The Asia Floor Wage Alliance has been a dedicated advocate for living wages in the garment industry since 2007. Its report, released in May 2023, titled “Towards a Woman-Centred Living Wage Beyond Borders,” presents an in-depth explanation of AFWA’s cross-border living wage methodology.

by Sinduri Sappanipillai, Asia Floor Wage Alliance (AFWA)

The garment industry employs countless individuals globally, with a significant majority being women. Low/poverty wages are an appalling fact of life for these hardworking people in the industry. Minimum wages, in many instances, languish below the poverty threshold, often failing to protect workers from the grim clutches of destitution.

The absence of a sufficient minimum wage results in numerous garment workers having to put in extended hours in order to earn extra pay/over time. This compels them to accept work even when working conditions are unsafe or when they are unwell, as they cannot afford to refuse. Additionally, the meagre wages force these workers to frequently resort to loans simply to make ends meet, leaving them with no savings to rely on in case of unemployment or unforeseen expenses.

Importantly, the financial burden of domestic unpaid labour and caregiving responsibilities, such as childrearing and looking after the elderly, which is typically shouldered by women within households, goes entirely unaddressed. Simultaneously, on the other end, global brands and retailers entrenched within the garment supply chain amass staggering profits. They capitalise on the cutthroat global competition for foreign direct investments, further exacerbating this stark divide between prosperity and hardship.

A living wage is the wage that is necessary for a worker to meet theirs and their family’s basic needs, and have a small amount of savings for unseen circumstances.

The Asia Floor Wage Alliance (AFWA) has been a dedicated advocate for living wages in the garment industry since 2007. Its report, released in May 2023, titled ‘Towards a Woman-Centred Living Wage Beyond Borders,’ presents an in-depth explanation of AFWA’s cross-border living wage methodology, which has garnered international recognition and legitimacy since its public announcement in 2009.

Women Living Wage - Asia Floor Wage
Cover of the report ‘Towards a Woman-Centred Living Wage Beyond Borders’

Debate and history – Minimum wage vs Living wage

The debate surrounding living wages in labour-intensive industries has regained prominence over the past two years. Historically, the International Labour Organisation (ILO) has played a crucial part in proposing conventions and recommendations to both developed and developing nations regarding the establishment of mechanisms and frameworks for determining minimum wages. The concept of a “minimum living wage” was introduced by the ILO, encompassing both the minimum level of remuneration and an acceptable standard of living. Initially, the emphasis leaned toward the former (”minimum”) and became intertwined with the World Bank’s poverty alleviation program. However, it remained confined to this trajectory, failing to reach a universally acceptable standard of living for all workers.

AFWA’s approach to advocating for living wages

Before the inception of AFWA, brands within global garment supply chains had pre-established responses to garment workers’ demands for living wages. They often asserted that they were already paying living wages, exploiting the confusion between minimum and living wages. Some would argue that there was no unified definition of a living wage within the labour movement, making it impractical to implement. AFWA reintroduced the concept of the “minimum living wage,” and transformed the minimum living wage into an actionable concept and initiated a regional strategy by developing a consistent benchmark for living wages across borders. This explained the disparity between living wages and minimum wages, and revealed that the latter barely surpassed the poverty threshold.

The Asia Floor Wage (AFW) concept was developed as a regional wage formulation demand that would serve as a living wage in garment industry manufacturing in Asia. The methodology is significant for several reasons:

In AFWA’s methodology, a living wage is based on the needs of workers and their families, known as the “family wage”. This family-centric approach ensures that the living wage estimation aligns more accurately with the actual needs of workers and their families.

AFWA recognises that families come in varying sizes and compositions. Based on a survey of family sizes in Asia, AFW is based on a family comprising 3 adult consumption units. Each adult in a household is treated as 1 consumption unit and every child as half a consumption unit. Therefore, 3 consumption units can include 1 worker and 2 adult dependents, 2 adults and 2 children, or 1 adult and 4 children.

AFW is anchored in food costs based on the internationally accepted Engle’s Law that shows that lower-income countries (in this case, garment production countries) spend more on food costs than higher income countries. AFW is based on an adult, engaged in physical labour, needing 3,000Kcal a day to perform their work effectively (using the benchmark set by the Indonesian government). The ILO has recently confirmed this 15 years after AFW was first made public in 2009. In 2022, the ILO’s report on minimum wage methodology defined 2950 calories as the norm. AFWA calculates the living wage for a family in the garment industry by scaling up the monthly total of food and non-food costs by 3 consumption units.

AFWA’s living wage methodology is a blend of bottom-up and top-down approaches. It draws on need-based surveys conducted among garment workers across various Asian countries, leveraging workers’ unions and associations for labour organisation and negotiation with global brands regarding living wages.

Women Living Wage - Asia Floor Wage
Women at work. The majority of the workforce in the garment industry is women.

Women-centred approach

AFWA’s definition of a living wage adopts a women-centred perspective by steadfastly assuming a single-earner family for a standard 3-consumption family unit. This ensures a specific earner dependent ratio (1:3) which recognises the importance of unpaid household work, including care work, which is vital for families and primarily carried out by women, making it unique from any other existing methodologies.

A right to living wage

The estimation of a living wage is independent of the number of hours worked per day or per week. Given the prevalence of overtime work in the garment industry, it is vital that the living wage is based on a minimum number of working hours or a standard working week. AFWA determines the standard to be no more than 48 hours a week, 8 hours a day considering the 6-day workweek in the garment industry to cover basic needs and provide a decent standard of living.

In contrast, the current reality of garment workers is that most of them work long hours (often exceeding 10 hours per day) to inch their income just above the unsustainable poverty-level minimum wage. This situation perpetuates a cycle of debt and financial insecurity, as the wages earned are often insufficient to meet the basic needs. For instance, at the outset of the pandemic, brands abandoned workers in their supply chains and women were left to fend for themselves and their families through any means, which entailed reducing their consumption, taking on huge debt, and selling meagre assets to cover the costs of basic survival.

It is crucial to note that the living wage is exclusive of benefits and allowances such as healthcare, pension, provident fund, overtime wages and performance allowances. Given that the employers in the Asian garment factories generally do not bear these costs, it becomes important that the living wage is sufficient to meet basic needs regardless of employers’ contributions.

Cross-country approach

AFWA’s analytical approach and strategy have culminated in a methodology for formulating the unique cross-border living wage at the Asia level. The advocacy strategy hinges on a comprehensive analysis of power dynamics within the global garment supply chain, urging apparel brands to shift from coercively suppressing labour costs to progressively realising a living wage by adjusting their pricing mechanisms with suppliers. AFWA’s regional living wage formulation alleviates a significant concern in production regions—the threat of brands relocating their operations and pitting one country against another.

Importantly, AFWA’s living wage methodology offers a regionally tailored solution that carefully aligns with national economies without disrupting their competitiveness. The AFW concept uses the World Bank’s purchasing power parity (PPP) dollar as a common currency to compare a regional or cross-country floor for living wage.

AFW – Survey and findings

AFWA regularly updates the Asia Floor Wage (AFW), which represents the living wage, using food basket surveys conducted in various production countries across Asia. Additionally, more recently, AFWA has been conducting comprehensive consumption surveys. The latest survey – Household Consumption Expenditure Survey (HCES) was conducted in 2022.

The Findings

The calculation of the food cost is based on the daily caloric needs of an adult worker engaged in physically demanding work, set at a standardised value of 3000 calories. The non-food costs, encompassing expenses such as housing, clothing, healthcare, reproductive health, fuel, transportation, education, and more, are simplified in the AFW by representing them as a factor of the food cost. The ratio of food to non-food costs is 45:55, and this adjustment was reaffirmed in 2022.

The report’s findings are based on surveys conducted with 1686 garment workers across seven countries: Bangladesh, Cambodia, Indonesia, India, Myanmar, Pakistan, and Sri Lanka, spanning 206 garment factories. The majority of those surveyed were women aged between 18 and 49, many of whom were responsible for supporting families with children under the age of 15. The Household Consumption and Expenditure Survey (HCSE) employed a structured interview schedule to gather data on consumption levels, categorised into six sections: (1) Basic worker profile, (2) Employment details, (3) Food consumption and related expenses, (4) Non-food consumption and related expenses, (5) Ownership of assets, and (6) Housing and living conditions.

The industry predominantly employs young workers. This raises significant concerns regarding the future prospects of women workers after they are pushed out of the industry at middle age, often with little or no social security and no savings due to having earned only poverty level minimum wages.

Differences in family size among workers across various countries are notable, with Indonesia having the lowest average family size at 3.6 and Pakistan registering the largest at 5, making it challenging for women workers to live with minimum wages. For example – In Pakistan, where the average family size is 5, women often face significant challenges as they are frequently the primary breadwinners earning minimum wage salaries. Additionally, 46% of households in Pakistan have at least one child aged 6-18 years, and 54% have children below the age of 6, making it even more challenging for women to provide for larger families while taking care of their children and households.

Despite the diverse composition of the garment workforce in each country, a striking similarity emerges in terms of cost-of-living expenditures and the constituents of both food and non-food items across the Asian region. This similarity justifies the selection of Asia as the unit of analysis for establishing a 45:55 ratio between food and non-food items, thereby enabling the creation of a consistent and regionally equivalent standard for estimating living wages.

A significant proportion of the workforce are engaged in temporary, casual, or irregular employment, with predominant presence of women with more dependents, and a lack or insufficiency of social security benefits.

The caloric statistics and the substantial disparities observed throughout the region give rise to profound concerns. For instance, in Sri Lanka, survey respondents reported consuming an average of 1834 Kcal/day at a cost of 271 LKR per day, which is among the lowest recorded figures. These consumption figures fall significantly below the international poverty thresholds, painting a stark and troubling picture of the widespread poverty and hunger that persists within the industry due to the current wage structures.

There is limited asset ownership, a prevalence of rented housing or a lack of ownership of homes or land, and restricted access to essential amenities such as sanitation facilities, and adequate healthcare infrastructure in urban areas.

Women Living Wage - Asia Floor Wage
Workers are observed engaging in work on the production floor. Women, with dependents often hold temporary jobs lacking social security benefits.

Imagine the impact of having a living wage. Instead of working excessive hours just to make ends meet, the workers, predominantly women, would be able to earn a fair wage in a 48-hour workweek. The additional few hours of free time would be transformative, in terms of quality of life. This means having the opportunity to spend more time with their children and family, being present for important moments in their children’s lives, nurturing and supporting them. They can have the joy of seeing their children grow, helping with homework, playing together and fostering strong family bonds while pursuing their own passions and interests.

Further, an extra few hours in terms of money can have a profound impact on the quality of life. It means being able to afford essential items like nutritious food, safe housing, and reliable transportation and healthcare.

As a reader, take a moment and share your thoughts on what having a living wage means to you. How does it enhance your life? How does it feel to have the financial stability to spend more time with loved ones, pursue your passions, or engage in activities that bring you joy? Feel free to share your thoughts and experiences!