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Profits vs. Poverty: Fashion Brands Prosper as Factory Sewers Starve

Many fashion purveyors are prospering. Their workers, on the other hand, are experiencing the pains of poverty.

One year into a global pandemic that has upended all semblance of normalcy, the divide between the world’s biggest apparel brands and the upstream labor responsible for their products grows even more stark.

In eight factories across Bangladesh, Cambodia, Ethiopia, Myanmar and the Philippines, nearly 10,000 garment workers experienced wage theft even as the 16 brands they sewed for raked in at least $10 billion in combined profits in the last six months of 2020 alone, according to a study published Thursday by the Business and Human Rights Resource Centre (BHRRC), a nonprofit think tank.

Meanwhile, suppliers are hurting not only from the spree of order cancellations that left them in the lurch at the start of the pandemic but also the exploitative buying practices that continue to crush their margins. All this has had a direct impact on suppliers’ ability to pay their workers even for finished jobs, the organization said.

By not receiving their full, already meager paychecks, workers have plunged further into a state of economic precarity, hunger and destitution that is a natural consequence of the insecure nature of their employment and their inability to build a financial cushion for dry spells with no work.

“Our research shows that the normal wages workers receive are, on average, over four times less than the wage they need to live on. Yet even that poverty wage hasn’t been paid to women workers,” Thulsi Narayanasamy, senior labor rights lead at the organization, said in a statement. “Destitution could and should have been avoided—if only they had been paid a fair, living wage. “

At the same time, the report noted, most fashion companies have not only recovered from the initial shakeup caused by lockdown-induced store closures and evaporated foot traffic but they are once again generating profits. In some cases, they’re performing better than ever.

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Between August 2020 and this past February, the BHRRC asked the 16 brands—Carter’s, Hanesbrands, H&M, Levi Strauss & Co., Lidl, L Brands, Matalan, Mark’s, Next, New Look, Nike, PVH Corp., River Island, Sainsbury’s, S.Oliver and The Children’s Place—to respond to the allegations of unpaid wages and benefits. Only three brands—H&M, Next and New Look—said they were engaging directly with local unions, labor representatives or labor groups to resolve the cases. Another three brands—Carter’s, The Children’s Place and Matalan—did not respond to the organization’s inquiries.

Brands that get involved in wage disputes can often resolve matters more quickly than if they stand by the sidelines, the BHRCC said. Ted Baker, for instance, “took quick and effective action” in response to pressure from labor groups last year after workers at Tanex factory in Romania received only partial payment of their salaries without explanation. (Joop! and Massimo Dutti followed suit.) This prompted the Romanian labor minister to launch an investigation, which resulted in fines for Tanex and the restoration of outstanding wages to affected workers.

There is also a precedent for brands directly compensating workers for owed wages, such as when Tesco, Starbucks, NBC Universal and Walt Disney agreed to compensate 26 Burmese migrant workers who were illegally underpaid 3.5 million baht ($115,450) by the Kalayanee factory in Mae Sot in Thailand, though such incidents are few and far between.

While all brands included in the report have policy commitments to ensure workers in their supply chain are paid—and 10 go even further, “explicitly” referring to aspirations to pay workers a living wage through voluntary initiatives such as ACT (Action, Collaboration, Transformation)—the cases and the brand responses reveal a system “constructed to limit the risk to brands and maximize risk to workers,” the authors of the report wrote. Voluntary agreements have only served as a fig leaf behind which brands can exempt themselves from genuine efforts to create a living wage, they added.

“Our research exposes an unfair industry rigged to favor brands at the expense of women workers who make our clothes,” Narayanasamy said. “A year into the pandemic, with growing profits, and after witnessing the utter destitution of workers, brands don’t have an excuse for failing to protect the basic rights of garment workers. It’s not optional to ensure legal wages and benefits are paid in your supply chain.”

Brands are aware of the issue, the BHRRC said. In a survey of 51 companies conducted between November and December, nearly half (49 percent) of them—including brands such as Bestseller and Next that reportedly canceled, delayed payments or asked for retroactive discounts on orders—said they had received word of non-payment of full salaries for workers between March and October 2020.

“The business model of fashion brands and the structure of global garment supply chains is built on an extreme inequality of power that creates and sustains poverty wages for garment workers,” Narayanasamy said. “To then have so many cases of not even paying workers during such a vulnerable time is excruciating.”

But a wage that a person can live on is a fundamental human right, she added. Payment of living wages as an industry standard would level the playing field for brands, transform the lives of workers and result in not only a “just recovery from the pandemic, but also to prevent the scale of crisis from repeating again.”

The report drew attention, in particular, to Wage Forward, a proposal by labor groups such as the Asian Floor Wage Alliance and the Clean Clothes Campaign to enact a legally binding agreement that requires apparel brands to pay an additional “living wage contribution” on every order they place. Instead of driving a race to the bottom for cheap production, the BHRRC said, brands should be working to improve the low wages they have helped to create to relieve the suffering of millions of workers in their supply chains.

“We can’t talk about a just recovery from the pandemic for garment workers without guaranteeing that a living wage will finally be paid to workers across the fashion supply chain,” she said. “After decades of failed initiatives, it’s time to make it happen.”