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Major Fair Wage Conference in Hong-Kong

Hong Kong Fair Wage Conference:

Brands’ willingness to be(come) more sustainable

 

 A major conference on fair wages was organized by the FLA in Hong Kong on October 25, 2010. All the major brands in the garment sector and beyond –such as Adidas, Puma, H&M, PVH and Nike – but also suppliers and NGOs were present.

 

A significant part of the conference was dedicated to the description of the situation on the wage front in a number of Asian countries that have been hit since summer 2010 by a long series of strikes about wages and working conditions: China (with the spate of suicides at Foxconn and repeated strikes at Honda and other companies), Vietnam (living wage campaign, lack of wage adjustments to inflation and so on), Cambodia (new minimum wage), Bangladesh (payment of wages and new minimum wage) and many other Asian countries. Wages have rapidly become the hottest issue in world manufacturing.

 

While the crisis has undoubtedly exacerbated the tensions related to labor costs – on both the employers’ and the workers’ side – all analysts agree that the problem originated well before the crisis and, in fact, has its roots in the low wage levels that continue to prevail systematically among the suppliers of large international companies.

 

As Auret Van Heerden, President and CEO of the Fair Labor Association warned, “these local events are only the tip of the iceberg of a global crisis –that of unfair wages, against which workers have just begun to react. They show the need to start addressing wage issues along the supply chain and to mobilize Corporate Social Responsibility and its main actors around wage issues.”

 

During the conference companies operating in those countries reported that the social climate was becoming more and more tense because of increasing workers’ wage claims. At the same time, the labor market has become tighter than before, even within the crisis, with increasing difficulties finding the necessary workers, with skilled labor shortages in China, Vietnam and other Asian countries, as well as a rapid increase in both the legal wage (through recent minimum wage increases) and the market wage.

 

Brands have also recognized that relocating from one country to another to avoid increased wage costs – as is happening today in China – may not be a viable solution, first because brands increasingly need stable suppliers that are reliable and can provide good quality products, and second, because after Bangladesh and Cambodia it is difficult to imagine other countries in the region where labor costs would be much cheaper, other conditions remaining equal.

 

Findings presented at the Hong Kong conference confirmed the need to address wage issues in terms of a broad spectrum of wage dimensions, including living wages, minimum wages, social dialogue, payment of hours worked and regular wage adjustments to take proper account of prices, enterprise performance and major changes in technology and human capital. The Fair Wage approach was presented by Daniel Vaughan-Whitehead, who established the analytical framework: “the aim is to provide CSR actors with a coherent and comprehensive set of fair wage dimensions and indicators that would help in defining and ensuring fair wages”. Some companies, such as Puma, have already carried out such a Fair Wage global assessment to identify the problems at local level and to determine possible remedies.

 

If companies adhered to such benchmarks, it would help progressively to improve wage practices along the supply chain, even more so if the brands themselves started to take some responsibility in this area.

 

Problems in the last few months in Asia also seem to confirm the need to tackle wages from a multidimensional approach, as shown by a collective study by 20 universities of the Foxconn case, where the problems seem to have been generated not only by excessive intensity at work and excessive working hours (100–110 overtime hours per month before the wave of suicides), but also by the poor wage levels, alienating pay systems based on piece rates, and also abusive and discriminatory use of students (30 percent of the workforce in the company) who were found not to benefit from employment contracts.

 

The interventions of some suppliers at the conference was also decisive: they clearly warned that they were too squeezed and could thus not move towards better wage practices until brands offered more favorable terms with regard to contractual arrangements. A debate also took place on the responsibility of the respective suppliers, brands, retailers and, finally, consumers for fairer wages along the supply chain. The conclusion was reached that a sort of new business model, based on corporate sustainability – including wage issues – would be needed, but that this would require shared responsibility on the part of all the actors involved. More initiatives will be launched within the new International Fair Wage Network. The conference also reflected a collective willingness to participate in a general mobilization in favor of fair wages for 2011.

 

According to the organizers, only a major international campaign of this kind is capable of changing mentalities and wage practices along the supply chain, thereby helping to prevent the current spillover of the wave of discontent and conflict that is currently shaking global chain operations.

 

For more information about the conference and for individual presentations, see http://www.fairlabor.org/