How ‘fair’ are wage practices along the supply chain? Global assessment in 2010-11

1. How ‘fair’ are wage practices along the supply chain?Global assessment in 2010-11 Daniel Vaughan-Whitehead Better Work Conference, 26-28 October 2011, Washington DC.

2. Fair Wage background • Increasing concerns over wage issues but poor evidence collected so far along the supply chain • Need first to define ‘Fair Wages’ through a new comprehensive framework on wage issues • Methodology based on a coherent set of Fair Wage dimensions and indicators • Methodology already tested and confirmed by surveys and case studies (in China, Vietnam, Indonesia in 2008-2011) • Incorporated into FLA auditing exercise (2008, 2009, 2010) • 2010 findings on 122 companies in Asia • Complemented by case studies in 2011

3. The 12 fair wage dimensions

4. The 12 fair wage dimensions

5. Audit 2010: The sample

6. Several areas of legal non-compliance: Double records

7. The non-payment of wages

8. Minimum wage compliance

9. Low pay problem

10. Excessive and under-payment of working time

11. Poorly motivating pay systems

12. Insufficient wage adjustments

13. Poor communication and social dialogue

14. Case studies on three suppliers in China (March 2011) • Carried out in February-March 2011 • Three main sources of information: management survey, workers’ interviews, statistical wage table • Aim 1: identify both common and divergent practices • Aim 2: assess their respective performance on the different Fair Wage dimensions

15. Overview of the three companies

16. Their main employment and wage developments

17. Confirmation of common wage problems • Low wages • Non-compliance to minimum wage • Excessive and not properly paid overtime • A wage-fixing dominated by the management • Lack of social dialogue

18. Differences in their main wage drawbacks • Company A: Low pay and living wage problems and too much compulsory overtime • Company B: High turnover despite improved wage levels and pay systems • Company C: Dominating piece rate leading to long working hours, stress and under-payments

19. Differences in their wage levels (starting wage; average wage; and /AFW)

20. Differences in their pay systems

21. Differences reflected in their final Fair Wage scoring

22. Main lessons • Statistics from 2010 FLA audit and 2011 case studies both painted a worrying picture • Confirmed the need to finally address wage issues along the supply chain • Need to do so through a multi-dimensional approach • The case studies have shown the difficulty to reform one wage dimension without touching the others

23. Confirmation of the need to tackle a multi-dimensional approach • All three Chinese companies increased wages to face labour shortage but this was not enough • Workers in companies A and C still confronted to excessive and under-paid overtime, and an over-dominating piece rate system • Company B’s efforts to increase wages and reform pay systems poorly effective due to a lack of communication and social dialogue • As a result, the three companies continue to suffer from increasing voluntary departures • Need to introduce reforms not only on wage levels but also on how wages are fixed, adjusted and communicated

24. The role of the actors • Need to provide such assessment but also remedial initiatives • Such large scale wage problems will not be resolved without actors’ joint action and combined synergies • Brands should be committed on wage reforms to give right signals to suppliers • NGOs’ action (but also Intern.organizations) to encourage and monitor the process • Companies’ efforts should not be isolated but amplified and facilitated through a general cooperative framework