H&M praised by media for committing to pay poverty wages

Last week several media outlets applauded H&M for committing to raise its purchasing prices to meet the increased legal minimum wage for the garment sector in Bangladesh. H&M is reportedly the first global brand to tell its Bangladeshi suppliers it will do so. While this may be true, the praise heaped upon H&M is unwarranted, and the fact the industry and media applaud it is indicative of a thoroughly broken system.

The new minimum wage is set at a meagre BDT12,500 (USD113) - an amount proven to be insufficient to sustain a family in Dhaka and below the World Bank extreme poverty line of USD2.15 per person per day. Trade unions in Bangladesh have repeatedly called on brands such as H&M to explicitly back their demand for BDT23,000 (USD208) and commit to paying prices to match a higher wage. H&M, like most other brands, made no commitment to increase prices paid to suppliers during the seven months of the wage revision, let alone publicly support a specific wage demand. This silence strengthened employers’ intention to aim low during the process: without the assurance brands would pay the increased cost, many factories feared for their survival with the constant looming twin threats of meagre profit margins and orders being redirected to even cheaper countries. Instead of reassuring suppliers and using their one chance every five years to put their money where their mouth is, brands waited for the flawed wage-setting process to settle on a conveniently low amount.

While brands’ social responsibility pages tout living wages and long-term supplier relationships, reality looks different. Not a single Bangladeshi garment worker in the supply chain of a major international brand receives pay that remotely resembles a living wage. When asked about workers’ wages, brands often assure that workers in their supply chain receive wages above the legal minimum. In the context of the garment industry, where minimum wages generally constitute a quarter to a third of a living wage, paying above the minimum usually still means paying a poverty wage.

At the same time, brands’ purchasing practices are a real hurdle to increasing those minimum wages. Brands’ relationships with their suppliers aren’t as rosy as the brands portray on their websites: instead of an equal partnership, the relationship is one of power imbalance. The brand sets the product price, sometimes even below the production costs; brands refuse to give assurances to factor in increased wages; and even regularly move their orders to a cheaper country. These purchasing practices continue to fuel labour rights abuses across the industry, including legally sanctioned poverty wages – because no employer or government is willing to risk a mass exodus of brands to the next cheapest destination.

Only in this context of defective purchasing practices is H&M’s commitment to absorb the new wage level into its prices something to celebrate. It should be self-evident to factor in the legal minimum wage when paying for a product primarily based on manual labour, and we should expect more from a company that already made a living wage promise to garment workers in 2013. Moreover, the new wage H&M commits to factor in is not a 56% wage increase as Bangladesh’s garment employer’s association (the BGMEA) claims. Taking inflation into account, it is merely a 14% increase to a minimum wage considered a poverty wage in 2018, when brands’ problematic purchasing behaviour also made commercial interests trump workers’ need for enough money for daily survival. This comes on top of decades of worker underpayment. In Bangladesh, as well as most other garment-producing countries, workers generally depend on overtime, loans, second jobs and skipping meals to make ends meet. For H&M to factor in the increase would only mean paying 14 cents more on a t-shirt sold for USD20.

Brands willingly let this happen and use their excessive power in the supply chain to impose outrageously low prices. They could easily change their practices, as only 5-10% of the price brands pay (FOB) is spent on labour costs. Tripling that wouldn’t bankrupt the wealthy companies that dominate the industry. Instead, H&M now earns praise for increasing its prices to meet the latest legal poverty wage. Workers were injured or killed in protests against this outrageous new minimum wage. Their needs and rights are wilfully ignored or neglected by those who hold power, including global brands like H&M. From a brand that has been making bold claims and commitments about paying workers living wages for many years, we should all be expecting much more than this.

The new minimum wage is set at a meagre BDT12,500 (USD113) - an amount proven to be insufficient to sustain a family in Dhaka and below the World Bank extreme poverty line of USD2.15 per person per day. Trade unions in Bangladesh have repeatedly called on brands such as H&M to explicitly back their demand for BDT23,000 (USD208) and commit to paying prices to match a higher wage. H&M, like most other brands, made no commitment to increase prices paid to suppliers during the seven months of the wage revision, let alone publicly support a specific wage demand. This silence strengthened employers’ intention to aim low during the process: without the assurance brands would pay the increased cost, many factories feared for their survival with the constant looming twin threats of meagre profit margins and orders being redirected to even cheaper countries. Instead of reassuring suppliers and using their one chance every five years to put their money where their mouth is, brands waited for the flawed wage-setting process to settle on a conveniently low amount.

While brands’ social responsibility pages tout living wages and long-term supplier relationships, reality looks different. Not a single Bangladeshi garment worker in the supply chain of a major international brand receives pay that remotely resembles a living wage. When asked about workers’ wages, brands often assure that workers in their supply chain receive wages above the legal minimum. In the context of the garment industry, where minimum wages generally constitute a quarter to a third of a living wage, paying above the minimum usually still means paying a poverty wage.

At the same time, brands’ purchasing practices are a real hurdle to increasing those minimum wages. Brands’ relationships with their suppliers aren’t as rosy as the brands portray on their websites: instead of an equal partnership, the relationship is one of power imbalance. The brand sets the product price, sometimes even below the production costs; brands refuse to give assurances to factor in increased wages; and even regularly move their orders to a cheaper country. These purchasing practices continue to fuel labour rights abuses across the industry, including legally sanctioned poverty wages – because no employer or government is willing to risk a mass exodus of brands to the next cheapest destination.

Only in this context of defective purchasing practices is H&M’s commitment to absorb the new wage level into its prices something to celebrate. It should be self-evident to factor in the legal minimum wage when paying for a product primarily based on manual labour, and we should expect more from a company that already made a living wage promise to garment workers in 2013. Moreover, the new wage H&M commits to factor in is not a 56% wage increase as Bangladesh’s garment employer’s association (the BGMEA) claims. Taking inflation into account, it is merely a 14% increase to a minimum wage considered a poverty wage in 2018, when brands’ problematic purchasing behaviour also made commercial interests trump workers’ need for enough money for daily survival. This comes on top of decades of worker underpayment. In Bangladesh, as well as most other garment-producing countries, workers generally depend on overtime, loans, second jobs and skipping meals to make ends meet. For H&M to factor in the increase would only mean paying 14 cents more on a t-shirt sold for USD20.

Brands willingly let this happen and use their excessive power in the supply chain to impose outrageously low prices. They could easily change their practices, as only 5-10% of the price brands pay (FOB) is spent on labour costs. Tripling that wouldn’t bankrupt the wealthy companies that dominate the industry. Instead, H&M now earns praise for increasing its prices to meet the latest legal poverty wage. Workers were injured or killed in protests against this outrageous new minimum wage. Their needs and rights are wilfully ignored or neglected by those who hold power, including global brands like H&M. From a brand that has been making bold claims and commitments about paying workers living wages for many years, we should all be expecting much more than this.

Anne Bienias, living wage coordinator for Clean Clothes Campaign, and Christie Miedema, campaigns and outreach coordinator for Clean Clothes Campaign.

This op-ed was published on 1 December 2023 on the blog of Business and Human Rights Resource Centre. The original version with all links can be found there.