The Struggle for Decent Work in the Global

The Struggle for Decent Work in the Global Apparel Value Chain-A Case Study Trade Union strategies for workers´ rights in the global supply chains of multinational companies. Turín 21 st September 2015

Aims of Session • Understand the value chain in apparel • Consider the importance of mapping value chain actors in developing trade union strategies for delivering Decent Work. • Develop a trade union approach to ‘economic and social upgrading’ • Critically examine the 4 pillars of Decent Work in the apparel sector

THE APPAREL VALUE CHAIN

Types of Value Chain • Buyer driven - Global retailers, global brands wield commercial power in industries such as toys, clothing, agricultural and consumer goods. • Producer driven - automobiles, aeronautical • Internet driven - E-commerce

‘Buyer-Drivenness’ in Apparel - Some examples • Race to the bottom in search of lowest labour cost • Cutting and running • Changing terms of contract midway through • Extending payment schedules • Demanding discounts • Super-exploitation of labour at arms length

SO WHERE DOES THE VALUE ADDED GO?

The Global Production and Value Chain in Apparel Logistics Raw materials Processing Component Networks Assembly Export Networks Retail Networks After G. Gereffi 2001

Example : Jacket made in Zongshan Province China Fabric/component cost: Other costs labour cost Overhead Profit $37. 60 $ 1. 48 $13. 92 $ 7. 52 $ 4. 24 FOB (ex factory price) = $64. 76 Retail Price $400

Relation of Labour cost to retail costs $13. 92 3. 48% of retail cost But. . 65% of factory costs

VALUE CHAIN LOGIC FOR FACTORIES, SECTORS AND COUNTRIES

The Value Chain Logic of Economic Upgrading Logistics Backward linkage Raw materials Processing Component Networks Forward Linkage Assembly Export Networks Retail Networks After G. Gereffi 2001

Economic Upgrading product upgrading: introduction of a more advanced type of product/service • process upgrading: changes introduced in the production process/service delivery with the objective of making it more efficient and productive • functional upgrading: a change in the mix of activities performed by a firm or a locality towards higher value added tasks, e. g. , inclusion of finishing, packaging, logistics and transport • chain upgrading: a move towards a more technologically advanced production chain. •

BUT DOES ECONOMIC UPGRADING LEAD TO SOCIAL UPGRADING?

Assessing the 4 Pillars of decent work in apparel • Job security • Rights at work • Social Protection • Social Dialogue

Pillar 1: Job Security Gains? • Movement from primary to secondary sector • In some countries increased employment for young women • Many are economic migrants • Winners and Losers?

Social Upgrading in Apparel Exporting Countries

WHAT ABOUT AT MICRO LEVEL? TASK A

Pillar 2 - Rights at Work • Normally would be ensured by national labour inspectorate and trade unions and collective bargaining • In apparel – anti union employers and in some countries under-developed labour administration systems • is carried out by private social audit firms or multistakeholder initiatives on behalf of buyers • Buyers need to show that they are upholding their codes of conduct

• To rationalise and professionalise the activity the ILO has taken on board monitoring and capacity building • Haiti, Bangladesh, Cambodia, Lesotho, Vietnam, Indonesia, Nicaragua, Bangladesh, Jordan.

Rights at work • • • Enterprises With fake records Not paying wages Delaying payment of wages Underpaying wages With starting wage below minimum wage With difficulty in paying overtime Providing social insurance to all workers Providing individual labour contracts 42 % 19 % 6% 58 % 23 % 33 % 68 % 23% YES 58 % NO 77% 33 % 32% 77% 45% Source: Auditing on wage issues, FLA 2008. in Daniel Vaughan Whitehead, 2009 Incorporating Fair Wages into CSR Paper prepared for the FLA conference on Wages along the Supply Chain, Washington, 26 October 2009.

Rights at Work: a Living Wage • No ILO Convention but Preamble to the ILO Constitution 1919 makes reference to an adequate living wage • Most brands and retailers have a code statement to – a wage which covers basic needs plus an element of discretionary income • In the absence of collective bargaining in the sector reliance on minimum wage setting • In most cases the minimum wage is not a living wage

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Current Model Buyer A Employers Association Fob Buyer B Buyer C Buyer D Fob Factory pplier Fob Su Minimum Wage Fob Buyer E TUs FOB= price paid to factory per garment piece Govt

Living Wage Issues • Anti-Trust obstacle • Retail Price escalation if there is a labour cost increase • No agreement on a living wage benchmark • How is it implemented in the absence of collective bargaining? • Buyers want to see factories improve efficiency as a way to find more money

The Problem of which Benchmark – A Wage Ladder

SO CAN ECONOMIC (PROCESS) UPGRADING LEAD TO SOCIAL UPGRADING? TASK B

Pillar 3: Social Protection Case Study: Industrial Injury Compensation

2013 Rana Plaza Bangladesh : A Game Changer

Health and Safety in the Bangladesh RMG post Spectrum 2005 62/80 2006 Spectrum Sweaters & Shahriyar Garments, Savar, Dhaka KTS Textile Industries 2006 Phoenix Garments 22/50 2006 Imam Group /57 2010 Garib & Garib 21/6 2010 Tung Hi Knit and Sweater /20 2011 Hameem Group 28/40+ 2012 Tazreen 115/200 2013 Rana Plaza 1130/2, 500 2013 Smart Fashions 7/10 54/60

Rana Plaza Arrangement – ILO facilitation • Industri. ALL and brands in presence of Clean Clothes Campaign and Worker Rights Consortium • Established a fund (temporary) • Claims Processing Entity • Oversight Committee

Compensation: the Rana Plaza Arrangement • US$30 million needed in the Arrangement Trust fund to ensure payments can be made. The claims process has begun. • June 2015 – 2 years later finally met – entirely voluntarily • Rana Plaza was a game changer…. .

SOCIAL DIALOGUE - A SEA CHANGE?

• A five year legally binding agreement • An independent inspection program • Public disclosure of all factories, inspection reports and corrective action plans (CAP) • A commitment by signatory brands (200+) to ensure funding for remediation and to maintain sourcing relationships • Democratically elected health and safety committees in all factories to identify and act on health and safety risks • Worker empowerment through an extensive training program, complaints mechanism and right to refuse unsafe work.

Indonesia Freedom of Association Protocol for the Sportswear Supply Industry 20112

Sectoral Agreement in Jordan 2013 ‘For a first contract, it is quite comprehensive with provisions on union recognition and access to workers, dues check-off, dormitory standards, dispute settlement, employer rights, and annual seniority bonuses for all workers regardless of their nationalities’

Action Collaboration and Transformation ACT 2015 • 14 garment brands and retailers have set up a platform under the Action Collaboration Transformation (ACT) MOU with Industri. ALL. • Target countries – Cambodia, Bangladesh, Ethopia – Myanmar. • to improve wages in the industry ‘by establishing industry collective bargaining in key garment and textile sourcing countries, supported by world class manufacturing standards and responsible purchasing practices’

Sectoral Agreement from Corporate Social Responsibility to Joint Responsibility Global Unions Buyers Manufacturers’ Associations National TUs

THANKS FOR YOUR ATTENTION