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Could a Pricing App Help Boost Garment Worker Wages?

Garment factories in Bangladesh are adopting a tool designed to promote fair wages for workers.

This week, the Bangladesh Knitwear Manufacturers and Exporters Association and the Sustainable Textile Initiative: Together for Change (STITCH) signed a Memorandum of Understanding to introduce Fair Wear Foundation’s Fair Price app at all member factories.

By promoting “fact-based” costing, the tool facilitates shared responsibility between buyers and suppliers to ensure that prices adequately cover labor expenses, including wage increases, according to Fair Wear, which formed STITCH with labor-rights organizations, unions and multi-stakeholder initiatives such as the Center for Development and Integration, Cividep, Mondiaal FNV and the Ethical Trading Initiative.

Fair Price, it said, helps factories calculate the cost of a product style based on the prevailing minimum wage, as well as a higher projected “target wage” level such as a future minimum wage, a collective bargaining agreement wage or a living wage.

“Across the global supply chain, margins and buffers have consistently been too low,” Fair Wear said. “At the heart of this problem lies the tremendous power imbalance between brands and suppliers, which, in many cases, resulted in a crude bargaining approach in cost price negotiation whereby actual manufacturing costs are disregarded in the interest of concluding an order.”

Understanding the “actual costs” of manufacturing, the organization said, is a critical first step toward due diligence on wages. Such insight is necessary to quantify how much a garment’s unit price needs to increase to enable the factory to pay, at the very least, the minimum wage.

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“Low prices are a primary cause of labor violations and unsustainable low wages,” Fair Wear said. “Fair Price is a tool to address this, by strengthening suppliers’ bargaining power, and consequently their financial sustainability and their ability to raise wages. A lack of financial resources or trust between brands and factories negatively affects social dialogue. As such, Fair Price can contribute to strengthening the enabling environment needed for social dialogue, which in turn is needed to realize sustainable wage increases for the workers.”

Fazlee Shamim Ehsan, vice president of the BKMEA, and Alexander Kohnstamm, executive director of Fair Wear, inked the agreement at the Westin Dhaka on Tuesday. STITCH consortium coordinator Mae Kallander, first secretary of the Netherlands Embassy in Dhaka Bas Blaauw, and STITCH trade union advisor Amirul Haque were also present at the signing.

“We will encourage our BKMEAs member factories to use the fair price app,” Ehsan said. “We need to ensure the fair price from buyers, as well as give fair wages to workers.”

BKMEA and STITCH will also be working together to promote gender-sensitive workplaces in accordance with a High Court directive to eliminate gender discrimination and sexual harassment in factories, Ehsan added. He noted that each BKMEA factory will be forming a grievance committee to receive and investigate complaints within four months’ time.

Wages have become increasingly contentious in the world’s second-largest exporter of clothing after China. The last time the government adjusted the minimum wage for the country’s 4 million garment employees, who are responsible for more than 80 percent of Bangladesh’s exports, was in 2018. Workers currently receive 8,000 taka ($84.31) per month. In the face of runaway inflation, which has caused the cost of everything from food to fuel to skyrocket, labor unions are urging the government to form a new wage board. When Garments Sramik Front staged a demonstration in Dhaka last week, workers demanded a minimum wage of at least 20,000 taka ($210.77) per month.

Bangladesh has one of the biggest wage gaps in the apparel industry, according to calculations by The Industry We Want, which the Ethical Trading Initiative and Fair Wear formed with funding from STITCH. While garment workers around the world receive, on average, just under half of what would constitute a living wage, those in the South Asian nation muster only 33 percent.

And sometimes even these low wages are compromised as economic conditions in the country worsen. Already retail giants such as Target and Walmart have canceled billions of dollars in discretionary products, including clothing. Insiders that Sourcing Journal spoke to say it’s still too early to tell what the knock-on effect might be, but some fear a repeat of 2020, when the huge order shakeup left suppliers and workers struggling for survival. With inflation in the mix, the impact might even be worse.

On Monday, more than a hundred workers swarmed the Bangladesh Garment Manufacturers and Exporters Association office in Chattogram to demand redress following the unexpected closure of their factory.

Base Textile, a manufacturer of T-shirts and polo shirts in Dhaka, had shuttered without notice on Aug. 13, owing workers three months’ worth of pay, they said. The demonstration dispersed after discussions with BGMEA officials, though the workers promised to return if they didn’t receive their dues. Both Base Textile and BGMEA did not respond to requests for comment.