Can a pricing model deliver due diligence on wage compliance in the apparel industry? An appraisal of the labour costing protocols of the Fair Wear Foundation and Action on Living Wages

Europe

OECD due diligence guidance recommends that buying companies develop pricing models which take into account a pro rata labour cost element sufficient to satisfy both minimum wage compliance and the basic needs of workers and their families’. Since pricing in apparel manufacturing is based on the buying and selling of sewing minutes, buying companies must gear their costing for living wage compliance through the labour minute value they pay as part of their manufacturing cost within an FOB price. A review of two initiatives (ACT and FWF) supporting the development of more transparent pricing models reveals major obstacles to achieving costing for wage compliance and the achievement of a living wage. The fragmented nature of apparel sourcing, the setting of margin by sourcing companies in advance of fob negotiations and a legitimate reluctance on the part of vendors to agree to full open costing frustrate the efforts to separately itemise labour minute cost. This article explores the structural requirements necessary to enable a pricing model which can fully satisfy the HRDD requirements regarding wage compliance in apparel supply chains.

File: Can a pricing model deliver due diligence on wage compliance in the apparel industry

Miller Doug