H&M says it will pay factory workers a ‘fair living wage.’ It doesn’t say what that means.

November 26, 2013

H&M's "roadmap." (H&M)

On Monday, H&M announced what looked like bold progress towards paying its factory workers something above poverty wages for the hours they spend pumping out flimsy garments. The Swedish company's "four-pronged approach" went into wide media release, and at a time when most other retailers are still dithering over how to help in the wake of the catastrophic building collapse in Bangladesh in April, positioned it as the socially responsible corporation to beat.

But how real are H&M's proposals? They're summarized on a cute one-pager, mostly rendered in the non-committal passive voice, as follows:

  • "H&M will support factory owners to develop pay structures that enable a fair living wage, ensure correct compensation, and overtime within legal limits. This will be explored by implementing the Fair Wage Method in our role model factories, from which we will source 100% of the products during five years."
  • "H&M's strategic suppliers should have pay structures in place to pay a fair living wage by 2018. By then, this will reach around 850,000 textile workers. Our strategic suppliers are currently 750 factory units producing about 60% of our products."
  • Starting in 2014, H&M will "Develop our price method to ensure the true cost of labor. By doing this we secure that we pay a price which enables our suppliers to pay their textile workers a fair living wage and reduce overtime."
  • "H&M will encourage governments to engage in a process to identify a living wage level, set a legal minimum wage accordingly and review wages annually thereafter."

Plus a few things about educating workers, strengthening unions, and strengthening their "social dialogue" project.

What's missing here? An actual number for what it'll pay workers. The closest H&M comes to that is saying it'll use the "Fair Wage Method" developed by Daniel Vaughan-Whitehead, who manages wage policy at the United Nations' International Labour Organization. The Fair Labor Association describes it as a 12-step way of determining whether rates are in fact fair, including factors like productivity and prevailing wages, and providing for annual review. But it's not exactly a formula, and therefore would be difficult to dispute when -- and if -- H&M arrives at a final number.

Those who've been working around these issues for a long time find the lack of specificity exasperating.

"If they want to pay living wages, they should pay living wages. They should give themselves a near-term deadline and give the world a number," said Scott Nova, executive director of the Worker Rights Consortium advocacy group. He was at a meeting in Stockholm a few weeks ago where H&M announced the initiative to stakeholders like labor unions and NGOs, and didn't make much of what it had to offer. "Just staying 'we're for a living wage, in 5 years we're going to pay an undefined amount in a subset or our factories,' that's not credible."

How much would paying a living wage even cost H&M? According to the WRC's calculations, labor comprises about 6 percent of a factory's costs, and only 1 or 2 percent of the final retail price. Bangladesh, where two of H&M's pilot factories are located, is proposing to double its minimum wage to about 31 cents an hour. The WRC estimates that a living wage would be more like $1.50 an hour. That would increase the price of a tank top, but not by much.

Meanwhile, H&M is already a member of the Fair Labor Association, which has a code of conduct that addresses adequate wages (the FLA certifies H&M's work only in China). Even so, it still pays the same rock-bottom prices as Wal-Mart and Nike.

"We've been down the road many times. This has all the hallmarks of fluff," Nova says. "Where H&M has the power to make it happen now is in the factories now. If they are willing to take the steps necessary, they can achieve it. Why are they not doing that, is the question."

Lydia DePillis is a reporter focusing on labor, business, and housing. She previously worked at The New Republic and the Washington City Paper. She's from Seattle.
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