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Summary and conclusions of the Fair Wage Network Conference organized in cooperation with BetterWork, BSCI and FLA

7–8 May, 2012, Geneva

1. Format of the conference and participants: two combined and complementary discussions

The main reason why the Fair Wage Network was created was the CSR deficit with regard to wages. By creating a large-scale movement or initiative concerned with fair wages, the idea was to respond to increasing concerns as regards wage issues along the supply chain, not only from the workers or NGOs but also from the brands themselves. The aim of this conference was thus to regroup all major stakeholders involved somehow in wages and working conditions along supply chain operations.
The conference was split into two days, to combine two necessary and complementary discussions: one among NGOs – which took place on the first day – with the aim of assessing all initiatives taken by civil society so far on wage issues, and the other extended to the brands – which took place on the second day – to discuss needs and challenges at enterprise level.
The lists below show that the two events benefited from high-level actors who discussed policy issues and contributed to the identification of concrete steps forward for the future. The date of the event was also selected just before the Better Work buyers’ conference that took place on 9 May.

Participants 7 May (NGOs)

Carien Duisterwinkel BSCI

Christian Ewert

ICTI Care Foundation

Julia Kilbourne

Ethical Trading Initiative

Rossitza Krueger

Fairtrade

Tessa Laan

Utz Certified

Dr Olga Orozco

BSCI

Mike Patrick

Social Accountability International

Dan Rees

ILO Better Work

Deborah Schmidiger

ILO

Auret van Heerden

FLA

Daniel Vaughan-Whitehead

ILO/Fair Wage Network

Margreet Vrieling

Fair Wear Foundation

Rachel Wilshaw

Oxfam/ETI Board member

Participants 8 May (extended to brands)

Afsah Alumia-Khan Intersport

Libby Annat

Primark

Pasquale Apicella

Arena Group

Vanessa Baumes

REWE GROUP

Vanessa Buehrer

GLOBUS

Carien Duisterwinkel

BSCI

Sonya Durkin-Jones

Nike

Christian Ewert

ICTI Care Foundation

Wilem Flinterman

Fairtrade

Esther Germans

Better Work

Susanna Harkonen

Better Work

Julian Havers

Fairtrade

Daniel Kälin

Migros

Julia Kilbourne

Ethical Trading Initiative

Katharine Kirk

Primark

Robbert de Kock

WFSGI - World Federation of the Sporting Goods Industry

Rossitza Krueger

Fairtrade

Tessa Laan

Utz Certified

Dr. Enrico Lauro

Arena

Marita Lorentzon

H&M

Christa Luginbuhl

Bern Declaration/ CCC

Marc-Ivar Magnus

WFSGI - World Federation of Sporting Goods Industry

Reidar Magnus

INTERSPORT

Elise More

Walt Disney

Dr Olga Orozco

BSCI

Katrin Oswald

Coop

Mike Patrick

Social Accountability International

Ingrid Porss

Lindex

Dan Rees

Better Work

Ariana Rossi

Better Work

Fiona Sadler

Marks and Spencer plc

Deborah Schmidiger

ILO

Andreas Tepest

Deichmann

Karol Trejo

PUMA

Auret van Heerden

FLA / Fair Wage Network

Daniel Vaughan-Whitehead

Fair Wage Network / ILO

Christian von Mitzlaff

Lift Standards BSCI Bangladesh

Margreet Vrieling

Fair Wear Foundation

Rachel Wilshaw

Oxfam/ETI Board member

 

2. NGOs identifying common objectives and putting together common tools

During the first day, the different tools developed so far by NGOs on wages were presented and discussed: the wage ladder, the living wage, the Fair wage.
The wage ladder (presented by Fair Wear Foundation) in the last few months strengthened its data basis notably in China, Vietnam, Bangladesh and Turkey with also new countries under coverage, such as FYR Macedonia and Romania. The living wage (presented by Oxfam) also developed through the campaign proposed by the Asian Floor Wage or Clean Clothes Campaign, but also concrete implementation of the living wage concept in individual enterprises, as carried out by Oxfam.
The Fair Wage approach (proposed by the FW Network) has also grown over past few months not only through the provision of the newest data collected on wage practices among suppliers, but also through the implementation of complete Fair Wage assessments carried out in cooperation with the FLA in brands such as Puma, H&M and Adidas, and also steps forward towards remediation to improve wage practices.
Beyond their obvious differences, these tools were found to share a common aim, that is, to progress simultaneously on a number of different wage indicators.
Other actors expressed their interest in working more on wage issues: first, Better Work reported being increasingly confronted by wage issues (see next section), but also Fair Trade, which so far has not much developed the wage dimension in its Fair Trade process.
The meeting was also an opportunity to better identify the complementarities between the existing tools but also the synergies that could be built between them.
It was also decided that common initiatives (like this joint conference on Fair Wage) could also be built between the different actors.

3. Brands recognizing the need to do more on wages

The second day extended the discussion to brands, first by providing them with a summary of the first day’s NGO discussions, and presenting major NGOs’ initiatives on wages.
This second discussion represented an important opportunity to get feedback from the brands, about their needs and their priorities regarding wage practices. They complained about the deteriorating social climate in countries such as Bangladesh but also labour shortages and increasing wage costs in China. Brands generally acknowledged poor wage standards along their supply chain. They reported, however, that it was difficult for them to influence the wage practices of suppliers especially underpayment of working hours and excessive overtime. They insisted on the need to join forces and to agree with other brands ordering from the same suppliers to somehow harmonize their standards on wages. This is also the reason why they turned to organizations such as Better Work and also the ILO to help them in terms of awareness-raising and training, and also to improve legislative provisions.
The brands also requested more examples of cases where remediation on wages worked well, especially in terms of productivity and human resources, to allow them to identify possible solutions at enterprise level.
Obviously, the relationship between brands and suppliers is particularly important to generate long-term improvements on wages, especially since the problems were seen to be rather different from a supplier and brand perspective. The conference stressed the need to organize in the future deeper discussions between the brands and suppliers on wage issues.

4. Similar concerns but also some national specificities

A number of wage drawbacks were reported by the various speakers:
 Extensive use of working hours, with overtime often being underpaid.
 Problems of legal compliance with minimum wage regulations, especially on two main points: first, that minimum wages should be ensured through regular basic hours and without including overtime; second, that workers should be regularly informed about the level of the statutory minimum wage.
 This use of excessive and underpaid working hours is often associated with two other elements: very low wages – that leads to poor living wage performance – that push workers to accept and even demand more working hours, even if underpaid; and poor pay systems often based on the piece rate system combined with strict attendance bonuses that push workers to work as much as possible.
Clearly, in view of their interaction, all the above drawbacks should be addressed all together.

Other fundamental flaws were also identified in the wage-fixing process in a number of countries. First, wages continue to be used as the adjustment variable cost: if energy/material prices go up or a buyer pays less, the wages are used as the adjustable factor.
Another major problem – partly the result of the above behaviour – is that wages are not considered a tool of human resource policies. This is also often due to a lack of solid HR systems/policies. Workers are not seen as a valuable resource, a paradoxical situation considering the major labour shortage problem faced by suppliers in countries such as China and others.

Finally, the discussions again highlighted the lack of collective bargaining – even if and when workers' representatives are present in the enterprise.

Despite this rather worrying picture, the participants shared the conclusion that if we want to progress on wages, we should not do it through more and more audits (that represent a sort of pass or fail exam), but by giving priority to awareness raising, training, negotiation and concrete remediation at enterprise level. We also need to have more cooperation, synergy and complementarities between the different initiatives and to use these complementarities as far as possible to strengthen our action on wages.
Beyond these rather common features, the evidence presented at the conference also highlighted how wage-fixing may be driven by national determinants. Wage trends in China are currently driven by government policy on minimum wage – increasingly also on social dialogue – but also the current shortage of labour that characterizes many provinces and cities. Wage practices also continue to be dominated by the piece rate system. In Vietnam, the minimum wage is also playing a major role. In other countries, such as Bangladesh and Cambodia, it is precisely the absence of minimum wage adjustments and too low wages that contributed to provoke a wave of strikes that is influencing suppliers’ operations in the country. This conclusion leads to the need to use national actors – governments, influential business operators – as another lever for progressively improving wage practices.

5. Needs and Challenges

The problems reported along the supply chain clearly require a multi-dimensional and multi-actor programme. While low wages remain one main concern – so that the living wage should continue to represent an essential benchmark – we also saw that initiatives should not only concentrate on wage levels. A first challenge consists in building manager’s awareness on the need not only to increase wage levels but also to reform other wage dimensions. The focus should not only be on the numbers (such as the minimum wage or the living wage) since numbers can become irrelevant very quickly (for example in Bangladesh rent and food prices went up the day the minimum wage was increased, resulting in a decline in the real wage of workers) but also on other dimensions, such as pay system reforms. BetterWork insisted on the need to better identify how the different pay systems work for the managers and for the workers, respectively, in order to move towards better balanced pay systems and improvements of wage functions. There was a consensus among participants on the need to tackle wage issues from different dimensions. Better Work decided to implement the Fair Wage approach in the field and other organizations will investigate how to use it to complement the other approaches currently followed (the Living Wage or the Wage Ladder approach). This does not mean that certain issues could not be addressed as priorities. Better Work insisted, for instance, on the need to address the payment of working hours, and the link between pay systems and the use and payment of overtime, and also compliance with the minimum wage. The Fair Wage approach could be used by other organizations to ensure more convergence in our actions on wage issues.
A major challenge is to respond to the fact that wages are not at the core of Human Resource policies. The HR costs associated with this strategy – such as turnover, labour shortage, skills downgrading – should be more clearly highlighted so that managers will progressively be willing to develop HR systems and compensations as a way to attract and retain workers.

Collective bargaining is a precious tool for negotiating wage-practice improvements in relation to each enterprise’s specificities but it remains poorly developed in most sourcing countries. The progressive development of collective bargaining should thus be more systematically stimulated, especially with regard to its potentially positive effects on both workers and the enterprise.

The respective actors should take up all these challenges.
There is first a need to create incentives for enterprises to engage themselves in the movement towards wage improvements. At factory level, it is important to focus on what factories can do to improve the situation. Big suppliers can play a pivotal role in their sector (for example, Foxconn will drive change in the electronics sector in China, as explained by the FLA). One strategy for change could be to engage strategic producers in a sector, to create a cascade effect.
Brands should also monitor wage practices more thoroughly, on all the necessary fair wage dimensions. For instance, should the brands accept a collective agreement with wages below the living wage? Should they allow wage practices that are assessed as being unfair? This should involve a greater involvement of brands in their suppliers’ wage practices. This should go also beyond, to encompass human resources and also the contents of purchasing contracts between the supplier and the brand – which in the end determines the suppliers’ margin for improving wage practices. There is a need to somehow share the responsibilities of wage practices between brands and suppliers.
NGOs should continue to play an active role in helping the brands and suppliers to better know the situation and to propose to them the most appropriate tools in the wage area. Conference participants emphasized that the current approach has so far focused too much on auditing, something that has brought systematic falsification of records – more than 50 per cent of suppliers were found to have double records on wages and working hours.

This is why the Fair Wage approach, for instance, is focusing on FW assessments and FW remediation packages, to help enterprises to identify and implement concrete improvements. BetterWork indicated its willingness to follow a multidimensional approach in the wage area.

At the same time, building government and tripartite capabilities is also key to ensuring that the national context will facilitate and not threaten such wage improvements at supplier level. Governments should thus be invited to participate in our wage debate, and we could plan to organize such Fair Wage conferences with governments in the future.
The participants also insisted on the more active role that the ILO could play to ensure more decent wage standards, especially on minimum wages, living wages and payment of working hours.
It is also essential to start collecting better data on wages from suppliers, as emphasized by BSCI, but also FairWear. One condition for having reliable wage data, however, is anonymous wage surveys (that is, without having brands involved in data collection).
Another essential dimension for successful data collection and analysis is information sharing and gathering, for a more robust and more extended data set. Accordingly, data by individual sector or by products may be progressively collected. We could also try to progressively constitute a data base by combining the necessary existing data base from different NGOs’ initiatives, from FLA on most labour issues from their annual audits, from BetterWork on working conditions and social dialogue, on other fair wage dimensions from the FairWageNetwork, on living wage from ETI, or on the wage ladder from FairWear. This process could be strengthened by involving academics. This should lead to more data, more analytical work and more policy options, all at the disposal of all actors, including the brands, and from which they could eventually base their action plans on wage issues. At the same time, subsets of data are needed on key indicators, for instance on poverty lines, prevailing wages, wage disparity, wage levels and wage adjustments. We shall try to have all information available on our FWN website, with also multi-links to all findings and results on wages available on NGOs’ websites.

Another conclusion was that we will not be able to reach fairer wages if we go only company by company, but rather if we reach a critical mass in the number of companies willing to change wage practices along the supply chain. This should represent another key challenge on wage policies.

Thus, beyond the urgent need, of course, to change mentalities and practices at enterprise level, initiatives to improve wages should also take place in individual sectors – also beyond the garment sector – and also at national level, to have multi-entry and multiple levers to improve wages. It is important, for instance, to measure the positive effects of wage improvements not only at enterprise level, for instance on productivity, but also at national level, on economic growth, living standards and consumption. Social dialogue and collective bargaining should also be seen as an essential way to drive change and improvement on wages.

There is therefore a series of challenges to take at different levels, and also different levers, dimensions and indicators to make sure that we will have the largest possible spectrum. And for all this, obviously, different actors are needed, and more cooperation between all of them.

7. The Next Steps Forward

Multiplier effects through such extended cooperation (between NGOs and brands) were obvious to all participants. It was agreed to progressively extend it to other actors, such as consumers, governments and other key actors at local and national level. This cooperation should be organized along clear lines, however, and pursue defined objectives. It was agreed that the activities of the FWN should progress towards the following objectives:

– Information/discussion: Continue to deliver information on wage developments and discuss them with all necessary actors through other conferences/seminars. The joint format of this conference with FLA, Better Work and BSCI as co-organizers under the framework of the FWN is a format that is particularly appropriate and could be extended to other co-funders/co-organizers for the next events.

– Data gathering/sharing: To provide relevant and representative information on wage practices robust data collection is essential. Partnership should be developed to build a reliable and extensive data basis.

It would be advantageous to use a standardized tool to gather wage data and then to mine it to learn more about wage dynamics in specific labour markets. Since there was some convergence around the Fair Wage concept, there would be a possibility for other organizations to use the FW assessment tools in cooperation with the FWN and the FLA. The self-assessment is available on line and could thus be administered by the FLA in cooperation with the interested organizations, with the FWN then ensuring analytical results and providing guidelines and policy inputs. At the same time, other data collected through other initiatives (such as the Wage Ladder and the Living Wage) could be combined to provide a more global picture of wage developments.

Wage surveys were proposed by participants in a few labour markets where wage pressures and conflicts were building up. Bangladesh, Cambodia and China were mentioned. The FWN also undertook to collect as much case study and pilot project material as possible and to use the website as a clearing house for this.

– Outreach: Governments and sectoral organizations play a key role with regard to wages and we need to engage with them where appropriate. This is best done in a coordinated manner and we should consider opportunities for such interventions. Better Work is the best placed to convene such engagements because the governments concerned are ILO constituents. BSCI also offered to invite us to attend their Round Table meetings in sourcing countries. At the same time, scaling up this process is necessary since individual efforts to improve wage practices could turn out to be counterproductive if other brands/suppliers do not engage in similar improvements (in wage levels but also pay system reforms). We should thus seek to reach a critical mass in the number of companies willing to change wage practices along the supply chain.

– Capacity building: Many suppliers do not see that compensation is a key component of human resource management, rather than just an issue of legal compliance. Consequently, we need to build capacity at enterprise level to handle wage questions in accordance with the Fair Wage concept and its different complementary dimensions. Since wage bargaining was identified as a major weakness, a key aspect of capacity building is to enable workers and managers to negotiate wage agreements that can lead to better wage outcomes while also better reflecting the state of the enterprise. In this area, it makes no sense to duplicate capacity building and we should cooperate in the development and delivery of such programmes.

– Reporting improvements: In order to convince more enterprises of the potential role of better wage practices, not only as a human resource tool, but also as a productivity enhancement factor, it will be important to collect all improvements made so far on wage issues and their implications. In particular, the effects of fairer wage practices should be better investigated both on the social side (in terms of living wage and better working conditions) but also extensively on the economic side, with regard to labour costs, productivity, competitiveness, labour shortage or turnover, human capital and quality of products. The Fair Wage Network will report on the effects of the remediation exercises carried out after Fair Wage issues are identified. Other actors, such as BetterWork, may also progressively build significant evidence on Fair Wages as a business case.

In conclusion, the discussions at this Fair Wage conference were extremely rich and a good sign of future progress in this area. Overall, the participants enjoyed the existence of a common framework, a space for cooperation and discussion of various existing initiatives, an opportunity for data gathering and sharing, and joint initiatives, such as this conference, which should be seen as complementary to other multi-stakeholders’ initiatives, such as those of BSCI, ETI, FLA and others. The objective is precisely to create a set of incentives for cooperation between all relevant actors in the wage area, an objective that will continue to be pursued in the future by the FWN and all its partners.

Daniel Vaughan-Whitehead
Auret van Heerden

Co-Chairs of the Fair Wage Network