Like ‘Watching a Car Wreck Unfold’: Poverty Wages Pressure Bangladesh-Sourcing Brands

A group of human-rights multistakeholder initiatives representing more than 2,500 international brands, retailers and suppliers in Bangladesh has written to the South Asian nation’s government urging it to reconsider the proposed new minimum wage, which experts say is well under what is necessary to sustain garment workers in the face of runaway inflation.

“The announcement of a new legal minimum wage…by the RMG Minimum Wage Board has prompted serious concerns,” Amfiori, the Ethical Trading Initiative (ETI), the Fair Labor Association (FLA) and the Fair Wear Foundation, together with Dutch workers’ union Mondiaal FNV, said Thursday of their letter to Prime Minister Sheikh Hasina. “This amount falls short of covering basic needs and a decent standard of living for the workers and contradicts the government’s commitment to decent work standards.”

More from Sourcing Journal

The wage board announced earlier this month that the lowest-grade workers will receive a wage of 12,500 Bangladeshi taka ($113) beginning Dec. 1, a 56 percent increase from the previous floor of 8,000 taka ($72) but just over half of the 23,000 taka ($208) unions have been lobbying for. The gap between the legal minimum wage and the average living wage in the world‘s second-largest clothing exporter after China, pegged by the Wageindicator Foundation in 2022 as 74 percent, remains among the highest of the major garment-producing countries, “posing challenges to the RMG sector’s aspirations to meet international standards and maintain its position as a responsible sourcing country.”

Amid continuing protests that have already claimed four lives, the organizations pressed authorities to respect the workers’ freedom of association, their right to strike and their right to demonstrate, as well as to release the protestors they’ve arrested and drop all charges. The letter’s signatories also expressed their “dedication to supporting a new legal minimum wage that ensures a decent living for RMG workers in Bangladesh” by encouraging members such as Adidas, H&M Group, Uniqlo parent Fast Retailing and Zara owner Inditex, to practice responsible purchasing by incorporating “fair wages into their human rights due diligence” and ensuring that suppliers can afford to pay decent wages by including a “fair and sustainable sharing of the cost burden for the increase in the legal minimum wages.”

“We know the employers’ concern is that in negotiating prices, their buyers will not enable them to pay higher wage increases,” Alexander Kohnstamm, executive director of the Fair Wear Foundation, told Sourcing Journal. “However, with the new minimum wage being insufficient, brands sourcing from Bangladesh must conduct heightened due diligence on wages to uphold their responsibility to respect human rights. This means higher resource investments in stakeholder consultation and remediation.”

Kohnstamm said that some Fair Wear member brands have approached the group with the “intent to apply their purchasing to stimulate wages higher than the new minimum wages.” While the organization will work closely with them to realize this, he said, there must be a “much broader commitment” from global brands because of the fragmented market—and soon.

“Workers shouldn’t be waiting another five years for [the] next inadequate increase,” Kohnstamm said. “In fact, an annual minimum wage review would be a great improvement from that taking place now every five years.”

So far only Patagonia has come out in support of the 23,000 taka figure workers are asking for. No brand or retailer, however, has publicly and explicitly committed to paying more even as the likes of Adidas, Levi Strauss & Company and Puma have expressed their concern about the surging violence and expressed their beliefs in the rights of workers. Even H&M, which a Bangladesh Garment Manufacturers and Exporters Association (BGMEA) executive said was among a “handful” of businesses that informed suppliers that there will be a blanket increase in prices, will only say officially that it recognizes the “important role we play to facilitate a fair compensation through responsible purchasing practices.”

Several brands that signed a previous letter to Hasina asking for “inclusive dialogue” with labor groups when determining the new wage, including Gap Inc., Hugo Boss, Lululemon, Patagonia, Calvin Klein owner PVH Corp. and Under Armor, have not responded to multiple emails from Sourcing Journal. Neither would the American Apparel & Footwear Association, the trade group that represents many of them, say anything more specific than the fact that its members are “absolutely committed” to responsible purchasing practices to support the wage increase.

At an event in New York City on Thursday night, Yukihiro Nitta, group senior vice president of Fast Retailing, said that conversations about prices and wages happen directly with suppliers and that it endeavors to pay fair rates because it’s important to maintain stable business relationships. Some of its suppliers already provide their employees a living wage, he said, though he declined to specify which ones.

“Absent an explicit commitment from the brand members of the ETI, FLA, and Fair Wear to pay prices sufficient for the wage to be raised to 23,000 [taka], without reducing orders, these communications are not meaningful,” Scott Nova, executive director of the Worker Rights Consortium, a Washington, D.C.-based advocacy group, told Sourcing Journal.

“All three organizations have elaborate living wage policies, but none of these policies do the one thing that matters: requiring member brands to end the pricing practices that make living wages impossible,” he said. “Instead, these organizations ‘encourage’ member companies to do the right thing. Encouraging giant apparel brands to take actions that raise their costs works about as well as encouraging your toddler to eat vegetables. Without rules and consequences, compliance will not be achieved.”

Nova said that it’s “essential” to bear in mind that the brands, including those in organizations like ETI, have the “power in their hands” to secure a decent minimum wage. “If the end result is the perpetuation of poverty wages, it will be because that is the result the brands wanted,” he said.

Peter McAllister, ETI’s executive director, previously said that organizations like his cannot “compel” individual companies to share the cost of any wage rises, only “encourage and support and make the case for absorbing what in real terms is still a very small wage increment.”

“When it comes down to individual commercial negotiations, we do not have sight of these and a number of factors come into play,” McAllister said. “We would say that given Bangladesh is essentially an export market and exports are paid for in hard currency, then the real value of wages in Bangladesh in hard currency terms have clearly diminished and just bringing them back up to where they were, let alone giving a real terms increase, is needed.”

Kalpona Akter, president of the Bangladesh Garment and Industrial Workers Federation and a former child garment worker, told Sourcing Journal that multistakeholder initiatives could be taking “strong steps” rather than “waiting to see our workers suffer” from poverty wages and violations of labor laws and rights.

“They all [have] the backs of these greedy corporations [that have] left workers striving or losing their lives while legitimately raising their voices,” Akter said. “This is enough. This deprivation should stop and our workers should be recognized with higher pay, union [representation] and jobs with dignity.”

Bangladesh’s 4.1 million garment workers, spread across 3,500 factories, contribute to some 85 percent of the nation’s $55 billion in annual exports.

In a memo to brands that attended a meeting “on short notice” on Wednesday, Faruque Hasan, president of the BGMEA, said that he appreciated their “support, collaboration and cooperation“ but that he must reiterate the “uphill struggle” for suppliers negotiating “spiraling” costs while investing millions into remediating and “greening” factories and trying to remain competitive. He noted that the price of electricity has risen by 25 percent, gas by 286.5 percent and diesel by 68 percent, along with other “notable” factors, resulting in both a higher cost of production and a higher cost of goods.

“As to the implementation of the new minimum wages which will take effect on Dec. 1, 2023, I have already appealed [to] you to consider its impact on the cost and factor it in in your negotiations duly,” Hasan said. “I have also appealed [to] you during the meeting that during the unexpected labor unrest in the past three weeks, factories which were forced to close down (some of them were vandalized)…were not able to continue their operations during those days. You have assured us that the factories will not be penalized, and I hope you will support your suppliers as much as possible.”

Over in the United States on Thursday, President Joe Biden signed the first presidential memorandum outlining his administration’s commitment to worker rights globally. In doing so, the White House said, the president is “directing” federal departments and agencies to “advance labor rights and worker empowerment in their work abroad.”

“First, we will engage governments, workers, labor organizations, trade unions, civil society, and the private sector around the world to protect and promote respect for internationally recognized labor rights,” Secretary of State Antony Blinken told reporters in San Francisco. “That means, for instance, that all of our ambassadors, all of the folks running our embassies around the world, will engage with workers, with unions so that their voices are reflected in everything that we do.”

“Second, we will work to hold accountable those who threaten, who intimidate, who attack union leaders, labor rights defenders, labor organizations—including using things like sanctions, trade penalties, visa restrictions—all the tools in our kit,” Blinken said. “We want to be there for people like Kalpona Atker, a Bangladeshi garment worker and activist, who says that she is alive today because the U.S. embassy advocated on her behalf. When we use our voice, when we use our advocacy around the world, we can make a concrete difference in making sure that those who are trying to advance labor rights are protected and defended.”

Last week, both the Department of State and the Department of Labor condemned what they described as “recent violence” against garment workers in Bangladesh, condemning in particular the alleged police involvement in the deaths of Md. Rasel Howlader, a 25-year-old maintenance machinist at Design Express in Gazipur, and Anjuara Khatun, a 26-year-old machine operator at Islam Garments, also in Gazipur.

“We call on the government of Bangladesh to respect workers’ freedom of assembly, end the violent crackdown on workers and conduct a full investigation of alleged police involvement in Howlader and Kahtun’s killings,” Thea Lee, deputy undersecretary for international affairs at the Labor Department said in a statement.

“We urge the government of Bangladesh to revisit the recent minimum wage decision to ensure that it provides equitable compensation that meets the needs of workers and their families,” Lee added. “To prevent future unrest, we also urge the amendment of existing labor laws to guarantee that all workers can fully exercise their right to freedom of association and collective bargaining, as called for by the International Labor Organization.”

IndustriALL Global Union, whose affiliate, Sommilito Garments Sramik Federation, counted Howlader as a member, too, continues to call upon the government of Bangladesh to reassess its minimum wage proposal so it’s in line with the 23,000 taka demand.

“Further, it is essential that government and employers respect international human rights, and immediately refrain from violence against protestors and ensure that no workers are blacklisted or detained for exercising their legal right to freedom of association and assembly,” Christina Hajagos-Clausen, the union federation’s director for the textile, garment, shoe and leather sector, told Sourcing Journal.

Hajagos-Clausen recently embarked on a whistle-stop tour of New York and Washington, D.C. to convince American brands and lawmakers about the importance of binding agreements, such as its ACT—short for Action, Collaboration Transformation—Memorandum of Understanding on living wages, freedom of association and collective bargaining, which IndustriALL has entered into with 19 fashion purveyors, including H&M, PVH Corp. and Inditex.

Thulsi Narayanasamy, director of international advocacy at the Worker Rights Consortium, also called into question whether voluntary initiatives have the power to hold brands to account for “their pricing practices that ultimately result in the exploitation of workers.”

“Until and unless brands commit and follow through on paying suppliers enough to facilitate a wage increase, we will still have an industry that is predicated on unfair wages that are at odds with brands’ stated commitments on living wages,” she said. “The local industry has repeatedly pointed to brands’ pricing practices as a barrier to increase wages, yet brands behave like innocent bystanders watching a car wreck unfold in Bangladesh, when in fact, they are the ones driving the car.”

Mark Anner, director of the Center for Global Workers’ Rights and associate professor of labor and employment relations at Pennsylvania State University, has one main thought. The industry, he said, needs to move toward a “triangular“ form of bargaining—one that is supported by a government-mandated legal framework—where brands, suppliers and workers discuss what a living wage should be, what paying the living wage does to the cost of production, and how the increase in production impacts the required purchasing price.

“This is how it was done for decades in the U.S., and it worked.“ he said. “Otherwise, we will remain in the endless cycle of suppliers and brands blaming each other on who is responsible for the payment of increased wages. What this means is that it is imperative that brands and retailers commit to covering the cost of a living wage and suppliers commit to paying a living wage.“

Brands may be facing a revenue slump but many of Bangladesh’s biggest buyers are still bringing in strong profits. Gap, for instance, reported a third-quarter net income of $218 million on Thursday. In the three months ended Aug. 31, H&M earned a net profit of 3.33 billion Swedish kronor ($314 million). Inditex posted a net profit of 2.5 billion euros ($2.7 billion) for the six months leading up to July 31. For Fast Retailing, profits in the 12 months through August rose 28 percent year over year to 381 billion yen ($2.5 billion), its second consecutive record. Meanwhile, suppliers continue to be squeezed on prices, sometimes selling below production cost.

“$208 seems extremely reasonable,” he added.