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.


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 »