Steps towards a living wage in global supply chains
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In Dec 2014 Oxfam released an issue briefing on the living wage. You can read more about it here: www.oxfam.org.uk/livingwage We've made this presentation available for anyone who would like to share the ideas from our living wage paper. It is fully editable, includes key graphics, and can be incorporated into other corporate presentations.
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Steps towards a living wage in global supply chains
- 1. Steps towards a living wage in global supply chains KEY POINTS Rachel Wilshaw/Bryony Timms January 2015
- 2. HUMAN RIGHTS INEQUALITY AND THE LIVING WAGE
- 3. 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. âBusiness 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 workersâ human rightsâ Phil Bloomer, ED Business and Human Rights Resource Centre
- 4. Page 4 EVEN IT UP: Time to End Extreme Inequality Oxfam report, 2014
- 5. Page 5 IN-WORK POVERTY â OXFAMâS EVIDENCE BASE
- 6. 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. Workersâ 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.
- 7. 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.
- 8. Page 8 MISMATCH BETWEEN PRICES PAID FOR BANANAS AND COST OF LIVING IN PRODUCING COUNTRIES
- 9. Page 9 MINIMUM WAGES AND ESTIMATES OF A LIVING WAGES IN 3 SECTORSMinimumwagesasapercentageof estimatedlivingwages(monthly) 0 20 40 60 80 100 72.9 40.2 36.5 Malawi Tea Sector South Africa Grape Sector Dominican Republic Banana Sector
- 10. Page 10 WAGE BENCHMARKS FOR THE KENYAN FLOWER SECTOR
- 11. 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, ânon-financialâ 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
- 12. STEPS IN THE RIGHT DIRECTION, AND INVESTING IN DEEPER CHANGE
- 13. 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.
- 14. 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
- 15. 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.
- 16. 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?
Hinweis der Redaktion
- Issue briefing, for companies and policy makers, published 10th December 2014, written by Rachel Wilshaw. Much has been written on the issue of a living wage, but this briefing looks at the root causes of low wages and the barriers to ensuring a living wage is paid, whilst giving credit to companies that have taken steps forward and providing a framework and recommendations for deeper change.
- The gap between rich and poor is spiralling out of control. Just 85 super rich individuals have the same wealth as half the people on our planet, 3.5 billion. Such extreme economic inequality stands in the way of ending global poverty. In October 2014, Oxfam launched a global campaign report, Even It Up: Time to End Extreme Inequality, that evidences the issues and outlines clear solutions to closing the gap between rich and the rest. http://policy-practice.oxfam.org.uk/publications/even-it-up-time-to-end-extreme-inequality-333012 Labour is a major driver of worsening inequality. Income from work determines most peopleâs economic status. Yet over the last 25 years, income from labour has made up a declining share of GDP across low-, middle- and high-income countries alike. The reality for many of the worldâs poorest people is that no matter how hard they work they cannot escape poverty, while those who are already rich continue to see their wealth grow at an ever-increasing rate.
- Jobs are on a 'low road' for work and wages, with women on a lower road than men. Many low road jobs are legal, even though workers are unable to work their way out of poverty, however hard they try. Sourcing company due diligence should include an assessment of the number of low road jobs, with a plan to move them into a more sustainable space.
- In Oxfamâs analysis, there are 3 key drivers of low wages. All of these need to be addressed together in order to implement significant change. Business models push cost and risk down the supply chain to maximise profit for shareholders. Wages of garment workers have fallen in real terms, whilst executive pay continues to rise: CEOs of the UKâs top companies takes home on average ÂŁ4.25 million, nearly twice what it was in 2002, 131 times the average employee salary, and around 2000 times as much as a typical garment worker in Bangladesh. Trade unions are often treated as adversaries by companies rather than partners, but they are vital countervailing force, ensuring that prosperity is shared and workers voices are heard. For example, Denmark has no minimum-wage law, but $20 an hour is the lowest the fast-food industry can pay under a collective bargaining agreement between 3F union and an employers group which includes Burger King and McDonaldâs. In the United States fast-food workers, serving the same companiesâ products but unable to bargain collectively, earn an average of just $8.90. There is often a significant gap between the legal minimum wage and a living wage, as countries compete for investment. The minimum wage is widely seen as âthe going rateâ rather than a wage floor.
- These graphs, taken from an Oxfam Germany study of banana pricing in supermarkets, demonstrate clearly the unfair share of value in the banana supply chain. The graph on the left shows the price of bananas in supermarkets has stagnated, with exception for the UK (the red line) where banana retail prices have fallen sharply because of the price wars between retailers. Over the same period the cost of living, represented by the consumer price index (calculated on the basis of the costs of food, health, education, housing, transport and communication) in banana producing countries has been increasing. This creates growing pressure on small scale farmers as the prices paid for bananas have not kept pace with increases in costs. Graphs taken from: http://www.oxfam.de/sites/www.oxfam.de/files/bananenstudie-oxfam-englisch.pdf
- There is often a significant gap between the legal minimum wage and a living wage, as countries compete for investment. The minimum wage is widely seen as âthe going rateâ rather than a wage floor. This graph is from Oxfamâs Even It Up report (2014), and shows the legal minimum wage as a percentage of an estimated living wage in 3 different sectors. In the Malawi tea industry, a tea plucker earns just 37 % of a living wage, based on a 2013 study by Richard Anker, an ILO economist, and Martha Anker, a health expert, on behalf of ISEAL Alliance. Even with in-kind benefits and meeting the minimum wage, workersâ income is below the World Bank extreme poverty line. http://www.fairtrade.net/single-view+M5fc5b408f70.html#_ftn1 See our report on wages in the tea industry http://policy-practice.oxfam.org.uk/publications/understanding-wage-issues-in-the-tea-industry-287930
- Since the Oxfam briefing paper was published, Richard and Martha Anker have published a fourth living wage study, on the Kenyan flower sector. The graph shows the minimum wage in relation to the collectively bargained wage and the researchersâ assessment of a living wage benchmark. http://www.fairtrade.net/fileadmin/user_upload/content/2009/resources/LivingWageReport_Kenya.pdf In its Poverty Footprint study with IPL, Oxfam calculated that if just 5p were added to the retail price of ÂŁ4 bunch of flowers, wages could be doubled. http://policy-practice.oxfam.org.uk/blog/2013/05/whats-the-poverty-footprint-of-cut-flowers-oxfams-new-report-with-ipl
- Forces For and Against Taking Action: Oxfam recognizes that a company cannot âjust pay a living wageâ along its supply chain. In many cases it is not the legal employer; the first or second tier supplier is. Wage levels and enforcement depend on the political, social and economic context. If a sourcing company pays more, there is no guarantee the extra money will reach the workers. Employers fear becoming less competitive, buyers fear falling foul of competition law. But there are also compelling reasons to take action.
- Progressive corporate codes, such as the Ethical Trading Initiative (ETI) Base Code and SA8000, incorporated a living wage in the late 1990s. However, it has taken many years for companies to give serious consideration to payment of a living wage in their own operation and supply chains. While progress was made in health and safety which is less challenging, and child labour, which carries reputational risks, it is only with the increasing momentum of living wage campaigns in recent years that practical steps are starting to be taken. All of the companies and organisations above have taken steps in the right direction, but in terms of results, very little has yet changed for very few workers.
- The organisations at the top have all been catalysts for deeper, more meaningful change . The framework we use for meaningful change is a combination of a) A fairer share of value in the chain; b) removal of barriers to collective bargaining; and c) influencing governments on minimum wage setting and regulation; combined with Commitment, Transparency and Collaboration. Examples given of initiatives that have potential for deeper change include: stakeholder collaboration in the banana and tea sectors; going beyond audit in the garment sector; change catalysed by Rana Plaza; and London Citizens and Living Wage Employers in the UK.Â
- The paper ends with a series of recommendations for companies to take positive actions towards paying a living wage in its global supply chains, under these headings. For example: Look inwards â are you already paying a living wage to your own employees and contracted staff? Have you publicly recognised the issue of low wages? Do you have short or long term plans to increase wages? Look at sourcing strategy and supply chain management â map your supply chain and choose the largest suppliers that are both high risk and high leverage in relation to wages. Work with suppliers to estimate the number of workers in low road jobs. Encourage suppliers to remove barriers to collective bargaining. Look outwards â are there companies in your industry that you could coordinate with to influence governments on low wages or collective bargaining? Are you working with others to use benchmarks and wage ladders to understand wage gaps?