Home / General / Can Walmart and Nike Afford Apparel Workers Making $40 More a Month? (Spoiler: Yes)

Can Walmart and Nike Afford Apparel Workers Making $40 More a Month? (Spoiler: Yes)

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While we are justifiably focused on the election, American corporations are still exploiting overseas workers and we aren’t paying any attention to that. Unlike those who claim that American apparel companies moving overseas are beneficient glorious job creators gifting work to the global poor, the workers themselves are real people with real demands. For example, Cambodian workers are demanding an increase in their nation’s minimum wage, from $140 a month to just under $180. That is not a lot of money. But the western apparel companies are making no statement affirming this demand except to say they like a transparent minimum wage. One can at least strongly suspect they actively are working behind the scenes to oppose it. Cole Stangler asks a bunch of experts on these issues, including myself, if these companies can afford the extra $40 a month. Um, yes.

Workers’ rights advocates believe that the U.S. and European brands should take a strong stance today.

“They should back labor unions’ proposed wages and they do have a responsibility,” said Irene Pietropaoli, a Myanmar-based consultant on business and human rights. “They are under no legal obligation to do so, but they clearly are key players in this debate and so have an ethical responsibility to show leadership, to influence the government when they can, to use their ‘leverage,’ to use the wording of the UN Guiding Principles (on Business and Human Rights).”

That landmark document, crafted and endorsed by the UN Human Rights Council in 2011, calls on companies to use their “leverage” to prevent “an adverse human rights impact” from taking place.

From labor’s perspective, that’s precisely what’s at stake. The Asia Floor Wage Alliance, an international alliance of trade unions and labor rights advocates that focuses on the garment industry, has calculated Cambodia’s “living wage” to be $283 a month—far above what local unions are demanding.

However, economic interests get in the way of such a rate, explained Auret van Heerden, senior advisor with the NYU Stern Center for Business and Human Rights and former president of the Fair Labor Association.

Suppliers are reluctant to hike wages because, for one, there’s no guarantee their buyers will absorb the higher labor costs. What’s more: garment factories typically operate on short-term contracts, lasting just a few months. If a factory owner decided to unilaterally raise pay, he risks losing future business. A buyer might react by sourcing elsewhere in Cambodia—or by simply finding cheaper labor abroad, in say, Bangladesh or Myanmar.

“A lot of the suppliers, privately, are accusing buyers, brands, of being really part of the problem because they’re cutting their prices on the one hand and they’re expecting them to absorb more costs on the other hand,” said van Heerden.

Of course, the brands themselves could simply sign longer-term contracts guaranteeing higher wages—but they don’t. And, at the moment, van Heerden explained, they’re likely reluctant to get involved in the minimum wage debate for fear of upsetting their business and political partners in Cambodia.

“If the brands do weigh in, they’re going to certainly antagonize government and the industry association, and they’re going to antagonize their own suppliers, frankly,” van Heerden says. “So they’re going to step on three sets of toes and not going to get any credit from the unions unless they want to sort of put themselves in bed with the unions, which is not a position they want to be in either. I can understand why they’d want to stay out of it.”

It is a complicated situation for the companies as they aren’t the only ones who don’t want to pay good wages. But the companies also have the ultimate power–it’s their product. They have the ability to commit to keeping a factory open in a nation that raises its wages or the ability to simply say that they are going to raise prices by $1 for a pair of shoes and that money goes to the workers. We should make them act to improve the lives of the workers making our clothing.

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  • DrDick

    Excellent piece. Of course raising wages for the workers, and the prices paid to the suppliers, would lower the rents collected by investors and management. Cthulhu knows we cannot do that!

    • Everything is about finance these days: putting more money in the pockets of the financiers at the expense of everyone else.

  • Brett

    They could absolutely stomach it. The impression I get from the article is that they’re mostly balking at any sort of long-term contract or commitment on it – they want to be able to ditch the country if cheaper production shows up somewhere else in the next few months (or suddenly cancel work if they don’t need to).

    They have the ability to commit to keeping a factory open in a nation that raises its wages or the ability to simply say that they are going to raise prices by $1 for a pair of shoes and that money goes to the workers.

    Can they actually guarantee that? I could totally see the higher payments disappearing into a morass of illegal local subcontractors doing wage theft. But I guess it did work under that previous agreement you highlighted in your book.

    • Sure they could guarantee it if they wanted to take meaningful control over their supply chains. Of course they don’t want to do that.

      • DrDick

        The only control they want over the supply chains is guaranteeing the lowest possible price to themselves. Clothing production costs only account for a tiny amount of the price.

  • bernard

    Can they afford it? Well, Nike’s 2015 net profits were $3.3 billion, which translates to $4.24 billion before tax.

    How much would the raise cost? Hard to find out how many workers there are in factories that supply Nike, but let’s call it 100,000. At $40/month that comes to ann additional $48 million a year, minus tax savings of almost $11 million, so $37.3 million – barely more than 1% of after tax profits.

    Their deal with LeBron James is said to pay James about $30 million/yr.

    • leftwingfox

      I’ve made this point repeatedly, but the house brand Jeans from Marks Work Warhorse in Canada used to be made in Canada, with a minimum wage of $10/hour, and were sold for $25-30. There is no way that The Gap is making $70 jeans in Honduras without massive profit margins.

      Lots of people seem to forget that branding and advertising create demand, and that a premium price point can create a perception of quality beyond economics 101 models.

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