How To Deliver a Living Wage in Supply Chains?

By Rachel Wilshaw, Ethical Trade Manager, Oxfam GB

How To Deliver a Living Wage in Supply Chains?

The concept of a living wage is not something new, but with recent reports warning of the lag between wages and productivity and outlining the failures in trickle down economics, it is in the spotlight. On Human Rights Day, Rachel Wilshaw talks about what has been done and what more companies can do to ensure that a living wage is paid.

Fresh evidence has been presented of the corrosive effect of growing inequality on society and the economy. The ILO recently published a global wage report warning of wages lagging behind productivity in many countries. The Archbishop of Canterbury expressed concern about hunger in the UK, linked to low wages and a weakened safety net. An OECD report discredited ‘trickle down economics’ and said inequality is holding back economic growth. An a bill on modern slavery is being debated in the British parliament, while Anti Slavery International marks 175 years of campaigning and laments that its work remains so much in need.

“Companies often talk about the number of jobs they create, but these are usually measured by quantity, not quality.”

These communications echo Oxfam’s own analysis in our report Even It Up: Time to End Extreme Inequality. This reported that, amongst other things, ordinary workers are taking home an ever-dwindling slice of the economic pie, as a declining share of GDP goes to labour and ever more goes to investors and executives.

Companies often talk proudly about the number of jobs their businesses create, but these are usually measured in quantity rather than quality. With the UN Framework on Business and Human Rights raising the bar for corporate responsibility, it is time for companies to take a hard look at the number of unacceptably ‘low road’ jobs in their supply chain, and what it would take to move them to the ‘higher road’ end of the Work Spectrum.

Based on my experience as Oxfam’s Ethical Trade Manager, there are THREE drivers of poverty wages:

  1. Unfair share of value in the chain: Companies are pushing their costs and risk onto the most vulnerable people. Recent Oxfam reports found poverty wages being paid by businesses in Malawi, Vietnam and Kenya that were supplying some of the UK’s most successful companies. We calculated that Kenyan flower workers’ wages could be doubled if just 5 pence was added to a £4 bunch of roses.
  2. Absence of collective bargaining: In Denmark, an employee flipping burgers for Burger King gets $20 an hour, based on a collective bargaining agreement; a US employee in the same company but denied this bargaining opportunity gets just $8.90. Something like 90% of workers in food and garment supply chains cannot negotiate terms with their employers.
  3. Inadequate minimum wages: The minimum wage for banana workers in the Dominican Republic is just 40% of a living wage; for Bangladesh it is nearer 20%.

These factors taken together create an almost perfect recipe for growing inequality. The average income of CEOs in the UK’s top 100 companies has nearly doubled in ten years, while many workers have seen wages decline in real terms. This is unfair and unsustainable.

Average income comparison

How does the growing disconnect between wealth at the top and bottom of supply chains fit with companies’ values?

Commitment, Transparency and Collaboration

What are the forces driving companies forward to address low wages, both the narrow financial business case and the broader one of regaining society’s trust?

What are other companies doing in this area, and what has been learnt from the steps they have taken? What hinders further progress?

Today, Oxfam publishes Steps towards a living wage in global supply chains. This issue briefing attempts to answer these questions. We look at what’s driving the problem and give credit to companies which are taking steps in the right direction. But though these are all welcome, we also go into why we believe more systemic change is needed, so that governments set minimum wages that people can genuinely live on, workers can negotiate the terms of their employment, and employers have the know-how and commercial flexibility to provide better jobs.

We hope that the briefing helps companies get it right on this challenging issue, described by the head of the Business and Human Rights Resource Centreas ‘one of the most powerful tools for business to contribute to their workers’ human rights.’

Editor’s Note:

Poverty wages were a key finding in a range of recent Oxfam reports:

  • A study of labour standards in Unilever’s Vietnam supply chain found wages in its own factory exceeded the legal minimum and poverty line but fell well short of a living wage, and were just above the minimum in the suppliers studied.
  • A study with Ethical Tea Partnership concluded that wages of tea pluckers were below the poverty line in India and below the extreme poverty line in Malawi, despite meeting the legal minimum and providing in-kind benefits.
  • A study with IPL in Kenya found job security increasing for skilled workers in flower pack-houses, but low wages and poor childcare were common. Oxfam calculated that wages could be doubled if just 5p were added to the retail price of a £4 bunch of flowers and earmarked for wages, an increase of 1.25%.
  • A report Working Poor in America highlighted that the US federal minimum wage of $7.25 an hour was well below the poverty line for a full-time worker and has not increased for more than 7 years. It argued for an increase to $10.10.
  • A report that launched a campaign to tackle inequality Even It Up: Time to End Extreme Inequality found that over the last 25 years, income from labour has made up a declining share of GDP across low-, middle- and high-income countries alike; this has been a key driver of growing inequality.

This blog was previously published on OXFAM and is reproduced with permission.

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