A string of fatal tragedies in Bangladesh over the last year has revealed the true price of cheap clothing. It culminated in April in a horrific building collapse that killed over 1,100 people. Loblaw’s Joe Fresh was implicated as among the clothing brands manufactured on site. What frequently follows these disasters is vague speculation on two points. First, how much does it cost to make the clothes we wear? More importantly, how much more would it cost if labour conditions were improved? The answer in both cases is “not much.” But exactly how much is “not much”?
We’ve made an attempt to put a specific price tag to the clothes on your back by working through actual production data—step by accounting step—to figure out how much more you’ll pay to improve pay and working conditions in Bangladesh, the world’s second largest garment exporter after China.
Here you’ll find three scenarios based on industry data from Boston-based O’Rourke Group Partners for a “men’s polyester active T-shirt.” One is their baseline production cost data, which we’ve based on the existing minimum wage in Bangladesh of US$42/month ($3,000 taka at the January 1, 2011 exchange rate). We then use that to build out two additional scenarios: one assuming a doubling of the current minimum wage plus factoring in the cost of fire and building safety improvements based on data from the Worker Rights Consortium; and another using a “living wage” figure from the East Asia labour organization Asia Floor Wage, which is considered at the high end of labour reform demands. Here we’ve factored in fire and building safety improvements as well.
As it turns out the cost increase to Western consumers is modest, even in the “high-end” scenario. To double the minimum wage and make fire and building safety improvements would raise retail prices 8%. To use the higher Asia Floor Wage, prices would rise 12%. However, because the safety improvements are one-time costs in both of these scenarios, the increase would actually fall after three years to 5% and 9%, respectively. At most, you’re looking at spending $2.08 extra for a T-shirt to improve the safety and wages of garment workers.
You can find our calculations and methodology here.
Now change appears to be coming. On May 13th various garment industry activist organizations announced that a deal had been reached between several, mostly European brands and a number of Bangladeshi and international unions including IndustriALL. Brands include H&M, the buyer with the biggest presence in the country, and also Inditex (owns Zara), Primark, C&A and Tesco. The agreement is called the Accord on Fire and Building Safety in Bangladesh. These brands now join PVH and Tchibo which signed in 2012, according to Scott Nova, executive director of the Worker Rights Consortium. By agreement these two had been waiting to be joined by at least two more brands before implementing the agreement’s initiatives. Loblaw signed on May 14th, getting in just under the May 15th deadline set by labour organizers.
Although a similar agreement was signed in 2012 in Indonesia, labour advocacy groups said the Bangladeshi agreement is unprecedented because not only is it legally binding, but it commits brands and suppliers to changing their pricing and sourcing practices. According to a statement from Toronto-based Maquila Solidarity Network, the agreement “provides for independent safety inspections, public reports on investigative findings, safety training for workers and management personnel, the right of workers to file complaints and refuse dangerous work, mandatory repairs and renovations, and the obligation of brands and retailers to cover those costs and to terminate business with any factory that refuses to make necessary safety upgrades.”
Dispute resolution will be subject to binding commercial arbitration if a steering committee made up of companies and unions is unable to solve an issue. Enforcement will take place in the courts of the brand’s home country.
Meanwhile in Bangladesh, the government has mandated a new minimum wage (the amount hasn’t been specified) retroactive to May 1, and says it will strengthen pro-unionization rules and collective bargaining, among other reforms.
It’s unclear how well the accord and government reforms will be implemented because it’s not the first time promises have been made and Bangladesh’s reputation for corruption is poor. It ranked 144th out of 174 on Transparency International’s corruption index for 2012.
MSN’s Kevin Thomas, director of advocacy, says the fact the accord is independent of government should help allay such fears. He’s less hopeful about the Bangladeshi government’s initiatives, but says, “I think that part of the key points of this agreement is that you’ve got some of the major buyers in Bangladesh working with some of the major trade unions and labour rights groups together to push on Bangladesh and I think that combination is going to be a powerful force.”
No dollar figure has been attached to the costs that will be borne by the brands, but according to labour advocacy groups they will be apportioned based on the amount of business each does in Bangladesh. A representative for Loblaw also declined to put a figure to the cost of reforms or when these changes would begin implementation. WRC has in the past estimated the work at US$3 billion over five years.
As for what happens to the brands—which currently include the Gap and Walmart—that haven’t signed up by the May 15th deadline, WRC’s Nova says without a trace of humour, “They turn into pumpkins.”