What is 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.

What such a wage amounts to depends on a number of social and economic factors. Members of the US Living Wage campaign have drafted an algebraic formula for determining a living wage that takes into account the average number of family members and adult wage earners per family in a region, as well as the above costs. The formula bases its calculations on the assumption that the total required would be met from adult take-home pay, after deductions and before overtime.

Such a "top down" approach based on societal norms is controversial, and begs many questions, among them:

• How to define basic needs and discretionary income?
• Who determines what a living wage is? whose living standards are to be used as the base line?
• Should the wage meet the needs of the worker only or worker plus family?
• What would the impact of a living wage be on national companies?

The Campaign for Labour Rights, participants in the US Living Wage campaign, make the reasonable point, however, that the controversy generated by attempting to reach agreement on a formula is itself an effective part of the campaign: "No one formula will enjoy universal acceptance. The more controversy about this formula and the alternative formulae proposed the better. Simply by drawing the industry into a debate about which formula to adopt, we force it implicitly to accept the principle of a living wage. Debating where the bar should be set will end up raising the bar."

Whilst accepting that, tactically, developing a formula might be effective in engaging the commitment of retail companies, the absence of such a formula should not be a pretext for companies' failure to take responsibility and formulate strategies for achieving a living wage in the industry.

It is up to companies to acquaint themselves with the conditions in which workers live - surely a telling indicator of the standard of living which their wages permit. And it is up to companies to engage with workers and their representatives, even in countries where the rights of trade unions go unrecognised, in order that workers themselves can play their part in determining what is acceptable as a living wage.

Neil Kearney, of the International Textile, Garment and Leather Workers Federation, clearly states the key role workers must play in reaching decisions: "Less emphasis should be put on developing a universal formula for calculating a living wage and more on consulting with workers as to what they think they need to provide for themselves and their families"... The same point is made by Canada's Maquila Network, whose position is that "while the call for companies to pay a living wage is a legitimate demand, the decision as to what this is has to rest with the workers."

Who Pays for a Living Wage?

That hundreds of thousands of workers in the global clothes industry should be paid a living rather than a survival wage is an idea which is increasingly finding favour in mainstream society. However, who is going to pay for the extra costs incurred? In the rare cases that they do indicate a commitment to a living wage, company codes of conduct do not specify where the financial responsibility lies.

The capacity for absorbing these costs, Labour Behind the Label believes, is to be found first and foremost among Northern companies.

In a Bangladeshi factory visited by CAFOD in 1998, the wages earned sewing large, quilted Nike ski jackets, based on figures provided by the management, came to 51p per jacket. A similar jacket on sale in the UK costs £100. The women workers earned half a per cent of the jacket's final price.25 Indonesian workers making sport shoes which retail at £60 in Britain were in 1998 earning 0.4% of the price paid by consumers.26

There is an abundance of such facts and figures, demonstrating what a small proportion of the retail price labour costs represent. US pressure group Global Exchange estimated in January 1999 that it would take 3% of Nike's annual advertising budget to pay all its Indonesian workers a living wage.

Supplier companies of course share with retailers the responsibility of ensuring that their workforce is paid a living wage. There is evidence, albeit anecdotal, that suppliers on occasion fail to pass on the financial resources made available to them to pay higher wages. Where an agreement has been entered into with suppliers, however, parent companies surely are able to set up systems which will enable them to verify that the rates paid are those that were agreed.

Similarly, it is up to companies to ensure that they pay their suppliers prices high enough to accommodate the costs of paying workers a living wage. One European clothes retailer which received much favourable publicity for agreeing to experiment with independent monitoring procedures, at the same time notified its Asian suppliers of a 30% cut in the price paid to them!

Labour Behind the Label's Campaign for a Living Wage

Regular media exposure of corporate malpractice and a number of high-profile campaigns by Labour Behind the Label members have ensured that British consumers are well aware of the need for better wages and working conditions in the clothes industry.

Labour Behind the Label is therefore inviting consumers to join in putting pressure on companies to:

• commit themselves to a living wage being paid to all workers involved in the chain of production;
• pay suppliers a price which enables them to pay their workers a living wage;
• ensure that workers have the opportunity to play their part in determining what is acceptable as a living wage.

LBL welcomes the commitment which a number of companies have made to the Ethical Trading Initiative (ETI) Base Code. In relation to wages, the code specifies that:

"wages should always be enough to meet basic needs and to provide some discretionary income."

LBL, however, has requested that more be done now - by ETI company members as well as companies working in partnership with aid agencies - to formulate strategies that will enable them to make progress in implementing their commitment to a living wage.

Only then will ETI members and other companies who have made similar commitments be seen to provide leadership in putting an end to the race for ever cheaper labour.