Discussing Fair Wages in China

Representatives of major brands, the Chinese Government, and the Fair Labor Association (FLA) gathered in Beijing on January 8 to discuss a new book examining wage trends at the global level. The book, Fair Wages – Strengthening Corporate Social Responsibility, sheds light on wage inequalities and unfairness facing workers around the world. It was authored by Dr. Daniel Vaughan-Whitehead, professor of corporate social responsibility at Sciences Po in Paris, who is responsible for wage practices at the International Labour Organization (ILO).

The book launch was chaired by Mr. Zhang Junfeng, Deputy Director of the Institute of International Labor and Social Security in Beijing, and brought in the perspectives of brands, suppliers, and Chinese trade unions. H&M, an FLA Participating Company, and Chengfeng, an FLA Participating Supplier, spoke about the need to support fair wages. Participants called for transparency from factories and buyers on wage expectations and costs, support from the local government, and the need to set long-term objectives in wage policies. Auret van Heerden, President and CEO of the FLA, opened the event by introducing three key concepts: responsibility, sustainability and fair wages for a fair society. These ideas were echoed throughout the day as participants discussed the way forward toward more equitable wages in factories in China.

Professor Daniel Vaughan-Whitehead highlighted some key issues, which sparked an engaging discussion between the speakers and the audience:

  • The reasons behind, and the trend of, growing wage disparity, with the gap between the rich and the poor becoming only more polarized in most economies.
  • The growing debate around the legal minimum wage – what does it mean as compared to living wage, and what is the appropriate level for minimum wage?
  • Pay systems, and the benefits of mixed payment systems rather than the typical piece-rate system employed in most factories worldwide.
  • Insufficient overtime payment and lack of transparency in reporting hours worked.

Visit www.fair-wage.org for more information, and learn more about the Fair Wage Approach.


FLA Hosts Training on Wage Issues in China

On January 3 and 4, 2012, FLA hosted a training session in Shenzhen, China, for accredited monitoring organizations and others wishing to learn more about the Fair Wage Approach developed by Daniel Vaughn-Whitehead of the ILO. During the training, attendees debated the piece rate payment system that is widely used in Chinese factories. This system pays employees per garment produced and is often implemented because it seems transparent and easily understood by both workers and managers. However, this approach can result in long working hours due to the incentive to produce a high quantity of goods. It also fails to build loyalty in the workforce and can lead to a poorer-quality product.

Some attendees suggested a mixed-pay system that could combine the piece rate system with performance incentives. These incentives could be quality-based, skills-based or even attitude-based, rewarding an employee for contributing to a positive working environment. This mixed approach, they said, could help keep the compensation system simple to understand and manage, while incentivizing workers to invest in their skills, the workplace atmosphere, and quality of the goods they produced.

Learn more about FLA’s approach to wage issues in supply chains.


Examining the Impact of Long Hours on Factory Workers

FLA’s research, assessments and surveys over the past two years confirm that excessive working hours have a negative impact on workers, often resulting in physical and psychological stress for workers and increased worker turnover. FLA surveys in China found that an estimated 50 percent of workers in the garment industry and 80 percent in electronics manufacturing work more than 60 hours per week, and an estimated 80 percent regularly work more than 7 days in a row.  Even more alarming is the fact that 20 percent sometimes work more than 24 consecutive days without a day of rest.

One argument some have used in defense of excessive working hours is that Chinese factory workers want to work more hours. This argument, however, does not paint the full picture:  45 percent of 1,766 recently-surveyed workers say that their salary would not be sufficient if they did not work more than 60 hours per week. In fact, 40 percent said their salaries were not sufficient to cover basic needs, such as education, health care and housing. In addition, 50 percent of workers reported that excessive working hours make them feel isolated and more prone to sickness.  Many said that they did not get to spend enough time with their families. Only 20 percent of workers felt satisfied with their job.

Shanghai_HOW_event

Brand, factory and supplier representatives gather at an FLA event to discuss solutions to problems caused by long work hours.

Data obtained by FLA shows that those who spend an excessive number of hours at work are eight times more likely to be unhappy with their job than those with regular hours. In addition, they are six times more likely to show signs of poor mental health.  In short: long working hours create risks to workers’ wellbeing and undermine factories’ retention efforts and long-term productivity. Because of the harmful impact that long hours have on workers, the FLA Workplace Code of Conduct, which is based on international labor standards, states that “the regular work week shall not exceed 48 hours…Employers shall allow workers at least 24 consecutive hours of rest in every seven-day period…[and] the sum of regular and overtime hours in a week shall not exceed 60 hours.”

On September 20, FLA Shanghai hosted a networking event and brief workshop for suppliers and brands operating in or sourcing from factories in China. Session facilitators asked participants to consider how to improve relations at hypothetical “Factory A,” which has high working hours. Read the rest of this entry »


Minimum wage a sensitive issue for Hong Kong workers, companies and consumers

A recent survey by Oxfam Hong Kong showed that more than 81 percent of Hong Kong residents would be “less inclined to patronise a company that violated the rights and interests of its employees.”  The survey comes just weeks before the statutory minimum wage goes into effect May 1.  According to Oxfam, some companies may cancel paid meal breaks and eliminate rest days to counter the cost of paying the minimum wage.  The majority of respondents opposed these measures, and “agreed that respecting workers’ rights is part of a company’s social responsibility.”  Read more from Oxfam Hong Kong and review the report here.

Wage fairness is more complex than just the money; the minimum wage may veil undue wage disparities or may not appropriately reflect worker productivity. It is essential that all stakeholders continue working together towards making wages fair for all workers.  Read more about FLA’s work on wage issues.


Wage Fairness: It’s not just about the money

Most corporate social responsibility work on wages has focused on whether a workplace meets a certain level of compensation, usually the legal minimum wage. But fairness of wages and, crucially, perception of wage fairness, are more complex than that. Even if a factory pays workers the national minimum wage and meets other legal requirements (e.g. pay the legally-required wage on time and in full; pay for the proper number of hours worked) it may nevertheless have unfair wages because of undue disparities in wages within the enterprise or because wages may not reflect worker productivity. In addition to meeting legal requirements, a factory must also consider wage levels in light of prevailing wages and cost of living; rates of wage adjustments, pay systems such as the bases for wages, overtime and wage deductions; and how pay systems are communicated and discussed with workers.

Working in collaboration with FLA and its affiliates, Daniel Vaughan-Whitehead of the International Labor Organization has developed a measurement approach that looks at twelve dimensions of fair wages.[1] Based on this approach, and the accompanying research, the FLA has created a self-assessment tool that companies and factories can use to assess whether their wage practices are fair and sustainable.

According to Daniel Vaughan-Whitehead, the following dimensions should be considered in order to ensure workers’ wages are fair:

  1. Payment of wages: A wage which is regularly and formally paid in full to the workers.
  2. Living wage: A wage that ensures minimum acceptable living standards.
  3. Minimum wage: A wage which respects the minimum wage regulations.
  4. Prevailing wage: A wage which is comparable to wages in similar enterprises in the same sector.
  5. Payment of working time: A wage that does not generate excessive working hours and properly rewards normal working hours and overtime.
  6. Read the rest of this entry »