How to Make a Bigger Impact with WageIndicator's Living Wages

By JanPaul Grollé, WageIndicator strategist

Informing local stakeholders about wages helps local workers, employers and governments to agree changes for better conditions. To make an even bigger impact we should also inform consumers, so they can reward fair conditions with fair prices.

WageIndicator aims to support the development of fair wage practices, by informing employees and employers about real and minimum wages, and since 2013, also about living wages. This information allows people all over the world to compare their wages with others, to legal obligations, and to local cost levels. It enables them to represent themselves and increase their chances of agreeing better wages. However, in many places this is not enough to make a sufficient impact, because it does not change the local power balance. This is why to make a bigger impact, we should involve the stakeholder who can exert the most influence of all: the buyer.

Low Wages, Slow Change

In most developed countries consumers are concerned by the way their clothes, food and electronics are being produced. Although they like low prices, many are bothered by suspicions that these are only possible because of workers being paid very low wages and withholding them the most essential conditions in health and safety. Since the Rana Plaza disaster in Bangladesh concerns about work conditions have taken center stage in the discussion among conscious consumers. International brands have taken up initiatives to improve the rights and conditions of workers, but at the same time their planners and buyers will continue to look for lower prices, driving wages down and jobs away. Local governments are hesitant to force improvements. They argue that they are concerned about driving jobs away. The bottom line result: change is happening slower than many would like to see.

The Consumer’s Dilemma

Meanwhile, conscious consumers have a hard time distinguishing between brands which are profiting from unfair wages and conditions, and the ones which try to ensure fair conditions throughout their supply chains. A consumer may believe that the cheapest brands are sure to be exploiting workers somewhere to enable their low price levels, but the price advantage could just as well come from scale advantages and a better business execution. Avoiding cheap brands is no solution. There is no guarantee that even a single cent of the price premium paid for more expensive brands ends up with workers.

A small section of very motivated consumers reads some of the corporate social responsibility reports of their favorite brands. This might give an accurate indication of the efforts by brands, and their awareness and attitude about unfair work conditions. But it is very hard to get indications of their real performance in paying fairly, and not just good intentions and programs. Consumers need to know what is being paid (versus local cost levels) to all workers in a brand’s supply chain. Then they can distinguish better and worse producers and brands, and may choose better brands.

What’s In It for the Brands

In a future where (mobile) internet penetration will approach one hundred percent everywhere, transparency is bound to increase. If information on relative wage levels would become available, some brands would be exposed for paying too little, while other brands would be proven as genuinely safeguarding fair wage levels in their supply chains. The favorable brands will want to show their performance in a reliable and objective way, while the unfavorable brands will need to at least monitor their performance to decide on their priorities. WageIndicator’s living wages would be useful benchmarks for both, because they are measured in one globally consistent way. Most other living wage methodologies are based on input from local stakeholders, which helps their validity locally but can cause differences across locations in what locals see as necessities. Also, the local bottom-up process is quite costly and is typically only revisited once every five years, while WageIndicator’s crowdsourcing process continuously collects new prices.

Collecting Wages for Every Producer

Next to providing living wages as benchmarks, WageIndicator could also help collecting the actual wages at specific employers’ establishments, at the request of brands who would want to measure the wages being paid among their suppliers. We are experimenting with self-reporting templates which brands can request from (prospective) producers, but also with methods to collect wages from employees directly, and with ways to involve local trade union representatives in flagging any inconsistencies. One of the most important challenges is to offer these processes as attractive propositions to brands, to generate revenues which can be invested into building a platform.

There are still many hurdles to overcome before we will get to a fully functioning platform, which can deliver reliable wage levels for specific producers and aggregate them into average scores for all suppliers of particular brands. With or without WageIndicator, these hurdles will be taken, helped by near-complete penetration of mobile internet users, new verification methods to identify users, and much more advanced and intense use of social media. WageIndicator has a unique set of data, expertise and relations, which can speed up this development. Our aim is to inform consumers about the wage levels behind international brands, so they can vote with their wallets, which will exert real pressure on producers all over the world to pay fair wages.

How to Get Through to the Consumer

One major remaining challenge will be to reach the consumer. Our wage ratings will compete with a million other information bits all vying for attention daily. WageIndicator is not planning to establish its own separate certification label. Instead, we are co-operating with other, broader certification labels, which include fair labor conditions next to other issues like sustainability, carbon footprint, or animal rights. We are relying on the brands with favorable wage ratings to communicate these to their customers.

Beyond Wages

Wages are only a part of the total work situation. They are a well-focused issue which is great to start with, but we do not need to stop there. We can think of a way to grade all work conditions. WageIndicator also has a database of Collective Bargaining Agreements, currently allowing selection per country, sector and 100 topics. With the CBAs in a categorised database, it will be possible to invite workers and trade union representatives to rank the various clauses on each topic from least to most desirable. These ranks could be used to grade all CBAs on their average level of work conditions, which would give a measurable yardstick for every producer based on its CBA. We could calculate an average score for each brand by aggregating the scores of all producers in their supply chain, not just for their relative wage levels, but for all work conditions.

Metrics to Drive Continuous Improvement

When consumers will know about these scores and a sizeable number of them would respond by buying better brands, the brands will have an incentive to increase their score. They can incentivise their suppliers to improve conditions, or switch to other producers with better scores. The scores could be used to reach optimal buying: lowest possible cost for highest possible work conditions. Today still a CSR Director will visit producers with ethical demands, while the buyer from the same brand comes in the week after with new demands for lower prices. Instead, brands could allow their buyers to offer a carefully set premium price for demonstrably superior work conditions, because the increased average work conditions score can generate more revenues. Research along the way will be needed to show what specific mechanisms are most effective to achieve this.

To a Much Bigger Impact

We don’t need all consumers and all brands to join in this development. Even if a critical minority of consumers starts favoring a couple of fair paying brands over the rest, this could trigger large changes in an industry which fights over small margins and market shares. More importantly, every cent which is shown to be paid extra to workers adds to the local wealth, in contrast to local negotiations which can only create a different distribution of the same amount of money. It only takes a small percentage of the retail price in developed markets to add substantial amounts to the wage levels in producer countries. This is the much bigger impact which WageIndicator can contribute to, with its expertise, data, and network.