Why Fashion Doesn’t Pay Fair

LONDON, United Kingdom — The fashion industry says it wants fair wages throughout its supply chain. It isn't willing to pay for them.

Though fatal disasters like the Rana Plaza collapse in Bangladesh six years ago have pushed brands to talk about the fair treatment of workers more than ever, many continue to relentlessly squeeze costs at the factory gate. Pricing practises remain opaque, hampering efforts to benchmark wages or track whether brands are following through on promises to increase pay. The industry as a whole remains divided on key questions like what constitutes a living wage and who's responsible for ensuring that standard is met.

The result: even though wages have gradually increased in many manufacturing countries, the industry is still fuelled by the labour of millions of mostly young, female workers who are not paid enough to provide for themselves and their families.

For instance, a 2018 study by the Fair Labour Association found the average garment worker in Bangladesh would need an 80 percent pay raise to begin earning wages even close to the most conservative living wage benchmark the report considered. A recent increase in the country’s minimum wage for garment workers to 8,000 taka a month (around $95) hasn’t closed the gap. The lowest living wage benchmark cited by the FLA was 13,620 taka a month.

“There hasn’t been a comprehensive response that shows that the industry is actually serious about implementing the living wage,” said Dominique Muller, policy director at Labour Behind the Label, which campaigns for garment workers’ rights. “Whatever estimate they use, they’re not paying it.”

Ultimately, it comes down to economics: to fix the issue, somebody has to pay for it. And in today’s cut-throat world of fast fashion, that’s a highly challenging proposition.

The meteoric rise of fast fashion over the last twenty years has relied on low-cost labour to meet soaring demand for cheap and trendy clothes. Between 2000 and 2014 global clothing production doubled and the number of garments purchased each year by the average consumer increased by around 60 percent, according to McKinsey & Company.

Ultimately, it comes down to economics: to fix the issue, somebody has to pay for it.

At the same time, the rise of online retailing has dampened profits at many traditional retailers. It’s created even fiercer competition among brands scrambling to meet consumer demand for instant--and cheap--access to the latest Instagram trend. The result on the factory floor has been intensified pressure to turn out floaty summer dresses or oversized blazers at a faster pace and lower cost.

“We’re in an environment where cheap is the driving force and profit is really important,” said Nigel Venes, strategic lead for apparel and textiles at the Ethical Trading Initiative. “Unless you have the whole market involved, there’s going to be a problem, because someone’s always going to be undercutting.”

To be sure, after years of limited progress, some companies are doubling down on commitments to drive change. Nineteen major brands have teamed up with IndustriALL Global Union to form the Action, Collaboration, Transformation, or ACT, initiative. Companies including Hennes & Mauritz AB, Zara-parent Inditex SA and the owner of Calvin Klein and Tommy Hilfiger, PVH Corp. have signed on to use their purchasing power to enable better working conditions and push for industry-level wage agreements secured through collective bargaining.

But the initiative is in its infancy and will likely need more brands to come on board to drive change. Brands can’t unilaterally raise wages because they usually don’t own the factories that make their clothes. Even the very largest companies often represent only a portion of a manufacturers’ customer base. And no brand wants to pay extra and end up undercut by competition with fewer scruples.

“It’s not something that one company can decide or set on their own,” said Anna Gedda head of sustainability at H&M. “This needs to be settled on an industry and also a country level.”

Even in countries with supposedly robust rules and regulations around wages, abuses occur. Recent scandals in the UK and Italy have exposed a shadowy economy of poorly paid garment workers that continues to operate under the radar.

And it's not just unnamed factories that fall foul of the rules. According to a UK parliamentary report published earlier this year, some 24 brands--including Valentino and Versace--were not complying with the country's Modern Slavery Act as of December. Both companies declined to comment.

Elsewhere, the group of cross-party lawmakers criticised the “exploitative” practises of fast fashion retailers that have failed to engage with initiatives to improve labour rights, calling out companies including Boohoo Group and Amazon UK.

In the wake of the criticism, Boohoo said it was revisiting its stance on membership of the Ethical Trading Initiative and recognition of trade unions. Amazon did not respond to requests for comment.

Unless you have the whole market involved, there's going to be a problem, because someone's always going to be undercutting.

Fixing fashion’s issues around workers’ rights requires brands to rethink the way they negotiate with factories and manage their supply chains. Governments and manufacturers need to be able to trust their industry will still be able to compete globally if wages are increased, and--quite possibly--consumers have to accept higher prices.

In short, it requires reshaping a global model that has made a lot of people a lot of money and democratised fashion for many people.

“The whole intention behind the way the system works is to maximise profits through minimising costs, and labour being treated as one of those costs,” said ethical trade consultant Sabita Banerji. “That’s why it’s been so difficult to change.”

The first step is gathering the right information. Brands are facing increasing pressure to properly understand and map their supply chains, and there’s a growing body of work on better buying practises. Direct-to-consumer brands like Everlane have proven that transparency around sourcing and prices can help win customers, but it’s a model that remains remote for the majority of the industry.

Across fashion’s sprawling and complex supply chain, simply establishing where clothes were made can prove tricky. Data on workers’ wages requires digging through another layer of opacity, making it difficult for brands to determine how they are impacting wages when they negotiate prices.

According to non-profit Fashion Revolution's annual Fashion Transparency Index, which ranks brands based on their public disclosures, fewer than 20 percent of the 200 brands it reviewed disclose their approach to achieving living wages throughout their supply chain, and only eight report on their annual progress towards that goal.

“A big problem in the industry is the lack of transparency,” said Doug Miller, professor of workers’ rights in fashion at Northumbria University. “It’s quite hard for people looking from the outside, and even for brands, to know what part of the price paid is for labor.”

Even as some companies campaign for better working conditions and wages, the pressure remains across the industry to continue to push costs lower. Manufacturers have complained that brands won’t pay more to cover minimum wage increases, and that they often have to accept prices that don’t cover their production costs.

For instance, the price paid by lead firms to supplier factories in Bangladesh has declined by around 13 percent since the Rana Plaza disaster in 2013, even though the country increased its minimum wage level that same year, according to a study by Pennsylvania State University’s Center for Global Workers’ Rights published last year.

There are brands that acknowledge the problem and have committed to change their buying practises, but companies have fallen short of such commitments in the past.

H&M’s Fair Living Wage Strategy which ran from 2013 to 2018 has sparked particular controversy. The fast-fashion giant, which ranks among the biggest in the world, has made headway, but failed to meet many activists’ expectations.

A review of the company’s progress published by the Ethical Trading Initiative last year found that, even in the company’s top-performing supplier factories, some workers still reported that their wage levels were too low to cover living costs.

It's not a choice for the industry because it's not sustainable how it purchases today.

H&M acknowledges more work needs to be done and points to its membership of ACT as a sign of its ongoing commitment to a long-term, systemic solution.

“It’s not a choice for the industry because it’s not sustainable how it purchases today,” said Jenny Fagerlin, global social sustainability manager at H&M. “It’s just a matter of time before the rules of the game come for the textile industry.”

ACT’s members have signed a memorandum of understanding, committing to change their purchasing practises to enable better working conditions, and to use their buying power as leverage to incentivise industry-level collective wage agreements in countries where they source.

But there too, progress is uncertain--hampered by politics and the limited number of companies currently signed up to the initiative. Last month, trade unions in Cambodia wrote to brands including Gap Inc, Adidas AG and Nike Inc , warning that their failure to commit to ACT is directly jeopardising negotiations that would raise wages and improve working conditions.

Adidas and Nike said they support efforts to ensure workers receive a living wage, and are actively working with suppliers and industry partners to improve worker compensation. Gap did not respond to request for comment.

“Brands are hesitant because it’s a cost,” said Christina Hajagos-Clausen, textile and garment industry director at IndustriALL Global Union. “This is a real business decision to commit to making changes, and they’re not small changes.”

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