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An H&M factory worker in Bangladesh.
Photo: GMB Akash/H&M

Why Is It So Hard for Clothing Manufacturers to Pay a Living Wage?

H&M promised to make sure the people who make the company’s clothes can live on their pay, but the benchmarks have shifted.

In the garment industry, stories about workers who barely eke out an existence on “starvation wages” are legion: Factory workers in New Delhi often describe living in makeshift hovels “barely fit for animals.” A young woman from Myanmar might wrestle with the decision to feed her children or send them to school. In Bangladesh, sewing-machine operators frequently toil for 100 hours or more a week, only to run out of money before the end of the month.

Workers have demanded higher pay in all those countries, of course, sometimes precipitating violence between protesters and police. Companies in general, however, have preferred to sidestep the issue altogether. In fact, no multinational brand or retailer currently claims to pay its garment workers a wage they can subsist on.

To be fair, defining a “living wage” can be a tricky business, one that requires some complex mathematics. Even within the same country, the minimum income a worker requires to afford basic needs — food, shelter, clothing, medicine — can vary wildly from one locale to another.

At the H&M factory in Hangzhou Suntex, China.
Photo: H&M

Plus, as brands are wont to remind people, most of them don’t own the factories that produce their clothes, meaning they neither pay for the garment workers’ wages nor determine what those wages are.

So when H&M declared in November 2013 that it would deliver a “fair living wage” to more than 850,000 workers across 750 factories by the end of 2018, the announcement was nothing short of a bombshell.

As the world’s second-largest apparel company — after Inditex, which owns Zara — H&M said it felt a sense of “shared responsibility” when it came to persistently low wages, an issue as endemic to the global garment industry as unrelenting hours, unsafe environments, and rampant verbal, physical, and sexual abuse.

H&M makes its famously cheap-chic apparel and footwear at about 1,900 independent suppliers around the world, often in the aforementioned low-cost countries.

“It has always been our vision that all textile workers should be able to live on their wage,” it said in a statement then. “We believe that the wage development, driven by for example governments in some countries, is taking too long, so we want to take further action and encourage the whole industry to follow. With size comes responsibility, and we have the ability to contribute to change.”

Its detractors were skeptical, particularly when no benchmark figures were forthcoming, but there was no reason to believe that H&M wasn’t in earnest. Even the acknowledgement that workers needed better wages, as one campaigner told me in 2013, was “a vital step.”

By 2017, however, H&M’s language regarding its living-wage strategy took a slight turn. The 2018 goal was to have “improved wage management systems in place” at suppliers representing 50 percent of its product volume.

Workers’ rights groups found H&M’s “less ambitious course,” along with the continued lack of specific benchmarks as it approaches its self-imposed deadline, troubling. In addition, whatever scant updates H&M released only served to bolster the impression of the brand as “notoriously opaque.”

“A number of elements in those updates seem to be generalist, not concrete enough, and to a certain extent, immaterial or irrelevant to the question: Well, as a result of this, are workers producing clothes for H&M getting a higher salary, yes or no?” says Ben Vanpeperstraete, lobby and advocacy coordinator at Clean Clothes Campaign, an alliance of labor unions and non-governmental organizations in Amsterdam. “And that’s the crux of the question. Everything else is relatively irrelevant fluff.”

H&M certainly doesn’t view itself that way. “We have always been clear on what our goal is; to set the foundation and mechanisms needed for fair living wages to be paid by suppliers,” says Cecilia Tiblad Berntsson, the firm’s social sustainability manager. “We have an ongoing dialogue with stakeholders and report annually both to stakeholders and media about the activities and actions within the fair living wage strategy.”

2018, she adds, will mark the “first milestone” in an overarching strategy to address the issue. H&M’s focus may be redirected to “where the local need is greatest and where there is a possibility to scale up effectively,” but the scope of its ambition hasn’t changed, Berntsson says.

To be sure, the retailer has placed itself in the crosshairs of a contentious issue. If the intricacies of a living wage weren’t enough to grapple with, there is also the notion of the minimum wage — that is, the lowest wage that a country’s local or federal government says employers are legally bound pay their workers.

Not only does a country’s minimum wage rarely square up with the concept of a living wage, but it can also differ by orders of magnitude.

In Sri Lanka, for instance, the basic pay averages 13,500 rupees ($197) per month, yet workers interviewed by campaigners from Labour Behind the Label in 2016 said they would require at least 33,000 rupees ($481) to support their families. The same group queried workers in India who were earning an average of 6,284 rupees ($92) per month. To make ends meet, those same workers said, they would need 13,000 rupees ($190), if not more.

Brands can sometimes use this lack of agreement over calculations as a way to stall efforts at pursuing living wages, according to Dominique Muller, director of policy at Labour Behind the Label, a not-for-profit organization based in the United Kingdom.

Furthermore, it’s in the interest of governments to keep the minimum wage low, in part because they don’t want brands to abscond to other countries in pursuit of cheaper labor.

“There’s a lot of pushing by brands to make sure that not only the government keeps wages low but also the supplier keeps wages low,” Muller says. “And then the suppliers and the industry associations will say to the government, ‘Look, you can’t increase wages because then we wouldn’t get the orders from the big brands.’”

Even within the same region, brands can play factories off each other, says Judy Gearhart, executive director of the International Labor Rights Forum, a human-rights organization based in Washington, DC.

“If one factory owner agrees to produce jeans for $2, then another can’t charge $2.50 or they’ll lose business,” she says. “In a sense, we are all fueling the race to the bottom, but it’s the largest, most successful brands that are driving themselves and the competition the hardest.”

Occasionally, workers will score a minor victory and minimum wages will creep up. But even an uptick of 77 percent — something that occured in Bangladesh a few years ago — is only a nominal one, Vanpeperstraete says.

a worker at a textile factory
A worker at a textile factory in China.
Photo: Jie Zhao/Corbis via Getty Images

Despite the appearance of progress, it’s important to keep in mind that Bangladesh’s wage increase was “also against an inflation of 12 percent a year, and the last revision was five years before that,” he says. “Consumer inflation will just eat it up again, so there are no real gains.”

To promote real change, a living-wage benchmark remains an indispensable tool, Gearhart says. “A living wage benchmark quantifies what workers need to live decently, so that they can support a family above the poverty line and still be able to have some discretionary spending and the ability to save,” she says.

The power brands wield over their suppliers can be oppressive to the point of tyrannical. And even so-called “codes of conduct,” those legalese-adjacent blocks of text that tout a company’s dedication to ethical labor practices, are rarely the talisman against supply-chain impropriety that brands make them out to be.

“The failure of codes of conduct to ensure workers’ rights has been robustly documented, with several phenomenal catastrophes — the Ali Enterprises fire in Pakistan, the Tazreen Fashions fire, and Rana Plaza building collapse in Bangladesh — occurring in factories that had been certified and/or inspected and approved for code compliance multiple times by multiple actors,” Gearhart says. “Additionally, the proponents of codes of conduct have not gathered or published quantitative reports about their impact on workers’ wages, hours, accidents, or ability to form unions.”

At best, codes of conduct are a feint, Vanpeperstraete says. At worst, they’re a figment of someone’s fever dream.

“Lots of codes of conduct talk about a living wage and we have no evidence of factories paying a living wage; lots of codes of conduct talk about right of workers to join or form a union of their own choosing and that rarely happens,” he says. “These codes of conduct are more about allaying the concerns of consumers than implementing these rights in the supply chains of brands.”

In some cases, codes of conduct might be little more than offhand suggestions.

Just last month, Arcadia Group, the operator of Topshop, Miss Selfridge, and Dorothy Perkins, told its factories that it would pay them 2 percent less on all forthcoming orders because it was performing under par, which it blamed on a shifting retail landscape fueled by online upstarts like Missguided and Boohoo.

“The fact that a brand has the power essentially to say, ‘Well, we’ve got these contracts agreed but we want you to provide it to us with this discount,’ is quite significant,” Muller says. “But it happens all the time: Brands on the one hand puff up their corporate social responsibility and on the other hand, when it suits them, do the opposite in terms of producing standards.”

But brands have an imperative, Muller says, if not a moral one based on the UN Guiding Principles for Business and Human Rights, then a legal one in terms of modern slavery laws.

Meanwhile, the yawning divide between the haves and the have-nots is only becoming wider.

Billionaire wealth has soared by an annual average of 13 percent since 2010 — six times greater than the wages of regular workers, which have risen by a yearly average of only 2 percent, according to Oxfam International, which published its latest report ahead of the World Economic Forum summit in Davos, Switzerland, last month.

Of the 2,043 dollar billionaires worldwide, nine out of 10 are men, a fact worth mentioning because a vast proportion of garment workers — 80 percent — happen to be women.

“Economic rewards are increasingly concentrated at the top,” Oxfam says. “It takes just over four days for a CEO from the top five companies in the garment sector to earn what an ordinary Bangladeshi woman garment worker earns in her whole lifetime.”

As is the case with most businesses, it’s the smaller, nimbler companies that have the drive and wherewithal to innovate when it comes to better wages for workers.

Some brands, like Fair Indigo and Raven + Lily, might choose to collaborate with worker-owned cooperatives.

A worker in an H&M factory in Indonesia.
Photo: H&M

“In this way the workers are really setting their price for the garments in the way that is economically sustainable for them,” says Robert Behnke, co-founder and president of Fair Indigo.

Others might take advantage of nascent mechanisms such as Fair Trade U.S.A.’s apparel program in North America or the Fairtrade Foundation’s Textile Standard in Europe.

Patagonia was one early adopter of the Fair Trade standard, beginning with the launch of 11 Fair Trade-certified women’s products in 2014. Currently, the outdoor-apparel brand pays a premium on some 200-plus men’s, women’s, and children’s products. The extra money goes directly to the workers who made the garments, and they form a committee that decides how to spend it.

“In essence, when you purchase a Fair Trade-certified product, it’s a guarantee that it was traded in a more ethical way and really that boils down to safer working conditions, improved livelihoods, and protections for the planet,” says Maya Spaull, senior director of Apparel and Home Goods at Fair Trade U.S.A. “So that’s what’s really behind that seal you see on Fair Trade products.”

But even when given the opportunity to promote living wages, brands and retailers can sometimes be willfully obtuse.

When Continental Clothing, a London-based wholesaler of blank garments, launched a pilot line of certified-organic T-shirts and hoodies with a built-in price premium for workers in India, for instance, the concept failed to “take off like crazy,” according to Mariusz Stochaj, the company’s head of product and sustainability.

The premium, which is similar to the one found in the Fair Trade system, isn’t much — about 10 pence (16 cents) for a T-shirt and 54 pence (79 cents) for a hoodie. But the idea is that this amount gets passed along the value chain, “from the factory through to the retailer without being marked up, ensuring that the small additional cost at the point of sale is returned to the workers in its entirety,” says Stochaj.

Some of Continental Clothing’s customers were welcoming of the idea, Stochaj says; others were wary of attracting unwelcome questions.

“It’s the same with organic cotton or any other sustainable practices where people will say, ‘Why haven’t you done it before?’ or ‘If it’s such a small premium to pay for such a big difference to those people, why don’t you just absorb it within your own profit margins?’” Stochaj says.

But paying a living wage can have immediate, tangible benefits, something Stochaj discovered in the two years the “Fair Share” project has been brewing. At the factory where the scheme is being piloted, absenteeism has plummeted. And recruiting new workers has never been easier.

“We have basically people on a waiting list waiting for vacancies, which we’ve never had before,” he says.

Perhaps the larger question is whether consumers even care about workers receiving a living wage. And until they do, most brands and retailers won’t.

“For most brands this is not a priority by itself,” says Adheer Bahulkar, a partner in the retail practice of A.T. Kearney, a global strategy and management consulting firm. “Because while more than two-thirds of consumers say that they want better living conditions for the workers, less than half of the same consumers are actually willing to pay more for their purchases.”

And therein lies the rub.

“Even with brands that have the best of intentions and want the triple bottom line of environmental, human, and economic well-being, economic well-being ends up trumping the need for environmental and human wellbeing,” he says. “Consumers have basically reset what they expect to pay, and this is putting more pressure on brands to either find ways to lower prices — and hence pay lower wages — or lose market share.”

But consumers wouldn’t have to pay much more, if anything, for their togs, activists say. After all, a garment worker’s wage is only 1 to 3 percent of the total cost of most clothing, according to the Clean Clothes Campaign.

Which is to say, if brands wanted to pay their workers a living wage today, they could. In December, Labour Behind the Label noted that it would cost H&M only 1.9 percent of the $2 billion it made in 2016 to pay all its Cambodian workers the additional $78 per month they would need to achieve a living wage.

A woman works in a textile factory in China.
Photo: Jie Zhao/Corbis via Getty Images

To approach the problem from a different angle, H&M would only have to reallocate one year of its annual advertising budget to muster up living wages for its Cambodian workers for six and a half years, the group says.

One problem is that most businesses still operate in silos where the number crunchers and the do-gooders are entirely divorced, Vanpeperstraete says.

“In clothing, the people buying it, the buyers, are considered the people who actually determine the margin of that specific organization — they determine profitability,” he says. “That results in an internal hierarchy of a company where the buyers are already more important than the CSR people because the buyers are making the money and the CSR people are spending the money. So who gets the last word?”

But what it all boils down to, he says, is the abundance of political will.

“Companies can be extremely efficient organizations when it comes to achieving specific goals, but only if they’re set on doing so,” says Vanpeperstraete. So many brands, he notes, laud their ability to deliver “ripped from the runway” looks at mass-market prices, with little turnaround time. “If they would have the same commitment to paying living wages, then that would probably happen, not necessarily overnight but in a very short time span,” he adds.

H&M, with its pledge in place, yet nebulous results, exists in a liminal, in-between space. “H&M has at least had the audacity to say, four years ago, ‘In five years time, workers will have a living wage,’” he concedes. “So they’re sort of half there on the political will. But I think in implementation we don’t necessarily feel yet or have enough evidence to believe that this is carried through in the way that the organization works.”

Yet the retailer’s atypical modus operandi might also be the key to its success. Unlike most of its high-street brethren, who flit from factory to factory while jostling for room on the production line with dozens of other brands, H&M maintains what it calls “strategic partnerships” with suppliers that provide 100 percent of its products for five years at a time.

In other words, it has leverage, which it can use to create — and sustain — meaningful improvements in a way that few brands can.

“H&M is in a crucial position to do stuff because it has those long-term relationships and those large buying volumes with a lot of factories,” Vanpeperstraete says. “If H&M calls a factory owner, they’ll listen. People pick up the phone for H&M.”


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