ABOUT THE WAGES AND PRICES
About Garment Workers and Consumers
THE LIVING WAGE AND
CONSUMERS' PRICE SENSITIVITY
GARMENT WORKERS - HOW MUCH DO THEY REALLY EARN?
One of the most frequent comments and reactions to disclosing what garment workers earn is: “How can I know whether 38 Euro are much or little without knowing the exact purchasing power of that amount of money in Bangladesh?”. A hint would be: with a decent salary, no one walks into a building that shows widening cracks. Overlooked by the world (in spite of the Rana Plaza accident), Bangladeshi garment workers took to the streets in autumn 2013, protesting for a 100% raise in salaries. After almost 3 months, police ended the protests with tear gas, and the government agreed to raise the salaries by ca 50%.
But to leave Bangladesh’s example: Equally ignored by the world, garment workers in Cambodia also protested for doubling their wages. This was in spring 2014. At that point, a garment worker earned 85$ per month. The rent for a one-room concrete floor “apartment” without water or electricity was 50$. The union-led strikes disintegrated after military police shot into the crowd.
NGOs around the world postulate the payment of “living wages”. The Clean Clothes Campaign has provided useful graphics to illustrate what a living wage should cover:
Living wages are calculated by independent institutions as follows:
50% for food
40% for housing, transport, health, family (the latter is important because in most countries there are no social systems)
10% as discretionary income (as mentioned, with now social systems and security, a little saving should be allowed for.
The following graphic provides an overview of the current payment situation:
These huge differences give the impression that a minimum wage would be very expensive and hard to achieve. The focus of interes usually lies in Asia due to the amounts produced there, and the media (especially after Rana Plaza) concentrate on Bangladesh, which is the second biggest textile exporter worldwide – but the situation doesn’t look too different in Eastern Europe (see more in the Clean Clothes Campaign’s reports on living wages).
Considering the fraction of production costs or selling price they actually account for, demonstrates that the selling price wouldn’t be affected too much (if the margin remained unchanged).
Note: This is for a simple t-shirt, usually consisting of ca 20 seams. The sewing costs vary from piece to piece according to the amount of labour required (consider more complicated items like pleated skirts or bras, or ornamental seems and other decorations).
Yet, it looks like an easy and logical task to raise the wages and let the consumer pay.
FASHION CONSUMERS - ARE THEY REALLY THAT PRICE-SENSITIVE?
Fashion consumers’ alleged price sensitivity is often blamed for the low wages paid to the garment workers.
But what are the choices the fashion consumers have? So far, the options consumers had were limited to
Buying higher priced products, which unfortunately doesn’t guarantee better working conditions, as expensive brands often work with the same suppliers as fast fashion brands.
Buying made-in-Europe products, which doesn’t guarantee better working conditions either, as fires in “Chinese” factories in North Italy (around Prato) have demonstrated last autumn.
Buying fair-trade products only, which seldom meet the individual styles in the same way like the extensive collections offered by fast fashion companies can.
All three options are linked to much higher expenses and therefore require a high involvement – on the other hand they don’t contribute much to an improvement for the millions of garment workers.
Market research [various sources, most found on statista] has demonstrated that
67% of fashion consumers are willing to pay 10% and more on fair trade garments.
Limitations in choice/style, budget and availability/convenience were identified as major barriers to fair fashion consumption.
87,5% expressed a willingness to change their own consumption behaviour in order to contribute to increased popularity of fair trade products.
An own survey conducted in early spring 2014 has revealed that
98% of fashion consumers do think of production conditions when shopping – most try to suspend those thoughts or to ignore a slightly bad conscience.
86% consider themselves as informed about the production conditions of the brands they use (further questions revealed that many of these informations were own guesses or rumours).
80% didn’t know how high (or low) production costs are.
95% would be willing to pay 50 cents per item for better working conditions and wages.
If the garment workers are in fact underpaid, and the consumers would in fact like to carry the costs for increasing the wages – why has nothing happened?
THE FLAW IN THE SYSTEM - INDIRECT SOURCING IN THE GARMENT INDUSTRY
The reason for this lies in the system of the garment production industry, or, to be more accurate, in the length of the supply chain and its lack of transparency.
The brands/retailers cannot simply raise the garment workers’ wages – this can only be done directly by the individual factories themselves. But those suppliers work for different clients (brands/retailers), with whom they very often are not even in direct contact (the placement of orders is handled by purchasing agents). Therefore, they cannot know the exact priorities of the clients, and instead have to guess on the most obvious priority (although it may not be the only one): profit. Also, suppliers may take an order slightly too big for them in order to maximize the degree of capacity utilization, and then source out a part of it to sub-contractors – again, via intermediaries. This practice of indirect sourcing is also due to the high time pressure in the industry: If any part is late, orders get split up and shares of the production are outsourced in order to finish in time. This further undermines any efforts to create transparency.