Livelihoods of workers in the poorest and most vulnerable countries are being decimated even before the coronavirus sweeps in, as supply chains grind to a halt. This is disastrous for families, triggering an alarming resurgence in poverty. It is bad news for businesses that will want to rebuild, and for consumers in developed countries who depend on robust and resilient supply chains.
Global brands and large companies acted swiftly to stabilise cash flow and protect their staff in developed countries. Attention in the next part of the 'respond and stabilise' phase needs to shift rapidly and ambitiously to workers throughout the value chain. Damage has already been done, but much can still be done to mitigate the worst effects on workers, as the Overseas Development Institute has already highlighted. Today, Business Fights Poverty and Harvard's Kennedy School launch a new Toolkit to help companies do just that: Toolkit on Addressing Vulnerable Workers in Global Value Chains.
The impacts of Covid-19 on vulnerable workers in the South are huge. But with each country focusing on its own national response, the scale of the problem is easy to miss.
According to the ILO on April 7th, the slump in jobs and working hours in Quarter 2 of 2020 is estimated as the equivalent of 14 million full-time jobs in low-income countries, 80 million jobs in low-middle income countries, and 100 million jobs in upper-middle income countries. 2.24 million Bangladeshi garment workers have lost jobs due as over 1,000 factories close. In Kenya, 500,000 people working in the flower industry are losing their livelihoods and 600,000 in the tea sector are suffering from closure of the Mombasa tea auction.
Without wage-protection schemes, household savings or government safety nets, laid-off workers and their families are plunged into poverty. Whole sectors are losing workforces, and with them years of investment in training, retention and productivity.
First, recognise who are the vulnerable workers in their value chains:
'Workers' includes employees and many more informal workers, migrants, and gig economy workers, who often work in global value chains in informal undocumented roles. Many are women, and lack of visibility is a challenge. Any action to protect these workers will involve working with and through suppliers - Tier 1 and beyond. Companies that have invested in strong human rights due diligence should already be a step ahead in having visibility of this workforce.
Immediate actions to respond to the crisis
To protect health and safety of workers, global brands need to work with suppliers on their physical measures, such as staggered shifts or new hygiene protocols. Some can also use their information infrastructure to support health. For example, online platforms used by Olam to share agricultural information with farmers now share Covid-19 information. Flexibility is needed: so that added time or cost of health and safety measures is accommodated. But so is rigidity: expectations on suppliers to uphold human rights should remain firm and clear.
To protect livelihoods of workers, the most obvious step is not to cancel contracts, especially where raw materials have already been procured and work done. Cancelled garment orders have caused devastation for garment factories and their workers, with some valuable exceptions: H&M and VF Corporation - have paused on hitting the 'force majeure' button and are honouring not cancelling commitments made for work already done.
There is plenty more scope for action to maintain some wage flows and keep workers on the books if not at work. Many southern Governments are now developing their emergency economic response but they simply don't have the fiscal firepower seen in the response of UK or US leaders (the stimulus packages as % of GDP are 15 times greater than in poorer countries). In Cambodia, the Government announced that laid-off garment workers would get 60% of their basic wage - 20% from Government and 40% from factories. But when factories said they could not pay, the guaranteed payment was reduced to just $70 a month – leaving a single worker on the poverty line or a breadwinner’s family well below it. Surely collaboration with global brands could have found a better solution?
A host of other immediate actions to consider include: repurposing factories to produce personal protective equipment, investing in training during the lockdown, working with unions and worker representatives on new terms, developing 'buy forward' or 'pay back later' schemes, connecting suppliers to new sources of finance, or swapping employees into sectors with current high demand. iFood, Latin America’s leader platform of food delivery, is creating a fund of c. £ 155,000 to support income of its couriers during the crisis. Fairtrade Africa has relaxed rules on how the Fairtrade Premium can be used. Alibaba has an employee-sharing scheme for workers to shift from hospitality and entertainment to food retail. L'Oreal is shortening payment terms and prioritising immediate payments to suppliers whose business is at risk. Natura & Co. is converting its makeup and fragrance factory lines in Latin America to production of hand sanitisers and soaps. More details of these and others are in the Toolkit.
Longer-term action and ambition
The next phase needs to be more ambitious and collaborative. The Asia Floor Wage Alliance has asked garment brands to jointly create a COVID-19 Workers’ Fund. Initiatives in Nigeria and Kenya seek to bring private sector networks and Government together. Governments have to lead on social protection for swathes of impoverished citizens, but businesses need to actively endorse government action, complement it by co-funding wages and retraining for workers in their own value chain, and innovate with governments.
When we can move from 'respond' to 'rebuild', an ambitious approach would build resilience into global value chains: developing crisis management plans with suppliers; rolling out basic documentation to cover the informal workforce, so they get legal protection and state support; building up resilience funds for the next crisis; committing to fair and transparent tax payments, so that developing country governments can invest in social protection and climate responses; channelling build-back investment and retraining into greener ways of working. Consumers, trade regulators, investors, northern and southern Governments all have a stake in building robust and safe value chains. The Coronavirus crisis demands new forms of collaboration – both to cope with shocks now and build back better later.
ODI tracker of vulnerability of countries to Coronavirus, economic impacts, and policy responses