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India Wage Theft ‘Worst’ Fashion Has Seen

Scott Nova, executive director of the Workers’ Rights Consortium, calls the crisis in Karnataka the worst case of wage theft he has ever witnessed.

Despite sewing clothes for some of the world’s biggest brands, more than 400,000 garment workers in the southern Indian state haven’t received their legally mandated minimum-wage increases, he told Sourcing Journal. Their livelihoods now hang precariously in the balance: Families are struggling to maintain the roofs over their heads, cutting back on meals or going hungry altogether. The Washington, D.C. advocacy group estimates that workers have lost out on $55 million—and counting—since April 2020, when the government implemented what Nova described as a “modest” hike in the so-called variable dearness allowance, based on the rate of inflation, to 417 Indian rupees ($5.60) per month.

But the owners of more than a thousand factories have refused to pay it, a decision they believe was justified after the labor ministry issued a proclamation suspending the implementation of the wage increase because of the Covid-19 fallout, Nova said. The issue headed to the High Court, which decreed that September that the postponement was illegal and that manufacturers were obligated to pay not only the proper wage moving forward but also all arrears. The court reiterated its position last April, one year after the wage increase was announced. Still, suppliers refused to budge.

“The employers have said, ‘Well, the case isn’t over,” Nova said. “They’ve asked for another hearing because they’re convening a committee to advise the government on how to respond to the court’s decision. It’s just a laughable delaying tactic, but it allows the employers to keep saying the case is unresolved. And the frustrating thing is the brands actually swallow that argument.”

Over the summer, the Worker Rights Consortium started pushing brands that source clothing from Karnataka, including C&A, Gap, H&M, Marks & Spencer, Nike, Puma, Uniqlo owner Fast Retailing, Walmart and Zara owner Inditex, to apply pressure to their suppliers. Several committed to doing so after the organization demonstrated that there was no legal basis to the employers’ claims.

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Most of the brands Sourcing Journal reached out to said they’ve made it clear that they expect their suppliers to adhere to local legal requirements, including paying the minimum wage. Inditex said its suppliers were “progressively” meeting these expectations, while Gap said it has established a timeline by which it expects “full compliance.” H&M said stakeholders that didn’t comply with its code of conduct would face “serious business consequences.” It will continue to “closely monitor and follow up on this,” a spokesperson said.

But brands “have not done much,” Nova said. “The problem is no one’s paying. Because asking the suppliers to pay is not what’s needed; the brands need to compel the suppliers to pay.” The question, he added, isn’t so much whether factories need to pay what they owe, something that isn’t in dispute, but rather what brands are doing to bring forth that result.

Nova said it’s likely no coincidence that pandemic-induced disruptions have turned the supply chain upside down. Brands that canceled or suspended orders at the beginning of the outbreak are now scrambling for suppliers that can maintain a steady flow of goods.

“The suppliers’ position is a little stronger right now, just because of the economics of production,” he said. “The fundamental power always lies with the brands, but brands are especially reluctant to discipline their suppliers at a time when the relative bargaining position is modestly tilted.”

Not that this is an excuse. The fact that so many brands have allowed the situation to persist for this long, despite their codes of conduct, is especially telling, Nova noted. He said that many of these same companies claim they want to achieve living wages in their supply chains, yet they won’t uphold a provision of the law that prevents workers from falling further away from subsistence levels.

“From my perspective, the hypocrisy of that is so extraordinary,” he added. “Where we are right now is that suppliers are still refusing to pay. They’re violating the most basic standard that the brands claim to uphold—and there have been zero consequences.”

Karnataka is far from the industry’s only minimum-wage battleground. Similar conflicts have emerged in Bangladesh, Cambodia, Sri Lanka, Vietnam and elsewhere. Lesotho in southern Africa was recently the site of violent worker protests after the government missed two scheduled minimum-wage increases. In Pakistan, factory owners have threatened to exit the province of Sindh after the High Court upheld in October a 43 percent increase in the minimum wage. Last week, Egyptian garment workers received a hard-won doubling of the minimum wage despite manufacturers lobbying against it. In most cases, the pay bumps have proven insufficient to free savings-poor workers from the cycle of poverty. Across the global south, wage theft, exacerbated by rollbacks in labor rights amid the pandemic, remains endemic.

Nova lays much of the blame with irresponsible brand buying practices, in particular the “sourcing squeeze” that leaves suppliers working with ever-thinner margins.

“The root cause is the enormous price pressure that brands or retailers placed on suppliers, which compel them to produce high prices below the cost of responsible lawful labor practices,” he said. Governments, he noted, are responsible for raising the minimum wage to a level that allows families to meet their basic needs, yet their efforts are butting up against the demands brands inflict on suppliers to “continue to produce at rock-bottom prices.”

Then there’s the fact that wages make up a small fraction of the retail price of the product. (Estimates place it somewhere between 2 percent to 5 percent.) Brands could triple the labor costs and “customers would barely feel it,” Nova said, adding that one of the most frustrating things about the problem is that it’s a fixable one.

“When you see conflicts breaking out, when you see mass strikes and demonstrations, when you see governments repressing strikes and demonstrations, all of that has to do with brands’ sourcing models,” Nova said. “As long as they insist on prices that are below the level of responsible production, you’re going to get crises like this. And this is the worst one we’ve seen.”