Position paper on Living Wages

December 2013

In some developing countries, workers do not receive the minimum legal wage and for
factories, the payment of the legal wage is already a challenge. This wage can also be kept
artificially low to attract foreign investment and export order and also to protect labour-
intensive export industries. When the legal wage is too low, it can have different knock-
on effects. It can explain why workers are working overtime. It can also lead to child
labour because parents, who do not earn enough to feed their family, send their children
to work. In the framework of BSCIs development approach, the BSCI encourages supplier
companies to provide their employees with a living wage. The question of a living wage is
addressed in the BSCI Audit Questionnaire as part of the obligatory gap minimum living
wage analysis that the external and independent auditors must perform during the BSCI
audit. The goal is to discuss the issue/gap with the supplier, review the living wage from
an aspirational view and try to help the employer, the one who is responsible to pay the
wages, see the benefit to the organization of improving wages.

As it is raised by experts, minimum wage is often not enough to cover basic needs of
workers and their families. As a consequence, it should be regularly revised by local
governments to reflect the increase of cost of basic consumption products.

BSCI seeks ways how a fair wage can be provided and to share the knowledge about this.
BSCI participates in the Fair Wages Network. The aim of the network is to regroup all the
actors involved along the supply chain and present in the CSR arena who would be ready
to commit themselves to work to promote better wage practices. The idea is to set up an
interactive and dynamic process, involving NGOs, managers, workers representatives and
researchers.

BSCI clearly supports the idea that workers should earn enough to be able to cover basic
needs and to have some discretionary income. Things become more complicated when
trying to define how a living wage should be calculated, what the size of an average family
is, and how much discretionary income is needed. Many definitions, approaches and
methodologies have emerged over the last decade but none is accepted with unanimity.

BSCIs best practice, the SA 8000 social standard, requires the payment of a living wage.
Social Accountability International (SAI) monitors the payment of living wages based on a
combination of qualitative and quantitative analyses.
Quantitative analyse means that the living wage is calculated as a wage sufficient to
provide food for an adequate diet and the remaining basic needs for the worker and half
of the average number of dependents in a family in that region, with an additional 10%
added on for discretionary income.
Qualitative methods used by SA 8000 auditors include comparing wages with those of a
unionized company in the region (providing independent unions exist in the area), and
worker interviews.
Both qualitative and quantitative methods are used in an audit to verify the results one
against the other.

In the new Code of Conduct BSCI says the following: Business enterprises honour this
principle when they respect the right of the workers to receive a wage that is sufficient to
provide them with a decent living for themselves and their families; as well as the social
benefits legally granted. Business enterprises should comply with wages mandated by
governments minimum wage legislation, or industry standard approved on the basis of
collective bargaining, whichever is higher. The legal minimum wage should not prevent
business enterprises from taking every effort to provide workers a remuneration that
allows them and their families a decent live.

Among other principles the Code highlights the principle of fair remuneration which takes
into consideration not only the quantitative aspect but also qualitative one. Wages have
to be paid timely, regularly, in full and in legal tender, notwithstanding of partial payment
in the form of allowance in kind is authorized. Deductions shall be permitted only under
conditions and to the extent prescribed by law or fixed by collective agreement.

BSCI believes that a sustainable way to increase wages for workers is through the local
legislation and based on discussions among local social partners. To foster the importance
of this concept, BSCI is engaged in a network of Round Tables in supplying countries that
gather representatives from local governments, trade unions, NGOs, as well as garment
producers and exporters associations and representatives. Those Round Tables help to
address strategic issues such as wages with the local governments who also bear
responsibility to ensure the well-being of the workers in the country.

In summary, the overarching goal should be that all stakeholders assume their
responsibility. Freedom of association and collective bargaining are two of the
fundamental rights of all workers. When these rights are respected, workers can use
them to ensure that other labour standards, including a living wage, are upheld.
Local governments have the duty to create the regulatory framework to protect and fulfil
the human rights of workers and to ensure enforcement of the laws. Trade Unions and
other civil society organizations should encourage the social dialogue. BSCI as a business
association will continue to advocate the human rights of workers as a central element in
doing sustainable business.