-term contracts and business relationships are more the exception than the norm. These long and fragmented value chains make it harder to hold different players responsible and trace this path of accountability.

4. Brands do not employ workers, yet they hold the most financial power/influence 

When we are talking about wages, it is also important to highlight that brands rarely own their production locations. Therefore, they do not employ the workers who make their products, which means brands generally do not have direct control over workers’ wage levels. Yet, brands generally drive pricing discussions with suppliers. 

5. Prices paid to factories are based on brands’ target margins, rather than actual production cost

Brands often calculate how much a product will retail for, and then use these figures to calculate the target margin for the product. The target margin, in turn, determines the amount that brands are willing to pay factories for each product. Fair Wear calls this practice ‘top-down’ pricing.

What’s wrong with this? Top-down pricing doesn’t consider wage levels and the production time required per item. ‘Bottom-up’ pricing, where the price brands pay is based on labour and other costs, isn’t as common.

Top down vs Bottom up pricing