What is a Fair Living Wage?
A fair living wage is defined as one which fulfils the basic needs of workers and their families, as well as provides some flexible income. According to the ILO (International Labour Organization) and global trade unions, there is no universal benchmark on how to calculate a living wage. Instead, they stress the importance of promoting freedom of association and collective bargaining as necessary for workers and employers to negotiate wages and working conditions.
We share the view that better workplace dialogue, as well as good business relations in the markets, are key to ensure lasting improvements for the textile workers. Meaning that freedom of association is fully respected, workers’ representatives have a voice, and trade unions can negotiate and bargain collectively. This touches all areas of working conditions, including the development of fair living wages. It’s also key for stable and predictable production markets where ethical and responsible businesses can thrive.
The inspiration behind our work is the Swedish model, in which the parties on the labour market negotiate and decide together. It has been a successful model of functioning social dialogue and industrial relations since The Saltsjöbaden Agreement in 1938.
The government engagement aspect of H&M group’s work is key. Governments must install an enabling legislative environment for labour rights, one that creates a better balance of power and supports collective bargaining between social partners. In particular, governments must secure implementation of international labour standards when it comes to trade union rights – the right to organize and the right to collective bargaining. Employers must be required to adhere to these standards; and in that sense, buyers can do much more to engage governments and stress adherence to these rights by their suppliers.
In the end, sustainable industrial relations can only be achieved by workers organizing themselves in democratic, independent trade unions at the factory or company level and at the national level. This requires action from governments, but it also requires education. Workers need to know their own rights and have channels for claiming them. Management must understand workers’ rights and put systems in place that foster better industrial relations and social dialogue. And brands must support their suppliers in improving working conditions. Training all actors on these issues across the supply chain, as H&M group is doing in partnership with us and others, is incredibly important.
- Mats Svensson, IF Metall
Collaboration is key
Challenges related to working conditions and wages concern the entire fashion industry. The fact that many brands often buy from the same supplier is just one of many reasons we work for an industry-wide change — not just for the workers making garments for H&M group, but for all workers. It's also a part of our internal goals: To 100% lead the change towards a more sustainable fashion industry. That also means pushing others to make responsible choices and be bold and courageous in our work.
In order to really drive our fair living wage strategy forwardand make a lasting impact, we need to collaborate with different stakeholders. We partner with industry experts, NGOs, trade unions, stakeholders and, of course, other brands. And through ACT (Action, Collaboration, Transformation), we’re teaming up with others to bring change across the industry, supporting freedom of association and industry-wide collective bargaining.
All the brands within ACT (as well as IndustriALL, representing textile workers all over the world), have agreed to work actively together to transform the way wages are set in the garment and textile industry. This is a unique and necessary collaboration making it possible for us to work in a way we have not been able to do before. Change won’t happen overnight, but we are convinced that this way of working is the most sustainable from a long-term perspective.
It’s positive that we join forces to find solutions to shared challenges. ACT enables lasting change for the whole industry in a way that wouldn’t be possible for individual companies. We need to address this collectively, especially since the challenges concern the whole industry and we share suppliers with other brands.
Anna Gedda, Head of Sustainability H&M group
ACT is something which has never been tried before. It’s a joint initiative of major brands in the garment and textile industry together with IndustriALL with a clear objective to work together to achieve living wages for textile workers in the garment and textile producing countries.
- Frank Hoffer, Executive Director ACT
How we do it
H&M group was groundbreaking back in the ‘70s with production offices in the production markets — a key strategy and a great asset for engaging with national governments, local trade unions and NGOs. Today, H&M group employs over 700 people in the markets where our suppliers manufacture, giving us a unique opportunity to initiate and support close relationships with our suppliers.
· We engage with factory owners, enabling them to embrace the importance of well-functioning industrial relations as well as implementing sound wage-management systems. Improved wage management systems and workplace dialogue are implemented at an increasing number of factories and countries. Read more here.
· We train workers about their rights, management about their responsibilities and assist the democratic elections of employee representatives through trade unions or worker committees. For example, in 2017, 100% of the garment-manufacturer units in Bangladesh producing for H&M group conducted democratic elections of worker representatives. In total, 2,882 persons were elected of which 40% of were women.
· We ensure that we maintain good purchasing practices by being a long-term and stable business partner who helps enable the factories to pay a fair living wage. A business parter that does well in their sustainability work will also be rewarded with more and larger orders.
Living wages are key to the Fair Wage Method — wages paid to workers should be sufficient to cover their needs and those of their families. But you also have to look at broader pay systems to ensure that the provision of a living wage is comprehensive and sustainable. For instance, is the wage level being adjusted based on each worker’s skills, education, and experience levels? How are you improving the fairness and efficiency of pay systems through pay-to-performance related pay? What systems are in place to ensure that wages are paid on time and that hours are fair? How is wage setting being communicated to workers and influenced by dialogue with those workers? H&M group is taking this broader approach, starting with extensive assessments at the factory level that go beyond audits and then proactively engaging with suppliers and workers to come up with remediation plans that have positive incentives baked in. Small and medium-sized enterprises can do this as well — it’s not about the size of the company. It’s about shifting mentalities and using the right levers to modify systems in a positive way.
- Daniel Vaughan-Whitehead, Fair Wage Network
The 2018 goal and the first milestone
As a unique, first-of-its-kind initiative, we developed our global Fair Living Wage Strategy in 2013, with guidance from multiple experts and trade unions.
By the end of 2018, we set out to:
• Implement improved wage management systems for all strategic suppliers.
• Empower garment workers by ensuring that democratically elected worker representatives are in place to cover 100% of the factories we work with in Bangladesh.
These goals go hand in hand and are highly dependent on each other.
We're proud to have reached — and exceeded, the goals. Or more specifically:
• 500 factories (representing 67% of our product volume) in ten countries are implementing improved wage management systems. This covers 635,000 garment workers.
• 594 factories (representing 73% of our product volume) in ten countries are implementing democratically elected worker representation. This covers 840,000 garment workers.
• 100% of the tier 1 factories we work with in Bangladesh had democratically elected worker representation by December 2017.
In total this means: 655 factories (representing 84% of our product volume) are either improving their wage management system or implementing democratically elected worker representation, or both. This covers 930,000 garment workers.
Although we’re surpassed the first goal, our work will continue, and we will cover an additional 223 factories during 2018.
Why the price tag doesn’t correlate with the payslip
A sweater that costs as little as €8 can absolutely be produced in a sustainable way — the sustainable option shouldn’t be more expensive, that would be extremely contra productive. The brands within H&M group can offer stylish garments at affordable prices, made in a sustainable way, due to the fact that we’re a big company with our own design teams, we order in large quantities and don’t have any middle hands. The workers in the supplier factories make exactly as much whether they produce a €8 garment or a €80 garment. That’s because different brands in different price ranges produce in the same countries and the same factories, by the same people — one of the reasons why it’s so important to collaborate with other brands outside the group and encourage others to take responsibility. At H&M group, we want to make sustainable products available and affordable for all.