Living Wages: Time for an Annual Health Check?

I went to the doctor last week for my annual checkup. He took my blood pressure, listened to my heart and lungs, and asked about my diet, exercise habits and a bunch of other things that could negatively impact my health.

My doctor’s approach has strong parallels for how we should be tackling the problem of living wages for workers. He understands that health isn’t the product of one single factor, but instead results from a combination of interacting conditions and practices.

Investors, brands and retailers, and other interested parties talk a lot about the need to pay living wages that enable workers and their families to live dignified and healthy lives. But there hasn’t been much progress to report.

Maybe it’s time to start applying the “annual health check approach” to living wages, and to widen the number of indicators we monitor and the questions we ask, in order to better understand what is interfering with the achievement of this important goal for workers, and what we need to change.

Years ago, when worker wages became an important topic of focus, the finger of blame was pointed toward “greedy suppliers” who were accused of sucking all the profits out of their companies to support lavish lifestyles and investments in anything but workers. Suppliers were seen as adversaries versus partners in the goal of giving living wages to workers. Supplier accountability for worker wages is still an important part of securing living wages for workers. But it’s not the only thing to look at.

Now, there’s no question that brands and retailers’ purchasing practices are a big part of the problem. In research carried out by Better Buying^TM back in 2015 when we were first building our Better Buying Purchasing Practices Index^TM (BBPPI), suppliers confirmed a strong and positive correlation between purchasing practices that are good for their businesses and those that are good for workers.  This means that the purchasing practices that result in financially healthy supplier businesses are the same ones that support better conditions and better pay for workers. Likewise, the purchasing practices that debilitate suppliers’ businesses are the same ones that put living wages out of reach for workers.

For suppliers, financial health is heavily influenced by their efficiency, capacity utilization, productivity, costs, worker turnover, and other factors that affect profitability. These can be controlled to a certain extent with good management, but they are also impacted by their customers’ purchasing practices.

Better Buying Institute isn’t the only one to have made this connection. Recent case studies shared by  the Fair Labor Association, which has required participating companies to work to improve purchasing practices for over a decade, captured links between certain purchasing practices and improved wages. Action, Collaboration, and Transformation (ACT), an initiative started by a handful of big European apparel brands and the global union, has also wisely identified responsible purchasing practices as building blocks that help create the necessary conditions for workers to secure a living wage. Companies commit to improving purchasing practices as a condition of joining and publicizing their involvement with ACT.

The problem now is that there is limited understanding by investors and others demanding living wages for workers about which specific purchasing practices need to be reformed. The topic of living wages came up over and over again in sessions of the OECD’s Forum on Due Diligence in the Garment and Footwear Industry earlier this year. But it seemed that whenever purchasing practices were mentioned, a particular indicator was latched onto as the magic bullet that brands and retailers need to track, monitor, and report on to show progress.  At the other end of the spectrum, others were asking for every bit of data about every practice of a brand or retailer’s work to be reported so that data mining exercises can identify “interesting practices” that need to be changed.

It doesn’t need to be this complicated. Just as my overall health is influenced by a number of key factors and behaviors, the financial health of suppliers is dependent on being able to count on their customers’ support in five key areas, which suppliers consistently cite, year after year, in our data collections. These five areas form the basis of Better Buying’s Five Principles of Responsible Purchasing^TM.

1. Passing along enough information about a customer’s planned business (Visibility)
2. Giving stable and predictable business across the year (Stability)
3. Giving enough time to complete all processes (Time)
4. Having fair financial practices (Financials)
5. The customer playing its part in improving supply chain social and environment sustainability (Shared Responsibility)

By following the Five Principles, and participating in Better Buying’s annual ratings cycle, brands and retailers can ensure they are building the foundation on which strategies for paying living wages can be built, and carrying out their own “annual health checks” to ensure the improvements they are making are having an impact.

If we are serious about  living wages, we need to take a more sophisticated approach to tracking progress on the range of purchasing practices that play a role in supporting or hindering suppliers’ payment of those. Changing a single practice may help, but may have unintended consequences elsewhere that create bigger obstacles to a suppliers’ financial health and the payment of living wages.

The Global Fashion Summit, in Copenhagen, is fast approaching. If we are serious about achieving living wages, we need to stop the wringing of hands about lack of progress, and the narrow focus on single solutions. Investors and others advocating for living wages need to start asking for holistic evidence about how brands and retailers are improving on the day-to-day practices that imperil the financial health of their suppliers, and persuading those brands and retailers to share data about practices supporting visibility, stability, time, financials, and shared responsibility.

Doctor’s orders!

Dr. Marsha Dickson, President and Co-Founder of Better Buying Institute and Irma Ayers Professor Emerita at the University of Delaware.

The Better Buying^TM  annual ratings cycle is open and collecting ratings until May 31st.