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Sri Lanka Crisis Pits ‘Survivability’ Versus ‘Subsistence Wages’

As Sri Lanka continues to be pummeled by economic upheaval and political turmoil, brands such as Gap, Nike and Calvin Klein owner PVH Corp. need to step up and take responsibility for the workers who are “paying the heaviest price” for the South Asian nation’s currency and inflation ills, labor campaigners urge in a new report.

According to research published last week by the Clean Clothes Campaign (CCC), most workers haven’t been receiving their full emergency relief allowance (ERA). As negotiated between unions and factories, the monthly sum of 10,000 Sri Lankan rupees ($30.31) was meant to help the sector’s 350,000-strong workforce fill the breach between the rising cost of living and their depreciating wages. But a survey of more than 20 factories, most of them suppliers to the world’s most popular brands, revealed that many have either failed to pay the complete sum or have drawn up conditions, such as perfect attendance, that disqualify a number of recipients.

In the months since the ERA was first disbursed, manufacturing orders from the West have declined due to tepid consumer demand and an inventory glut, the report noted. At the same time, prices paid to factories have not increased to reflect the devaluation. Suppliers, it said, have not only cut back on hours but most have ended or reduced their ERA payments to less than a third of the proposed amount, “even though inflation remains staggeringly high” at more than 50 percent.

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Even with the addition of benefits such as a subsidized dry food package and a transportation allowance, the typical Sri Lankan garment worker, “in the best of cases,” would at most receive 23,000 Sri Lankan rupees ($69.71), plus a set of discounted provisions, the CCC said.

“This is clearly an inadequate response to the severe economic and social crisis faced by Sri Lankan garment workers, the main producers of income for their very wealthy employers and of national income for the entire country,” the organization wrote. Workers who were already eking “subsistence wages” are now living in poverty and “on the edge of starvation,” it added. Public sector staff from the country’s banks, hospitals and ports went on strike last week because hikes in income tax and power tariffs have likewise “made it difficult to live.”

The organization said that one consequence of the “high degree” of concentration of apparel production in Sri Lanka is that a handful of brands and even fewer employers wield “tremendous power,” something that should come with a corresponding degree of responsibility.

Of the 400 production sites, half are owned by just 10 companies. Nearly all of the facilities pump out merchandise for roughly a dozen U.S. and European brands, which besides Gap, Nike and PVH Corp., include Amazon, Asos, Columbia Sportswear, Marks & Spencer, Next, Patagonia, Ralph Lauren and Victoria’s Secret. PVH Corp. had the biggest footprint, with production occupying 58 sites, according to a public supplier list from December.

When CCC wrote to the companies in July and then September to ask what actions they were taking to “ensure the survivability” of the workers who make their clothing, as well as information about their sourcing and pricing policies, most didn’t reply.

“Even the few responses we did receive were limited to general assurances and had little substantive content,” it said. “In a few cases, the general assurances were accompanied by statements to the effect that sourcing levels and pricing policies were ‘confidential business information’ that could not be shared.”

PVH Corp., which also owns Tommy Hilfiger, said that it wasn’t contacted by the CCC and was therefore unaware of the allegations beforehand. The company said it takes the information presented by the report very seriously, however, and is investigating the matter.

A Patagonia representative told Sourcing Journal that its factories are “proactively taking steps” to support their workers through the crisis. Because its sewing partners are Fair Trade-certified, Patagonia pays a premium that goes into a fund controlled by workers. “Through the fair compensation workstream with the Fair Labor Association, we are deeply engaged in efforts to increase wages in Sri Lanka as well,” the representative added. “Our partner factories pay above minimum wage but also serve as key partners in our journey to achieve living wages as a whole.”

Asos said that it has been engaging with CCC campaigners over the past year and that conversations with suppliers have evolved as the on-the-ground situation has changed. Toward the end of 2022, it extended its checks around the payment of monthly wages and social security to include specific questions about ERA payments, which the majority of its suppliers confirmed they were paying. The e-tailer has also made payment of an ERA a non-negotiable minimum requirement for all new factories it plans to onboard in Sri Lanka.

Similarly, Victoria’s Secret said it continues to work with its partners in the country to ensure stability and that its sourcing strategy in the island nation remains unchanged. “No matter the circumstances, we hold our suppliers to the standards set forth in our supplier code of conduct and supplier guidebook, which include the demands outlined in this brief,” a spokesperson for the lingerie maker said.

Columbia Sportswear, Gap, Marks & Spencer, Next, Nike and Ralph Lauren did not respond to requests for comment.

Yohan Lawrence, secretary general of the Joint Apparel Association Forum (JAAF), which represents Sri Lanka’s garment manufacturers, said he takes issue with the way the CCC has framed the ERA. The payment, he said, was always voluntary. “There is no such payment that has been mandated by law, nor is there any requirement for a company to make any such payment,” he told Sourcing Journal.

Whether under the label of an “ERA” or “any other terminology,” factories have kept their employees at the “center of their business,” Lawrence said.

“At this time of economic hardship, all companies have made additional payments to employees based on their individual circumstances,” he said, noting that they might take the form of monthly or quarterly lump sum payments, one-off cash payments, increases to the basic salary or discounted provisions.

“Companies have continued to provide relief to their employees through cash and non-cash benefits,” Lawrence added. “ In certain instances, these cash payments have since been amalgamated into the annual salary increments that have been done in the past few months.”

In a formal statement that the JAAF released Wednesday, the group said that far beyond paying “subsistence wages,” its members pay employees “well above” the minimum wage and have made “significant” cost of living adjustments to salaries “over and above” the annual increments.

“There is no doubt that the workers’ hardships are real,” it said. “The apparel industry will not be able to function without our workers, and JAAF has acknowledged the importance of its workers to the health, well-being and sustainability of the apparel industry and Sri Lanka’s economy.”

The JAAF said that it is “prudent” to realize that Sri Lanka’s crisis will not be “resolved overnight.” Rather, it will take the “collective efforts” of lawmakers, workers, business owners and international stakeholders to achieve a “lasting and sustainable solution” that goes beyond emergency relief.

Still, the CCC says it’s vital that brands publicly state what they have done and what they intend to do to ensure that workers in their supply chains receive the incomes they need to ride out the crisis, including the full ERA as demanded by unions. Furthermore, it said, brands must ensure that workers “enjoy the fundamental human rights guaranteed by international conventions and Sri Lankan law and act responsibly and transparently to assist the workers in this hour of need.”

Brands have a responsibility to the workers that “enable their profits,” said Anton Marcus, joint secretary of the Free Trade Zones & General Services Employees Union, a member of the CCC and the largest union representing garment workers in the country.

“They must ensure that the factories they source from pay their workers the 10,000-Sri Lankan rupee ERA. If factories are not able to do so, then brands should step in and contribute financially to make it possible,” he said. “The Sri Lankan garment workers have contributed to making these brands rich, the least these brands can do is to ensure their workers get through this crisis.”