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What would loosen the roots of labour exploitation in supply chains?

Forced labour is a symptom of a wider malaise facing workers in global supply chains. Governance gaps and skewed business structures are exacerbating inequality and must be tackled for workers to be properly protected.

‘Revealed: Asian slave labour producing prawns for supermarkets in US, UK’, ran one of the many headlines in the last year that linked the UK to violations of labour rights in global supply chains. Others highlighted child labour in our chocolate, trafficking in our tea and slavery in cotton. There are more cases—of course—these just attract headlines because they involve consumer brands.

The stream of exposés is difficult to square with corporate sustainability reports, which tend to focus on environmental metrics and highlight success stories. In sectors with systemic labour issues, social compliance programmes and corporate social responsibility (CSR) projects are currently akin to pruning a field of weeds, while leaving the roots undisturbed.

Low wages, job insecurity and absence of worker representation were key findings from three recent Oxfam studies conducted with companies, including a study of labour standards in Unilever’s Vietnam supply chain, a study with IPL in Kenyan flowers and green beans and a study with Ethical Tea Partnership into tea pickers’ wages in three countries. The latter found that wages were a long way below the poverty line in Assam (India) and Malawi, despite meeting legal minima and providing in-kind benefits, as shown below. Since publication Oxfam has worked in a coalition of stakeholders to tackle the wage issues.'

Value of minimum wage rates set by national or district governments in each research area compared to international poverty lines (3 unit household with one earner)

Source: Understanding Wage Issues in the Tea Industry, a report by Oxfam and Ethical Tea Partnership published in May 2013, with IDH and Ergon Associates.

Based on its research, Oxfam developed the concept of a ‘Work Spectrum’ for its new briefing paper Steps towards a living wage in global supply chains. At one end of the spectrum sits forced labour which ‘does harm’ to workers and is clearly illegal. The next column contains ‘low-road’ jobs that trap millions of workers in poverty. Wages may be legal but they are very low, contracts are insecure, hours are excessive, and there is no worker representation. Next are ‘medium road’ jobs which ‘do some good’ and finally ‘high road’ jobs which ‘do good’: they provide secure work on a living wage with good worker representation. Oxfam is particularly concerned about the ‘low road’ jobs, often held by women, which provide no net benefit to families or communities yet are proudly reported by business as ‘providing jobs’.

A 2014 media expose in The Observer linked the very low wages in Assam’s tea industry to the trafficking of teenage girls into domestic servitude. In March 2015 Nazdeek, an Indian NGO, expressed its outrage that a new wage settlement is below the legal minimum wage. When workers cannot work their way out of poverty however hard they work, as here, household members are much more vulnerable to trafficking and child labour.

Governance gaps

We can't get a handle on forced labour and ‘low road’ jobs without understanding the governance gaps and business structures that allow them to thrive. Governance gaps have opened up because labour regulation is national but the market place is global, and governments (of all persuasions) are prepared to sacrifice the labour standards of their citizens in a ‘race to the bottom’ for trade and investment.

Under the prevailing business model of shareholder ownership, powerful shareholders and executives extract profit from value chains in the short term by taking an excessive share of income for themselves while pushing cost and risk down onto the most vulnerable. In Asia’s garment industries, for example, wages have declined in real terms in the last decade, while during the same period the incomes of the UK’s top CEOs doubled to £4.25 million.

Governance gaps and skewed business structures constitute a perfect recipe for growing economic inequality. The report that launched Oxfam’s global campaign to tackle this, Even it Up: Time to End Extreme Inequality, showed that over the last 25 years income from labour has made up a declining share of gross domestic product (GDP) across low-, middle- and high-income countries alike. Around the world, ordinary workers are taking home an ever-dwindling slice of the pie, while those at the top take more and more.

Labour’s declining share of the pie

Source:  Global & Local Economic Review; an elaboration from data generated by the UN Global Policy Model (2013), reproduced in Oxfam’s report Even it Up: Time to End Extreme Inequality (2014).

As business and a wealthy elite increase their power, they often wield their influence with governments by lobbying to keep regulation light, in a process known as ‘political capture’. In the last month The Guardian has highlighted lobbying in the US against rises in the minimum wage, and research by Spinwatch that 300 staff working for British peers and MPs have lobbying interests, whose activities continue to be hidden from public view.

What needs to change for workers to be properly protected?

Some developments point the way:

• Governments raising the minimum wage: Brazil raised its minimum wage by nearly 50 percent in real terms between 1995 and 2011, and poverty and inequality duly fell in step.

• Unions negotiating sector agreements: fast food workers flipping burgers for McDonalds and Burger King earn $20 an hour in Denmark as against $8.90 in the US, as the Danish workers are protected by a sector collective bargaining agreement.

• Employers choosing to pay a living wage: over 1000 companies and charities have been accredited as living wage employers in the UK (including 21 of the FTSE 100, up from two in 2012).

• Lobbying to raise the playing field: In 2014, following months of unrest in Cambodia, eight garment brands wrote to the government promising to factor higher wages into their pricing; two months later, the government raise the minimum wage by 28 percent. In the UK, joint advocacy led by Ethical Trading Initiative led the government to include a Transparency in Supply Chains Clause in the draft Modern Slavery Bill.

• Driving a race to the top: Oxfam’s Behind the Brands campaign has prised policy commitments out of global food and beverage brands and onto their websites, giving the public and investors rare comparative information on how companies approach systemic issues in their supply chains.

But for value in global trade to be shared more equitably, exploitation to be penalised and good quality jobs to become the norm, two other changes stand out as being needed:

1. A normative framework for ‘decent work’: At a high policy level, there is no ‘normative framework’ for decent work, including a living wage. This would include principles and key performance indicators that enjoy wide acceptance, which would generate positive change in businesses and guide investor decision-making. Examples include representation of workers on compensation committees, measures of a living wage in supply chains, rewards for direct employment and penalties linked to an ‘exploiter pays’ principle.  

2. More meaningful corporate reporting:  There is a need for published, evidence-based analyses of political social and economic issues by sector and country. These would be undertaken by professional researchers, such as universities, with input from civil society organisations. Placed in the public domain, they would act as an information baseline against which corporate sustainability reports could be judged. This would encourage companies to be more honest in their reporting and more collaborative in addressing root causes, enabling stakeholders to separate greenwash from genuine progress.

In summary, forced labour is a symptom of a wider malaise in workplaces across global supply chains. Governance gaps and skewed business structures are exacerbating inequality and must be tackled for workers to be properly protected. An accepted normative framework for decent work and better corporate reporting are urgently needed.

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