In this article Rodney Reed considers the 'Asia Floor Wage' and the 'Stitching a Decent Wage across Borders' Campaign by the Asia Floor Wage Alliance. The whole of Asia, not just Bangladesh, is the garment manufacturing base at the focus of this Campaign.
There is a rise in 'ethical consumerism' in Europe and North America and this Campaign intends to reach these retail customers and encourage them to ask "how much per hour was the worker paid who made this garment" and to realise the amazingly low percentage of the cost of a garment represented by the worker's wages. In addition to paying low wages even the most efficient Asian garment factories have very low profit margins because of the aggressive buying practices of the international garment buyers working for the chain store multiples. According to the 'Asia Floor Wage Campaign' cheap clothes sold in retail shops and stores in North America and Europe are only possible because of poverty level garment worker wages in Asia.
This 'Asia Floor Wage Campaign' (AFWC) can be viewed as a threat by factory proprietors and international buyers but it can also be recognised as a marketing and Branding opportunity. This is because it could open the way for garments from Asia Floor Wage factories to be sold in Europe and North America at premium retail prices in the same way that organically grown and 'fairtrade' and Rainforest Alliance branded products are retailed presently. The Campaign aim must be presented carefully in the European and North American retail sector in order to avoid a possible 'ethical boycott' of Bangladesh made or Asian made garments, a 'lose-lose' scenario for workers, proprietors, buyers and the retail customers. An Asia Floor Wage Bangladesh Campaign (AFWBC) press conference in Dhaka indicated the Campaign will target the giant retailers buying from Bangladesh factories.
The Bangladesh garment sector has a Government defined 'minimum wage'. Considerable concern has been expressed by labour activists and legislators in North America and Europe about this 'minimum wage' being less than a 'living wage'. The campaign for an Asia Floor Wage has attracted a great deal of attention in Europe but relatively little in Bangladesh. What distinguishes the Asia Floor Wage from the 'living wage' or the 'minimum wage' is the notion of 'Purchasing Power Parity' (PPP), a World Bank method for comparing different nations' economies. It is based on each nation's purchasing power compared to the purchasing power of the US$. Food costs form the core of the Asia Floor Wage formulation and food costs compared to income are considered to be significantly higher in the global south than in the global north. The Asia Floor Wage, stated in local currency, varies according to the country's economy and so it is not as simple as stating it is $1 a day or $10 a day.
Union leaders and labour activists in Europe and Asia have come together as the AFWC to explore a strategy for Asian workers in the global garment industry to respond to poverty level wages. This strategy has been progressively developed and formalised since 2005 and has grown into an international alliance to support worker's struggles. The launch of the Asia Floor Wage in Bangladesh was attended by many workers' leaders. The Asia Floor Wage Alliance now comprises over 70 trade unions, labour and human rights organisations, development NGOs, women's rights groups and academics in 17 countries across Asia, Europe and North America.
The campaign recognises the importance of Asia to the garment industry and the need for workers in this industry to be paid an adequate wage. In the campaigner's view when workers struggle to improve their wages and conditions in one country companies often relocate to another country where wages are even lower and regulations are weaker. Reacting to this perceived threat garment workers are afraid to fight for better wages, because they fear they might lose their jobs. According to AFWC this fear ensures that garment workers in Asia remain the most poorly paid, poorly organised, and most keenly exploited in the industry while undermining efforts to promote workers solidarity across Asia. Approximately 60 per cent of worldwide garment production occurs in Asia and the Industry employs over 100 million workers across Asia, a large portion of whom are women. Even though these workers play a critical role in maintaining the garment industry the AFW campaigners claim they earn about half of what they need to provide for the basic needs of their families. The Asia Floor Wage (AFW) is a response to this problem, developed by an alliance of NGOs, trade unions and academics from Asia, Europe and North America. The AFW Alliance has set out not only to raise the wages of garments and knitwear workers but to strengthen workers' bargaining power in the international garment production chains of giant retailers throughout Asia. A 'floor wage standard' according to AFWC would prevent capital flight from occurring and not only increase workers standard of living but also offer greater job stability.
The Asia Floor Wage is based on the income required for a single earner to provide minimal support for a family of four (2 adults and 2 children) by working a 48 hour work week. The AFW comprises food costs and non-food costs with each accounting for half the total wage. Food costs are calculated on the basis of a standard 3,000 calories per day per adult. Non-food costs include healthcare, housing, clothing, childcare, transportation, fuel, education and are calculated as a factor of food costs. This method of calculation is used by the AFWC to address the problem of defining food baskets and non-food costs across countries and to ensure that a common demand could be raised in Asia. Food cost is the core reference point in the AFW because proportionately high food costs they argue to be indicative of a high poverty level. However this reliance on a basis of 3000 calories of food per day for each adult and the subsequent factoring of all other costs of living from that food price appears to the writer to be the most significant weakness in the Campaign. It is unlikely that even affluent or middle class Bangladeshi men and women need or want to eat 3000 calories per day. So a more realistic estimation of food intake to remain fit and healthy would lead to a significant downward revision of the floor wage for the whole Region. The Asia Floor Wage has been set at 475 'International Dollars' - using the Purchasing Power Parity (PPP) method of the World Bank and in Bangladesh Taka it converts as 10,754 whereas the wage quoted in the Asia Floor Wage Bangladesh Campaign (AFWBC) Press Conference was 6,700 Bd Taka. This might be the result of local Campaigners recognising that the Asia Floor Wage assumption of 3000 Calories per day for an adult in Asia is a significant overestimate of the food intake needed for a garment worker and her family to be fit and healthy.
The AFW Campaign has set its sights on Tier 1 garment factories, i.e. those which supply goods to a group of internationally targeted brands, with the goal of achieving an AFW throughout the Asia garment industry by 2015. According to AFWC a standard wage across the industry will not only help workers meet their basic needs and those of their families but it will also offer a form of regional collective bargaining.
The garment industry in Asia claims that margins available to the factories from the international buyers do not allow any increase in wages. However according to figures provided by the India Commission for Asia Floor Wage Alliance labour cost in India and Bangladesh is only 2.8% of the retail price for a basic men's shirt exported to USA, the retail margin available to the retailer in the USA being 75%. If, as this Commission reports, the garment labour cost is 64 cents on a shirt priced at $22.50 then the cost to the Brand would go up by only 64 cents if wages were doubled. This would be less than a 5% increase in retail price and studies in the USA and Europe have shown that retail customers are willing to pay a premium of 5% for an ethical product. The Asia Floor Wage Campaign links payment of a Floor Level Asia Wage with a premium retail price for products from 'ethical' brands.
In conclusion this Campaign is unusual because it is a 'need based wage' calculation for a whole region and not just for Bangladesh. The Asia Floor Wage Campaign was started by workers rights groups, was picked up by newspapers all over Europe and so caused considerable concern to the international garment and knitwear buying companies because it might alert their retail customers to poverty level wages. These 'ethical consumers' might boycott garments made in their 'cheap wage' factories or in a country with the lowest garment workers wages in the world! The Campaign makes it clear that garment worker poverty is a problem caused by the low prices expected by retail customers and by the buyers working for those chain store multiples. It would appear that low prices now being paid in Bangladesh by international buyers for garments made here might cause Bangladesh to miss out on achieving its Millennium Development Goal (MDG) on poverty reduction because of continuing garment worker poverty.
Factories paying an Asia Floor Wage in Bangladesh open up an opportunity for marketing and Branding clothes that come from Asia Floor Wage compliant factories and so for selling Bangladesh manufactured knitwear and garments in Europe and North America at a premium rate. What is most important about the AFW is that it has the potential to improve the lives of a large number of workers and possibly to set standards that can then be applied to other industries and regions. Though the focus of this article has been garment factories the same principles apply to all export oriented trade sectors in Bangladesh. r
A Senior Columnist and a regular contributor to The Executive Times Rodney Reed M.Soc.Sc (Birmingham) is the Company Chairman and MD of Reed Consulting (BD) Ltd. The author and his wife Mrs Ann Reed, who is a Director of the Company, are residents of Dhaka. Reed Consulting Bangladesh Ltd www.reedconsultingbd.com is Incorporated in Bangladesh. Reed Consulting (BD) Ltd is a Strategic Partner of CSR Asia and specialises in developing the policy and practice of Social Responsibility in Bangladesh and in neighbouring countries. The Reed Consulting (BD) Ltd 'mission statement' is 'Enabling businesses in Bangladesh to be socially responsible sustainable and profitable'.
