Regulating the Wage Effort Bargain in Outsourced Apparel Production – Two provocations Better Work Research Conference Doug Miller, University of Northumbria, UK

Why do wages serve as the residual element at micro level? Why is fabric more important than labour? Why is the price of fabric specified in a commercial contract but the actual cost of labour not? Better Work Research Conference

Two main research questions What is buyer practice in relation to labour costing? Can this be the path to implementation of a living wage – however defined?

Preliminary Findings: Buyer/Supplier Practice Little buyer use of predictive labour costing using Standard minute values/standard allowed minutes (PTS) Contrary to popular belief there is no internationally agreed tariff of standard times for garments. There is wide variation in methods of costing at the supplier end – use of PTS, historic times, in plant time study, nothing. Suppliers unwilling to reveal exact times to buyers because of pressure of open costing.

Key Findings: Implementing a living wage 1. The implementation of a living wage is only feasible in a wholly owned and controlled manufacturing facility. 2. Therefore in the context of the current debate on the living wage, buyers can only contribute to a raising of wages in a facility 3. Buyers with a living wage code commitment could however factor a living wage into the CMT element of the price they pay to a supplier for a specific order. 4. Predictive labour costing using predetermined time systems could provide us with a model….

Provocation 1

cont. Stage 1: Determine factory labour minute values. Average monthly wage/no. of available minutes Stage 2: Calculate labour cost for prevailing wage X = AMV for garment x factory labour minute value. This is paid in normal FOB but separately itemised. Stage 3: Calculate labour cost for a living wage Y = AMV for garment x living wage factory minute value (average monthly living wage / available minutes in a standard month)

cont. Stage 4: The difference between X & Y x the number of units in the order is the costed living wage amount. This can be held on account by the buyer with the amount(s) disclosed annually to the factory union and the management in a communiqué prior to a wage round. Stage 5a: The union and management at the factory would as part of the bargaining round negotiate how this amount is to be distributed on to the wage (NB this would be consistent with a Fair Wages approach).

cont. Stage 5b: Where trade unions and collective bargaining do not yet exist, workers could be invited to organise themselves to negotiate how such living wage supplements might be translated into the wage. Stage 6: To guarantee pass through the accrued amount could be released on sight of an (auditable) collective agreement.

Unresolved question leading to Provocation Is it not time for buyers to come out from behind Anti- Trust law to discuss how they can work together in shared facilities to ensure sustained increases in wages? How do we deal with the issue of equity where only one section of a factory is operating a living wage costing model?

Recommendations Better Work/ILO could explore the feasibility of a convening of companies specialising in setting SMVs/SAMs to determine convergence towards internationally accepted values beginning with basic garments. If not already being undertaken, Better Work PICC training for workers could include an awareness of incentive schemes and draw on existing trade union expertise in this area.

Recommendations ( Businesses/suppliers should address the establishment of positive support for freedom of association and collective bargaining via the issue of a written and therefore auditable guarantee of non victimisation in the event of workers choosing to exercise their right join a trade union of their choice. Encourage in country buyer forums to apply for Business Reviews of collaborative efforts to address a living wage in supplier factories in respect of any existing competition/anti trust legislation.