Steps towards a living wage in

global supply chains

KEY POINTS

Rachel Wilshaw/Bryony Timms January 2015

HUMAN RIGHTS INEQUALITY AND THE

LIVING WAGE

Page 3

LIVING WAGE AND THE UN GUIDING PRINCIPLES ON

BUSINESS AND HUMAN RIGHTS

• A living wage does more than keep people out of poverty. It allows

them to participate in social and cultural life and afford a basic

lifestyle considered acceptable by society at its current level of

development. It is a human right.

• When a profitable company does not ensure a living wage is paid, it

is pushing onto the most vulnerable people in its supply chain the

negative impact of its business model.

‘Business needs to demonstrate it contributes to the common good.

The living wage is one of the most powerful tools for business to

contribute to their workers’ human rights’

Phil Bloomer, ED Business and Human Rights Resource Centre

Page 4

EVEN IT UP: Time to End

Extreme InequalityOxfam report, 2014

Page 5

IN-WORK POVERTY – OXFAM’S EVIDENCE BASE

Page 6

WORK SPECTRUM

UNSUSTAINABLE SUSTAINABLE

ILLEGAL ROAD

Does harm

LOW ROAD

In-work poverty

MEDIUM ROAD

Does some good

HIGH ROAD

Does good

Forced labour, denying

workers their human

rights and freedom and

children their

education.

Subsistence only.

Work on legal-but-low

wages, excessive

hours, often insecure.

No worker voice.

Wages above legal

minima, secure

contracts. Workers’

committee.

Secure work on a living

wage, based on a

collective bargaining

agreement.

Forced labour in the

Thai seafood industry.

Unrest and poor

nutrition in Cambodia

garments

Slowly improving work

in a Kenyan

packhouse.

Wellbeing at living

wage employer Alta

Gracia, in the

Dominican Republic.

Page 7

WHAT IS DRIVING LOW WAGES?

1

Unfair share

of value

in chain

2

Absence of

collective

bargaining

3

Inadequate

minimum

wage

The wages of garment

workers have fallen in real

terms over the period UK

executive pay has doubled.

Fast food workers

get $8.90 an hour in

the US but $20 in

Denmark, due to a

sector Collective

Bargaining

Agreement.

Minimum wages

are held down by

governments to

keep companies

sourcing and

investing there.

Page 8

MISMATCH BETWEEN PRICES PAID FOR BANANAS

AND COST OF LIVING IN PRODUCING COUNTRIES

Page 9

MINIMUM WAGES AND ESTIMATES OF A

LIVING WAGES IN 3 SECTORSM

inim

um

wa

ge

s a

s a

perc

en

tag

e o

f

estim

ate

d liv

ing

wag

es (

mo

nth

ly)

0

20

40

60

80

100

72.9

40.2 36.5

Malawi Tea

Sector

South Africa

Grape Sector

Dominican Republic

Banana Sector

Page 10

WAGE BENCHMARKS FOR THE KENYAN FLOWER

SECTOR

Page 11

Lack of capacity for social dialogue

between employers and trade unions.

Short-termism of the shareholder

investor model.

Reputational risk from exposes and a

growing movement for a living wage

Expectations of stakeholders including

employees, customers and society.

Expectations of governments e,g,

‘non-financial’ reporting on human rights

risks, procurement policy.

Correlation between fair treatment and

better quality and productivity.

A resilient supply chain low in material,

water and energy use needs multi-skilled,

adaptable motivated workers.

Growing attention paid to human rights

risks by SRI fund managers.

Workers who earn more can buy more,

stimulating the economy.

Complex, fragmented, opaque

supply chains.

Lack of enforcement of labour law

and redress for violations.

Compliance auditing. Lack of living wage

benchmarks, tools and advice.

Competition law which protects

consumers from high prices but not

workers from low ones.

FORCES ON COMPANIES TO ACT ON LOW WAGES

AND FORCES HOLDING THEM BACK

STEPS IN THE RIGHT DIRECTION, AND

INVESTING IN DEEPER CHANGE

Page 13

STEPS IN THE RIGHT DIRECTION

• Productivity enhancements

used to raise low wages.

• Retailer-initiated wage funds.

• Changes in corporate policy

and/or public commitments.

• Brand collaboration involving a

trade union.

• Welcome, but as yet little has

changed for very few workers.

Page 14

WHAT IS NEEDED FOR DEEPER CHANGE?

Fairer share

of value

in chain

+ Commitment, Transparency and Collaboration

Collective

bargaining

Minimum

wage = a

living wage

Page 15

ORGANISATIONS DRIVING DEEPER CHANGE

Enabling factors:

• Campaigning and public debate.

• Published research linking low

wages to poverty.

• Collaboration across a sector eg

bananas, tea, garments.

• Engagement by companies with

international unions.

• Agreed wage benchmarks.

• Case studies and statistics on

business benefits.

• Third party accreditation.

Page 16

RECOMMENDATIONS

1. Look inwards

• Get your own house in order with your own employees.

• Publish a commitment, develop a plan. Report progress and challenges.

2. Look at sourcing strategy and supply chain management

• Start with suppliers where there is a high risk of low wages and you have

commercial leverage.

• What would make suppliers feel secure in raising wages, and remove

barriers to collective bargaining? Longer contracts? Fewer audits?

3. Look outwards

• Who can you collaborate with to understand wage gaps?

• What can you do to influence governments?