Codes of Conduct and auditing continue to be the primary methods through which global buyers attempt to uphold labor rights and standards in their supply chains. This form of private regulation was designed and built by global buyers and multi-stakeholder institutions in the global North. Apparel workers in the global South were never consulted in the design and implementation of the codes of conduct that affect their working lives. This begs the questions: “What do apparel workers care about?” “What aspects of codes are most important to them?”
To get to the bottom of this, Cornell Global Labor Institute researchers Sarosh Kuruvilla (Cornell) and Chunyun Li (London School of Economics) assembled labor turnover data from 622 factories in 28 countries, supplying to a global apparel retailer. The authors reasoned that the turnover data is useful in that it represents workers behavior, in contrast to surveys of workers regarding their working conditions (a popular method of getting worker reactions). The authors’ approach was to try and identify the causes of worker behavior. In other words, what prompted workers to leave their factories?
What may be surprising to readers of this column is that the levels of worker turnover in global apparel supply chains is very high. The percentage of workers who voluntarily quit their job is 5 percent per month in Cambodia, between 30 and 40 percent per year in Vietnam, and above 60 percent per year in Bangladesh in some factories. As we all know, people generally leave their jobs if they are dissatisfied. If this logic is correct, then the high levels of turnover in apparel supply chains must indicate how workers feel about their working conditions—the very thing that corporate codes of conduct are designed to improve. High turnover rates indicate substantial lost productivity—a concern for both factory owners and global buyers.
In order to get at the issues that cause turnover, the authors rely on audit data results, specifically violations data. The idea was to figure out the statistical relationship between violations of various code of conduct issues and the turnover rate, across all 622 factories in 28 countries. They calculated an overall compliance rate for each factory. They then calculated compliance rates for different categories in the code of conduct, such as governance, safety and health and labor standards.
Using regression techniques, they first look at the association between the overall compliance rate and turnover. They found a strong and significant relationship: the more violations of code of conduct items, the higher the turnover—an indication of deep dissatisfaction with working conditions. But then, when they looked at all the different categories, only the labor standards category was associated with turnover, i.e., the more violations of labor issues, the higher the turnover rate.
It then made logical sense to look further into which labor violations were important within the labor standards category. So the authors regressed the turnover rate on the various subcategories, i.e.: child labor, forced labor, discrimination, humane treatment, working hours and wages and benefits (there was no data on freedom of association and collective bargaining). Not surprisingly, workers only seemed to care about wage and benefit violations—none of the other labor categories were significantly related to the turnover decision. So wages were the sole cause of turnover in this global sample. Table 1 depicts the regression results in non-technical terms.
Table 1: What causes Apparel Workers to quit their jobs?
In one final analysis, the authors looked more closely into the relationship between wages and turnover, reasoning that the relationship between the two would be stronger in poorer countries than richer countries (because wage levels in the richer garment exporting countries are generally higher than minimum wages, whereas the wages in the poorest countries are closer to the minimum wage, which itself is often set below the cost of living). And yes, the results support this hypothesis.
What does this result tell us about the interests of global buyers and apparel sector workers, and how private regulation operates?
First, it is clear there is a mismatch between the interests of global buyers and apparel workers. Buyers decided on corporate codes of conduct for their supply chain in order to gain “legitimacy” with their critics, and with their stakeholders in their countries. On the other hand, workers evaluate their jobs based on a “livelihood” logic, specifically, are the wages paid enough to sustain their livelihoods. And if the wages are not enough, they quit.
Buyers require that the wages paid in the factories are above the local minimum wage, and many claim to ensure that the wage paid must be enough to provide basic needs and some disposable income (the ETI base code requires this for example). However, there is little data available regarding supply chain wages. Most companies do not report average wages in the supply chain on their websites. Some wage data from audits in multiple industries (Kuruvilla, 2021) show that wages are just slightly above local minimums, but those minimums are not always set or adjusted based on the cost of living. And the distance between average and living wages was extremely large according to the data.
Second, in the context of new reporting requirements likely to be required under the EU’s mandatory human rights diligence legislation, it is likely that wages will be a reporting requirement. In fact, GLI ‘s Jason Judd and Sarosh Kuruvilla are developing a series of reporting requirements for use by corporate accountability regulators and brands and retailers.
At a more abstract level, the disconnect between what is important to global buyers, and what is important to apparel sector workers, is an illustration of de-coupling between code requirements, actual factory practices, and workers’ preferences. For corporate codes of conduct to really improve workers lives’, there is a need to better meld the livelihood logic of factory workers and the legitimacy logic underlying corporations. Until that is done, workers will continue to “vote with their feet” in the face of low wages in the apparel supply chain.