Country Case Studies

The following case studies demonstrate the inability of workers to survive on their wages. These should be read bearing in mind Labour Behind the Label's definition of a living wage:

"A living wage enables workers to meet their needs for nutritious food and clean water, shelter, clothes, education, health care and transport, as well as allowing for a discretionary income. It should be enough to provide for the basic needs of workers and their families, to allow them to participate fully in society and live with dignity. It should take into account the cost of living, social security benefits and the relative standards of other groups".

Bulgaria
The textile and garment sector is one of the few industries still partly in operation within a national economy which is in overall decline. The industry is well equipped, staff are qualified, selling markets are easily accessible, and labour is cheap for foreign retailers due to the dramatic devaluation of the Bulgarian currency. Greek managers are shifting production to this neighbouring country where they pay only half the price for an available and well-qualified labour force. In some areas, women workers from the Turkish/Muslim minority population provide an even cheaper female labour pool.

The minimum wage in Bulgaria is about £24 a month. This is below the official poverty line and it is paid because it is so little. In 1997, members of the German Clean Clothes Campaign visited Orfei Ltd, a knitwear and sportswear manufacturer in Bulgaria.

80% of the employees were women and, with very high male unemployment, the majority were their family's sole breadwinner. They were well qualified and most had been working at the factory for more than 10 years. In 1997, inflation was 578%. A 400% salary increase to take account of inflation had lifted workers' salaries to an average of £39 a month. Although there are no official figures, our partner organisations have calculated a living wage for a family of 4 to be about £280 a month. In other words, an Orfei worker's average wage covered 14% of their families living costs.8 Families survive thanks to backyard agriculture and links with their extended families practising small-scale agriculture in rural areas.

A further visit in 1999 involved visits to 5 factories. The researchers found considerable contradictions between the statements made by managers and those made by workers on issues such as wages. Managers' standard answer was that wages were £65 a month. But when workers were asked to respond anonymously, with nobody from the factory management present, the majority reported monthly salaries of between £38 and £48. On these rates, workers earn between £1.60 and £2.50 a day. Calculating on the basis of a £2.05 average daily salary and an 8-hour day…

China
Since embarking on economic reforms and open-market policies in 1978, China has become one of the fastest growing economies in the world. By the late 1990s, China had become the world leader in clothes exports. In 1996, China and Hong Kong exported £28 billion's worth of clothes, 29% of total world exports. The next largest exporter, Italy, exported only a third of that amount.9

Four million garment workers now work in 44,000 factories strung across hundreds of Special Economic Zones (SEZs) around China's coastline. SEZs offer incentives to foreign investors such as 3- to 5- year tax holidays on company profits, low rent, low-cost materials, and relaxed foreign currency controls. It is an unwritten rule that SEZs in China are strike-free zones with no tolerance for unions.

The majority of workers are young women, 17-25 years old. They are migrants from rural areas with little formal education and no work experience. Behind them, there are many waiting, eager to take their jobs. Most work in the factory for 3-5 years before returning to their village to get married or start a small business. They live in dormitories shared with 6-12 others, sleeping in bunk beds. Bathrooms are shared and there are no cooking facilities. Families in the rural areas are often dependent on their financial support. Their aspiration to escape from rural poverty, coupled with their responsibility towards other family members, makes these young women a compliant workforce. By stringent living and personal sacrifice, working 12-16 hour shifts a day with only 2 days off per month, they are able to send small sums to their families.

One US entrepreneur explains the reasons for his company Ava-Line's success: "We have a factory in China where we have 250 people. We own them; it's our factory. We pay them $40 (£24.20) a month and they work 28 days a month. They work from 7am to 11pm with two breaks for lunch and dinner. They all eat together, 16 people to a room, stacked on four bunks to a corner. Generally, they are young girls from the hills".10

Han Dongfang, editor of the China Labour Bulletin and advocate for human rights, has said that Chinese people had high hopes that multi-nationals would bring more humane treatment to factory production. But many workers are disillusioned.

A current trend is for multi-national companies to shift work from publicly owned, regulated factories on the north coast, where there are some worker benefits and government regulations, to the booming sector of foreign-owned, private, unregulated, low-wage factories along China's south coast. There, privately owned sweatshops pay as little as 7p an hour, with no benefits and no regulations.11

Legal minimum wages are set by each provincial government and vary from 6p-17p an hour.12 According to independent labour rights organisations in Hong Kong, a subsistence or living wage in China would amount to 52p an hour. Such a wage would meet the basic survival needs of a poor, small family.

In 1997, human rights researchers working with the US National Labor Committee investigated 21 garment factories in four areas of China.

In Liang Shi handbag factory, which is typical of many, the hourly rate is between 71/2p and 13p an hour. Warehouse workers on the lowest pay scales, after working 10-hour shifts 7 days a week, take away just £5.25. After money is deducted for food and accommodation, they are left with just £2.08. Machinists earn an average of 11p an hour, or £6.60 after a 60 hour-working week. After deductions, this leaves them with £3.52.

"I don't understand it. Very fine leather is stored in our factory. Why do they pay so poorly?"

"The pay is very low. I cannot save my money. I want to work overtime to get extra money, but too much overtime will affect my health, making me feel weak, so I don't want to work overtime everyday. During the rush orders they give us no choice, because if we don't work overtime, we get fined." 13

Indonesia
As part of the Suharto government's economic development plans, Indonesia opened up its economy for foreign investment. Economic Processing Zones were set u p, giving companies producing for export special privileges, including the suspension of custom's duties and value added tax. In the 1980s, Indonesia boasted the lowest per capita income in SE Asia, and proved a popular destination for foreign companies seeking low labour costs. 66% of foreign investment in Indonesia is in manufacturing, with shoe and garment production a key sector.

Indonesia was seriously hit by the Asian currency crisis in 1997. The value of the stock market dropped 42% between January and October. The value of the rupiah was 2,500 to the dollar in July 1997, but by February 1998 had fallen to between 9 and 10,000.The monthly inflation rate of over 12% in February 1998 was the highest in more than three decades.

Following this currency crisis, Indonesia's "comparative advantage" in terms of low labour costs was even greater. Average garment factory workers who earned the equivalent of £1.50 a day in 1997, after devaluation in 1998 earned only 50p a day. Some garment retailers and buyers rushed to cash in.

The New York Times reported the Vice President of The Limited, a US clothing company, boasting that The Limited is a "winner" and "enjoying a bonanza" because

"making stylish blouses, sports clothes and underwear in Asia is suddenly less costly, which means a windfall profit for the lucky retailer… Weaker Asian currencies make whatever is produced in the region less expensive in dollars. And rising unemployment in Indonesia, Sri Lanka and the Philippines holds down the wages of those who make The Limited's clothing there. Plus there is a spill over effect into other Asian countries, sensing competitive pressure and holding back on what they charge." 14

But, if the retailers are enjoying a boom, what about the Indonesian workers? The banking crisis dried up credit for garment manufacturers and political and economic instability deterred some investors and buyers from cashing in on what were probably the cheapest wages in the world. Tens of thousands of garment workers were laid off during 1998.

For those remaining in employment, it became even more difficult than before to make ends meet. Since the economic crisis, workers have struggled to meet even their basic needs. In April 1998, the minimum wage was increased by 15% to 200,000 rupiah a month, an increase way below increases in the cost of living and the annual inflation rate of 70%. Basic commodities like rice, cooking oil and sugar had tripled in price. Powdered milk, which took a day's wages at the minimum wage level before the crisis, afterwards took approximately 10 days wages.

In March 1998, a group of American Nike and Reebok shareholders visited 3 footwear factories in Indonesia. The smallest employed 6,000 and the largest 21,000 workers, mostly young women aged between 20 and 22.

The group found that:

"Most workers we talked with were receiving the minimum wage as their basic pay. Workers can receive productivity and attendance bonuses above the base wage, as well as overtime pay. One worker, who received 54,000 rupiah a week said: 'I cannot make enough to cover my basic needs.' Another: 'Now there is little overtime and the high price of goods makes it very difficult. Wages have not increased. We are trying to figure out how to make it.' A third: 'Nike shoes cost a lot. Why should the workers get so little?" 16

Comparing the costs of basic foods over 12 months in Indonesia

Sport shoe companies Nike and Reebok did in 1998 award their sport shoe workers two wage increases totalling 40% - bringing the monthly wage of the workers concerned to 250,000 rupiah compared to a minimum wage of
200,000 and an estimated living wage of 350,000. Nike and Reebok are said to have shared the costs of this increase with their suppliers.

Nike and Reebok are alone in having made such a decision and there is no doubt that it will have been welcome compensation for workers trying to cope with an annual inflation rate of 70%. The move, however, must be seen in the context of the gains made by Nike, Reebok and all who sourced from Indonesia at the time, from the sharp devaluation of the rupiah. It is unclear why Nike and Reebok failed to grant the same pay rises to Indonesian workers producing sportswear rather than sport shoes.

The situation of garment workers Dani and Maslaha demonstrates the human dimension of the Indonesian financial crisis. Dani lives with his wife Nyai and two children in a 2-roomed ply wood shack in Jakarta, the Indonesian capital. Dani, the family's sole breadwinner, is one of the millions of Indonesian workers buffeted by the economic crisis that struck the country in late 1997.

"I work for PT Griya Prima, making clothes for GAP and Docker. Things are bad; they aren't paying our wages on time…There's no overtime anymore so we are earning the minimum wage of 35p a day. We're living off our savings. We try to make do, but we have to pay rent, electricity and water. The price of milk has trebled so we have stopped buying it for the children; we have to give them sweet tea and water. Food is vegetable soup with lots of water. Sometimes an egg, but never meat… Nyai feels the work is too hard for so little money".

Maslaha works for PT Griya Prima making garments for US companies such as GAP and LEVI's. She shares her tiny 8 x 8 ft room with 3 other girls from the same factory.

"I'm from central Java. I came to Jakarta 5 years ago looking for work. I wanted experience. I didn't want to be a farmer; they earn even less than we do. My parents live in the country. We earn 57p a day. Our rent is £15 a month between 4 of us. On top of that, we pay for baths and eat off stalls; there's no kitchen." 17

Vietnam
In March 1998, American shareholders from Nike and Reebok visited 3 sport shoe factories in Vietnam, producing exclusively for Nike. The factories varied in size between 6,000 and 10,000 workers, 90% of whom were young women between the ages of 18 and 20.

The wage for workers in the foreign export sector is set in dollars, but paid in Vietnamese dong. Minimum wage levels are set for foreign investment joint ventures, according to region. In March 1998, the minimum wage for Ho Chi Minh City and Hanoi was $45 (£27.30) a month, $40 (£24.20) in certain other large cities and $35 (£21.20) elsewhere. This policy of establishing the minimum wage in dollars creates an area of controversy which directly affects the wages paid to workers. The management of Sam Yang, a Nike subcontractor factory, reported that at the time of contract signing, the exchange rate was 11,000 dong to the dollar, and consequently, 11,000 was set as the exchange rate for the duration of the contract. In March 1998, however, the exchange rate was actually 13,400 dong to the dollar.

According to Madame Khanh of the Confederation of Labour of the Vietnam Labour Ministry, workers' wages should be adjusted according to the fluctuating exchange rate. Clearly, exchange rate fluctuations - and the extent to which benefits are gained by buyers or passed on to workers - radically affect the workers' purchasing power.

Impact of exchange rate on hourly cost of basic commodities

India
The Indian clothes industry did not gain importance until the 1970s, when the government launched a series of measures aimed at liberalising industrial policy, but strongly favouring the small-scale, mainly informal sector. The subsequent increase in production means that clothes are now the single largest foreign exchange earner for India, accounting for some 20% of exports. Yet India's share of the world market is of only 2.5%, primarily in the European Union. Manufacturing is located mainly in Delhi, Bombay, Bangalore, Madras and the Tirupur area.

According to the Minimum Wages Act, minimum wages in the garment industry vary according to both region and category of worker. In Bombay, which falls into the highest category, the basic wage per month is:

· Category 1 - a Master Cutter, Rs2,150 (£30)
· Category 2 - a cutter, Rs2050 (£28)
· Category 3 - tailors, packers and ironers, - Rs1,950 (£27)
· category 4 - lower grade tailors, packers and ironers, - Rs1,900 (£26)
· category 5 - thread cutters, Rs1,850 (£25).20

In addition to the basic wage, workers are supposed to receive a Dearness (cost of living) Allowance of Rs1,000. Thus a Category 3 worker should receive a total of Rs2,950 (£41).

Minimum wage rates are revised every 5 years. For the last 4 years, wages have stayed the same whilst inflation has been approximately 10% a year.21

On average, women workers - who should be receiving category 3 or 4 wages - are earning 1,500-2,000 (£21-£28), and some are earning as little as Rs800 (£11) a month for full time thread cutting.22

Trade unionists say that their priority is to obtain the minimum wage implemented and they "cannot dream of demanding a living wage". When trade unions press for the minimum wage, employers say they cannot afford it. They close down the workplace, dismiss all the workers, move somewhere else and start again with a new set of workers. If they have several sweatshops, employers move work from one to another if workers demand higher wages.

Most women workers are married, a few younger ones live with their parents. Some husbands are earning similar amounts, others are not getting a regular wage. Almost all families have children and many have dependent elderly parents. Whilst minimum wage rates, if they were paid, would be adequate to meet the costs of food, the real costs of education, health care, housing and care of elderly relatives have not been taken into account.

Although there is a contributory Employees' State Insurance Scheme (ESIS) entitling workers and their families to free health care, many women in the informal sector are not on the official payroll and so are not covered. In any case, medicines are often not available in ESIS clinics and some hospitals have been closed down. Many workers are forced into using private health care which can be extremely costly. Similarly, education in government-run schools is free, but the quality is so poor that even informal sector workers will try to send their children to government-aided private schools, where fees are Rs100-150 (£1.40-£2.10) a month.

Minimum wage rates are far from a living wage. They provide no leeway for savings or taking insurance - and no possibility of entertainment or holidays. Many garment workers, many of whom are not even being paid minimum wage rates, are living on the edge, and any small thing - an illness, repairs to their home, a marriage - can push them over, forcing them into a debt they can never get out of.

UK
In the last 25 years, relocation, bankruptcy and the introduction of labour saving technologies has cut the total number of jobs in the UK's combined clothing and textile industries from one million to 282,20023 - a figure which does not include homeworkers and the self-employed. At the same time, the network of small workshops and homeworkers, whose exact numbers are unknown, has boomed. Many of them are grouped around London's East End, the East and West Midlands and Greater Manchester, often run by Asians, including Kurds and Turks. Like their counterparts in Asia, Eastern Europe and Latin America, homeworkers and workers in Britain's sweatshops often suffer poor wages, poor working conditions and job insecurity.

Following the introduction of the National Minimum Wage in April 1999, KFAT, the National Union for Knitwear, Footwear and Textiles Workers has been active amongst Leicester's Asian garment workers. The campaign slogan "£3.60 or more, or they're breaking the law" is attracting attention.

In Leicester's Belgrave area, there are lots of clothing and textiles companies. Some are small, employing only a handful of people, but others are much larger with 50 or more workers. Most are from the local Asian community. Many are low paid and very few are union members.

KFAT's community organiser, Chanda Parmar, comments:

"Workers are being paid anything from £2 to £3.50 an hour, but employers are recording fewer hours than are really being worked. That way, it looks like £3.60 is being paid. We've collected a number of pay slips which show completely false figures for the hours worked."

Blatant abuse of the National Minimum Wage law is not uncommon. One worker told KFAT:

"On the third week, I worked 43 hours and I was expecting to be paid £154.80 gross. But I only received £123.30 as my pay slip only recorded 34.25 hours. When I questioned my employer he said you are on piece work now…"

The element of fear remains a problem, with threats from bosses making many scared to come forward.24

Homeworkers over 21 are entitled to be paid at least the minimum wage of £3.60 an hour, which came into force in April 1999. Of 81 homeworkers contacted since 1 April by either the National Group on Homeworking (NGH) or local homeworking projects, 31 only are in receipt of the National Minimum Wage and 43 are not (7 did not specify their hourly rate).

The findings of NGH, from 40 in-depth interviews around the UK, are that most homeworkers are surprised to hear that they are covered by the minimum wage legislation, but that many who are receiving less than the minimum wage rate are afraid to challenge their employer for fear of losing work. Homeworkers from ethnic minorities were found to be receiving much lower rates of pay than white homeworkers doing similar work.

Some unions consider the National Minimum Wage rate, where it is paid, to be far too low to make a real impact on the poverty of low paid-workers. In January 1999, for example, the TGWU launched its "£5 Now" campaign. Apart from the contribution this would make to eradicating poverty and improving social conditions, the TGWU suggest that there is also a powerful economic argument for raising pay levels at the bottom end of the labour market.

Lastly, low wages can and do exacerbate other problems. In particular, poorly paid workers find themselves forced to work long overtime hours where overtime is available. In China and Bangladesh, workers are commonly working seven days a week with two days off per month if no orders are pressing. In the UK, the poorest-paid homeworkers work all the hours they can, sometimes enlisting the help of their families in order to produce more or complete their work faster.