Why we need a global living wage backed by a new international labour law

Competition to keep prices low and corporate profits high often results in exploitative labour practices, with the greatest burden on informal and precarious workers. These workers are generally a part of global supply chains, yet, what they earn is not enough to cover basic living costs. Despite efforts worldwide to reduce the number of working people in poverty, progress has stalled. A key reason is that current labour laws are powerless to help these workers as they were designed with a different workforce in mind.  Labour laws are national in scope, while work today occurs in global supply chains in which both workers and capital cross borders. Labour laws regulate employment, whereas those pushing down wages often subcontract production. To close this gap between labour laws and today’s mode of production, we need a global living wage backed by an international labour law.  

Over the last 30 years or so, we have seen a growth in the gap between the rich and everyone else. One of the victims of growing inequality are the informal workers. On the upside, at least these people have work. On the downside, their work is not regulated by labour laws.

The consequence is that they are rarely provided a living wage, causing them to live hand to mouth whilst struggling to provide for the basic needs for themselves and their families, including food and decent shelter. Adding to their struggle is the fact that they often cannot afford healthcare, nor to pay for education which could provide them with much-needed tools to create a better future for themselves and their children.

The industry which receives the most negative publicity for low wages is the garment industry. Bangladesh came under global spotlight in 2013 when the Rana Plaza building that mainly housed garment factories making apparel for international brands, and the event, which was the world’s deadliest garment industry accident[1] took the life of over 1130 people and injured over 2,000 more.[2]  What is lesser known about Bangladesh’s garment industry is that Bangladesh has not seen improvements in their labour laws nor an increase in minimum wages since 2013. Garment sector workers in Bangladesh are typically on short-term contracts or no contracts at all, some working from factories such as Rana Plaza, but many also work from home. Recent reports found that Bangladesh garment workers earn 35 cents AUD per hour on average,[3] and have to work 84 hours to afford a doctor’s appointment.[4]

In the aftermaths of the Rana Plaza collapse the industry, the Bangladeshi government and the international community pledged to fundamentally change the garment industry. The resulting Bangladesh Accord on Fire and Building Safety in Bangladesh, which provides a model for an internationally enforceable agreement, has produced significant changes for safety levels, but has done nothing for wages, as my recent research shows. What will it take to get similar action to ensure that wages rise to a liveable level?

Unfortunately, low wages are not isolated to the textile industry, nor to Bangladesh, and informal workers are often the most vulnerable ones. They can be found all over the world, in all sorts of industries, ranging from electronics, to construction, to agriculture. They include homeworkers that get work from subcontractors, contract workers who work in small workshops or small teams conducting work in the supply chains of formal enterprises and those who work for formal enterprises on a contracted basis.

What is perhaps most concerning, is that the number of informal workers has been on the rise in most countries since the financial crisis. In 2017, an estimated 2 billion people – more than 61% of working people worldwide, were part of the informal economy.[5]

One of the reasons behind this increase is the reality gap between labour laws and the conditions under which work occurs today. Most labour laws around the world are based on an antiquated model where employees have direct employment contract with their employer. However, the number of these kinds of jobs has been shrinking across the world. In addition, national based labour laws cannot account for the fact that we live in a world where workers and capital cross national borders. Today’s workforce is largely part of complex international supply chains, where the distance between those at the top and those further down the chains continues to grow.[6]

The actors that are higher up in the supply chains put pressure on those lower down to cut production costs, ultimately putting profit over people in the race to the bottom. The cuts are felt by precarious workers at the bottom of the supply chain through wage stagnation or cuts, and a lack of safety measures.

Although some corporations have initiated voluntary social responsibility measures to improve the livelihood of the workers in their supply chains, it is hard for one company to act alone. A perfect illustration of this is H&M’s living wage initiative. Just a few months after the Rana Plaza event, they announced that their suppliers should have measures in place by 2018 to ensure a fair living wage to the 850,000 workers in their supply chains. 5 years later, this is still not the case.[7]

Individual countries are also poorly placed to solve this issue, as they often fear that implementing a living wage will lead to capital flight. Powerful actors in global supply chain rely on keeping the labour cost land often put pressure on governments to avoid an increase in minimum wages, enforcement of existing labour laws or an extension of labour rights to workers regardless of employment status.

This is why we need a global living wage backed by a labour law that spans across national boundaries, designed for the production conditions of the 21st century. Only then can corporations be held accountable for human rights throughout their supply chains and create safeguards to ensure that everyone earns a salary that covers their basic needs. Because everyone deserves a living wage, regardless of where they work and live.

This proposal is further outlined in my book, ‘Living Wage: Regulatory Solutions to Informal and Precarious Work in Global Supply Chains’ which you can purchase here.  

You can learn more about why this Global Living Wage Instrument in a future blog post. Sign up to Corporate Accountability Research’s Newsletter to stay up to date.

[1] https://www.theguardian.com/world/2013/may/23/bangladesh-factory-collapse-rana-plaza

[2] https://www.theguardian.com/cities/2015/apr/23/rana-plaza-factory-collapse-history-cities-50-buildings

[3] https://peppermintmag.com/what-she-makes/ https://www.framtiden.no/201804247287/aktuelt/levelonn/to-minutter-av-en-tekstilarbeiders-liv.html

[4] https://www.framtiden.no/201804247287/aktuelt/levelonn/to-minutter-av-en-tekstilarbeiders-liv.html

[5] https://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_627189/lang--en/index.htm

[6] A report from 2016 found that the global supply chains of 50 top companies employ only six per cent of people in a direct employment relationship, yet rely on a hidden workforce of 94 per cent (http://www.wiego.org/publications/scandal-inside-global-supply-chains-50-top-companies)

[7] http://www.eco-a-porter.com/2018/05/11/at-5-years-from-rana-plaza-hm-does-not-keep-its-promises/?lang=en