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Statement on the Asia Floor Wage Alliance’s proposal

October 09, 2009

Herzogenaurach, 9 October 2009 – We welcome the efforts made by the Asia Floor Wage Alliance (AFWA), a coalition of labour rights organisations and trade unions, to formulate a living wage which has broad application across Asia. We also acknowledge and support some of their key observations regarding the weakness of collective bargaining processes in the garment industry, the failure of government minimum wage-setting to keep apace with cost of living increases and the general inadequacies in wage regulation and enforcement in the region.

It is widely acknowledged that the apparel sector is a low-margin mass production industry, one which offers large scale but low paid employment. As AFWA correctly observes, the base wages for workers in this industry closely track the legal minimum wages set by governments. With the introduction of a floor wage, as proposed by AFWA, total wages would be increased significantly. In the case of Bangladesh the floor wage (calculated on a purchasing power parity basis by AFWA) would demand a six fold increase, compared with the current minimum wage, in Sri Lanka it would be a three-fold increase. This raises an important question about the economic viability of such proposals. Can a garment manufacturer or textile producer remain competitive if they adopt the suggested floor wage?

The answer, AFWA believes, lies in the concept of redistributive justice and an expectation that international buyers would respond by paying more for their goods. In a highly competitive global market this would demand that agreement be reached with all international buyers, en bloc, and ultimately this would be passed along as increased prices for the end consumer. As AFWA has itself observed, however, the reality is that “in the major consuming countries in Europe and the US, the retail price of garments has been falling for some twenty years now.” Indeed such price deflation is set to continue, as consumers seek out lower-cost goods during these troubled economic times.

The adidas Group believes that wages in our own supply chain should meet basic needs and also provide for reasonable savings and expenditure. Indeed it is our long term goal to partner with suppliers who progressively raise employee living standards through improved wage systems, benefits, welfare programmes and other services which enhance quality of life. We therefore share with AFWA a common desire for workers to secure just and favourable remuneration for their labour. In the coming months we will engage with AFWA to understand more about their proposals, and to openly debate and discuss the practicalities of translating living wage concepts into a meaningful improvement in the wage conditions for garment workers in Asia.