Living Wages: Recurring problems of ethical fashion in Sri Lanka?

Living Wages: Recurring problems of ethical fashion in Sri Lanka?

Annelies Goger and Kanchana N. Ruwanpura

When Beyoncé and U.K. fast fashion retailer Topshop made a decision to source her new gym wear label, Ivy Park, from Sri Lanka, a head-on encounter with the sweatshop debate was probably not on their radar. MAS Holdings, a company that produces clothing for Ivy Park, is one of Sri Lanka’s largest clothing manufacturers and has gone to great lengths (and expense) to cultivate a reputation for being one of the world’s most ethical and innovative clothing suppliers – from building the world’s first eco-friendly apparel plant in partnership with Marks & Spencer to its “MAS Women Go Beyond,” a women’s empowerment initiative, among other initiatives.

Yet, a U.K. tabloid, the Sun on Sunday levied harsh accusations that the workers producing Ivy Park clothing at a MAS Holdings factory were toiling under “sweatshop” conditions, as “slave” labor, with low wages. Various other newspapers, blogs, and op-eds followed suit, some arguing that Beyoncé et al., can solve this if they “switch suppliers.” These are not new allegations for the clothing industry—the global anti-sweatshop movement is over twenty years old and has taken on diverse institutional and organizational forms. So what is new this time? What is going on? Who is responsible?

As academic researchers who have worked on various dimensions of ethical trade, management, and labor practices in Sri Lanka for several years, we wanted to share our account of how the Sri Lankan apparel industry fits within the ethical sourcing landscape of global supply chains today. We argue that a focus on wages as a centerpiece of what counts as “ethical” manufacturing is remarkable in this incarnation of the sweatshop debate.(1)

Although the living wage issue is certainly not new, it is significant to make low wages the main determinant of what it means to be unethical and to use Beyoncé’s support for the feminist cause as leverage to shame suppliers for low wages. This matters because even as we write this, in Sri Lanka’s negotiations over the GSP+ trade preferences, Europe and the EU remain silent on living wages. Living wages are rarely incorporated into corporate and multi-stakeholder compliance codes that govern global supply chains. It is even more rare for buyers to document progress in achieving them.

Apparel is commonly portrayed as a foot-loose industry that moves around in search of the lowest wages—the assumption being that wages are the most important factor in sourcing decisions. As many have argued, however, wages only make up 0.5% to 4% of the final retail price, on average. In many cases, a doubling of wages for workers will not have a substantial impact on margins or final prices, because the share is so low to begin with. By comparison, clothing retailers have much more capital at risk when they over-produce clothing and then have to mark it down. This is why a highly capable supplier that can produce smaller batches will be more competitive than one that offers the lowest price.

From 2008-2011, the global apparel industry was facing not only the global economic recession, but also the final removal of Multi-Fiber Arrangement (MFA) quotas, which regulated apparel trade since the 1970s. The MFA phase-out lifted restrictions from high-volume producing countries, such as China, which flooded apparel markets and increased downward price pressures. In this context, buyers gained bargaining power to place more demands on suppliers at a lower price.

Sri Lanka’s response to these challenges was to focus on its’ niche in brand-conscious “ethical” apparel. As we have documented elsewhere, Sri Lanka was in a position to do this in large part due to a longstanding history of strong labor laws and local norms that value education and prohibit child labor. Since the early 2000s, many Sri Lankan industrialists put ethical production at the core of their business model and cultivated a reputation as highly capable and visionary suppliers–domestically and internationally. Highly capable suppliers are responsive to buyer demands, such as meeting compliance or quality standards, managing upstream supply, or providing quick-turnaround production.

As a result, MAS Holdings and many other leading Sri Lankan suppliers tend to perform very well in meeting conventional monitoring and compliance standards. Yet, the concerns raised around wages by the recent media foray do hold water. Sri Lankan garment workers are not paid a living wage. As one of us has argued elsewhere, wages are the Achilles heel of the Sri Lankan apparel industry.

Minimum wage levels matter, because codes of conduct frequently defer to national laws to set standards. The Wages Boards Ordinance (WBO), a tripartite body, regulates minimum wages in Sri Lanka. Sri Lankan law requires employers to pay garment sector workers on a monthly salary basis (not on an hourly, daily, or piece-rate basis). According to the Sri Lanka Department of Labor website, the minimum wage for sewing operators in Sri Lanka was last increased in 2013, and it is currently at 10,075 Sri Lankan Rupees per month (US$66, conversion on 6/2/2016). Wage increments determined by the WBO often do not keep pace with inflation.

As the International Labor Organization documented, Sri Lanka’s minimum wages are among the lowest in the world for garment-producing countries—lower than regional competitors India and Bangladesh. Sri Lankan wages remain lower than India and Bangladesh even after adjusting for purchasing power parity, using 2014 World Bank World Development Indicators. While the responsibility for the failure to adequately protect worker welfare rests with the state, given that the WBO is a tripartite body, employers, the state, and unions are all culpable in this outcome.

Apparel companies may argue, in response, that prevailing wages are much higher than the minimum. However, based on our research in several factories in 2011, operators were paid between 15,000 to 20,000 Sri Lankan Rupees per month. These wages included productivity incentives, attendance bonuses, and overtime pay. Campaigners, such as Asia Floor Wage, have calculated a living wage figures for Sri Lanka to be much higher.

For Sri Lankan apparel companies, the lack of paying its workers a living wage poses very real risks. Recently, the Modern Anti-Slavery Act in the UK has increased governance of supply chain procurement. For example, suppliers will bear responsibility if low wages compel their workers to engage in commercial sex work. The ongoing problems with extreme poverty, overcrowding, and unsanitary living conditions outside Sri Lanka’s largest export processing zone, Katunayaka, are also a verifiable reminder that apparel worker wages are woefully inadequate.

In closing, now that the living wage issue is at the forefront of the ethical trade debate, Sri Lankan suppliers may need to adjust their business models to account for the risk of tarnishing their Garments without Guilt brand. The Sri Lankan government, in turn, has a role to play in setting a minimum wage that adequately protects worker welfare and moves the country from being at the back of the pack, globally. Given uneven power dynamics, global buyers themselves have much more work to do to ensure their sourcing practices result in prices that make a living wage possible.

(1) The issue of freedom of association, mentioned in the expose, is also important and more complex than the narrative assumes, but we chose to focus this piece on the wage issue given a lack of space.


Annelies M. Goger is a Senior Research Associate at Social Policy Research Associates, in Oakland, California, where she conducts labour and education policy research. She received her Ph.D. in Geography from the University of North Carolina at Chapel Hill in 2013, with dissertation research on ethical trade in the Sri Lankan clothing industry. The first author’s research was supported by the Social Science Research Council International Dissertation Research Fellowship (with funding from the Andrew W. Mellon Foundation), the U.S. National Science Foundation, and the Fulbright U.S. Student Program in Sri Lanka. Kanchana N. Ruwanpura is a Reader in Development Geography at the Institute of Geography, University of Edinburgh and Co-Director at the Centre for South Asian Studies at her home academic institution.  She has her PhD from the University of Cambridge and has been researching on Sri Lankan apparels since 2008. Authors are placed in alphabetical order; the funding for the second author came from the ESRC Grant Number: RES-0161-25-0181.