Garment suppliers in India are feeling a “sourcing squeeze” as prices paid by buyers for clothing exported to the United States and Europe have plummeted to new lows, a recent study has found.
From 1994 to 2017, the real dollar price paid by American buyers declined by 62.81 percent, according to lead author Mark Anner, director of the Center for Global Workers’ Rights and associate professor of labor and employment relations at Pennsylvania State University, writing in the “Sourcing Dynamics, Workers’ Rights, and Inequality in Garment Global Supply Chains in India” report.
The real dollar price of blouses made of synthetic fabric exported to the European Union fell by 31.93 percent from 2010 to 2017, and the real dollar price paid by buyers for cotton T-shirts slid by 41.4 percent.
At the same time, speed to market has accelerated.
From 2012 to 2017, average lead times—that is, the time given to suppliers to source fabric and other inputs and make and ship an order—clipped 11 percent from 87.39 days to 77.67 days, Anner said. Yet buyers took longer to pay suppliers after orders shipped, stretching the time from 47 to 54 days.
The effect of the squeeze hasn’t been marginal. Between 2012 and 2017, suppliers reported that their average profit margins dropped by 28.41 percent. During the past year, 39 percent of the 340 supplier factories Anner polled admitted to accepting at least one order below the cost of production. The vast majority of suppliers—80 percent—said buyers often change order specifications or sometimes after the start of a production cycle.
Workers in India, too, are feeling the pinch.
A survey of 560 workers indicated a “profound concern” about the increasing workloads, which some referred to as an “inhumane” pace of production. Production targets, they said, have moved from daily goals to hourly targets.
Sixty-three percent of workers described overtime work as “sometimes or always” obligatory, and 32 percent said they were not paid the legal overtime rate of 200 percent.
Verbal abuse and sexual harassment have likewise intensified, with 64 percent of workers indicating they had been yelled at by their supervisors, often for not fulfilling their production targets. They complained of epithets like “donkeys” and “owls.” Female workers said they were often sexually harassed and the subject of physical abuse at work.
Below-subsistence wages remain a concern.
Male workers polled took home an average of $162.23 per month, including overtime payments and bonuses and after deductions. Female workers earned a monthly average of $113.69, which 96 percent said was insufficient for covering living expenses.
“The squeeze down on prices by lead firms has pushed supplier factories to keep down real wages, often by not raising wages during periods of inflation, by lobbying governments not to raise the minimum wage and, in some cases, by lobbying governments to have a lower minimum wage for apparel export workers relative to workers in other manufacturing sectors,” Anner wrote in the report. “When it is not possible to keep real wages down, supplier firms can turn to the long-held practice in the sector of increasing work intensity by increasing worker production targets.”
The price and sourcing squeezes can further disenfranchise workers by creating an incentive for employers to pursue union avoidance strategies, because employers often assume that unions will bargain for higher wages and increased benefits or promote strikes that may disrupt production.
The findings, Anner said, reflect the severe power imbalance in the supply chain, where buyers leave no room for negotiations. But the trickle-down effect of such predatory sourcing practices means workers bear the brunt of the impact. Rather than the garment factory term of “production target,” Anner said, some workers refer to their “production torture.”
“Considerable evidence [suggests] that the purchasing practices of multinational enterprises…substantially contribute to chronic low wages, long and intense working hours, and worker-rights violations,” Anner added. “These practices of international buyers also contribute to an increase in nonstandard forms of work.”
Buyers must instead adjust their purchasing practices, including “unreasonably short” lead times and changes to order specifications after the production cycle starts. They should also hone their planning and forecasting, and, when changes in suppliers are necessary, “pursue responsible exit strategies.”
“Buyers also must do more to ensure full transparency in their supply chains, including by providing data on unionization rates and collective-bargaining agreements and plans to ensure living-wage payments to the workers in their supplier factories,” he said. “Finally, there should be zero tolerance for all core labor-standards violations as well as violations in the areas of health and building safety, violence and harassment in the world of work, migrant workers’ rights and homeworkers’ rights.”
Anner doesn’t let governments in buyer countries off the hook, either. They play a “crucial role in setting the rules that govern supply chains and shape the dynamics of competition,” he said.
State policies in recent decades, he noted, have deregulated financial markets and liberalized trade, contributing to a “crisis of overcapacity and hyper cost-based competition.”
“This indicates the need for governments to modify regulations and incentives for sustainable supply chain investing and to enact mandatory due diligence legislation that covers all multinational buyers, not just the very largest,” he wrote.