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Can the Electronics Industry Provide a Living Wage? Not While Corporations Set the Rules

People are fighting for a living wage in global electronics supply chains, but corporations and the WTO stand in their way.

The phrase “living wage” has gained steam in recent years: Advocates argue that a wage level that allows for basic needs – plus a modicum of disposable income – is a human right, and failing to pay one is a violation of human rights. The concept has risen in popularity in recent years as evidence of poverty-level wages across a multitude of global industries has mounted, from agriculture, to textiles, to electronics and beyond. Struggles for a living wage are seen as a way to address poverty and inequality in locations where a legal minimum wage either does not exist, is not enforced or is insufficient to provide for a family.

The major roadblock to achieving a living wage in global supply chains is the lack of interest on the part of global brands.

On October 27, 140 people from government, civil society, nongovernmental organizations, academia and the private sector gathered at the Social and Economic Council (SER) of the Netherlands to address the pressing issue of instituting living wages in global supply chains. These supply chains comprise the entire production processes for consumer goods, including the gathering of raw materials, the processing of materials, component production, assembly and manufacture.

The group gathered in the Netherlands because it serves as the national contact point for the Organization for Economic Cooperation and Development (OECD), a coalition of 34 member countries founded in 1961 with a stated mission to “promote policies that will improve the economic and social well-being of people around the world.” The organization offers governments and businesses recommendations for operation and oversight via its Guidelines for Multinational Enterprises, which were most recently updated in 2011.

Conference attendees agreed that it impossible to come up with a single global living wage because living wage amounts must be calculated based on highly variable local contexts and living standards. Conceptually speaking, however, a living wage is easy to define.

Pauline Overeem, coordinator of the GoodElectronics Network, shared this definition of a living wage as provided by the independent labor monitoring organization Electronics Watch:

A “living wage” means a “take home” or “net” wage (excluding any taxes, bonuses, allowances, or overtime wages) earned during a country’s legal maximum work-week (not exceeding 48 hours), which is sufficient to pay for the basic needs (housing, energy, nutrition, clothing, health care, education, potable water, childcare, and transportation) of a family of four people, and includes an additional 10% of the cost of basic needs as discretionary income.

Global Living Wage Coalition coordinator Michelle Bhattacharyya summed up the idea of the minimum wage as “the minimum level that you need for a decent life that we consider a human right.”

However, though the idea of a living wage has become a focal point of conversation, the reality of it is scarce. Several conference attendees observed that the major roadblock to achieving a living wage in global supply chains is the lack of interest on the part of large multinational brands. This was evident at the conference, where the electronics industry was in focus. Bart Slob, senior adviser for Sustainable Economic Development at the Royal Tropical Institute in Amsterdam, told Truthout, “We tried to invite many of the big IT brands. None of them accepted.”

The only electronics industry corporation represented at the conference was Philips, a Dutch company that Slob praised for its “candid” engagement with dialogue on this and other issues of human and labor rights and environmental sustainability. Comparing the approach of Philips to US electronics companies, he explained that leaders from Philips are “always prepared to share their problems. That’s very different from some of the companies from the US that tend to just not engage in dialogue.” He added, “They might have a marketing or a PR statement, but they tend not to talk about the underlying issues of why it is so difficult to pay a living wage.”

Overeem of GoodElectronics expressed frustration over the lack of engagement among large brands and industry groups, explaining that the conference organizers “tried to bring the Dutch trade associations for electronics over to the meeting and they said, ‘We are not particularly interested in a living wage.'”

Similarly, Hansje van der Zwaan-Plagman, senior adviser on human rights at ASN Bank, which focuses on funding sustainability-oriented businesses, said, “We haven’t seen a company in electronics say that they are really addressing the issue of living wage.” She continued, “We are looking for that example. We would very much applaud that.”

The share of the overall value embedded in supply chains that goes back to workers in pay has been declining over years.

The purchasing practices of large brands like Apple and Samsung pose a serious obstacle to a living wage, according to activists. The reason for this is the power imbalance enjoyed by large brands in the purchasing relationship they have with their suppliers. Due to the size of their purchase orders and their economic clout in the industry, companies like Apple and Samsung are known for paying suppliers as little as possible, squeezing their profit margins to tiny percentages, which has a direct negative impact on the wages paid to workers.

At the conference, Daniel Vaughan-Whitehead, senior economist with the International Labor Organization, pointed out the economic inequality that stems from this relationship, explaining that there is an unequal distribution of growth in global supply chains controlled by large corporations, and that economic data show that the share of the overall value embedded in those supply chains that goes back to workers in pay has been declining over years.

The way Apple manages its mounting riches is a case in point – one that is examined in detail by a new GoodElectronics report titled “The Financialisation of Apple,” released the same day as the conference. Based on longitudinal economic data, the authors of the report show how two simultaneous trends – declining payments of corporate taxes and offshoring work to wherever labor is cheapest – have produced vastly unequal conditions that benefit corporations and their shareholders at the expense of everyone else.

Herman Mulder, independent member of Netherlands National Contact Point OECD Guidelines for Multinational Enterprises, critiqued the corporate imperative to enrich shareholders in his opening remarks of the conference, and framed this as a significant obstacle to protecting human rights and fostering sustainability, explaining that many CEOs see the issue of a living wage as irresponsible from a business standpoint because it sets a target higher than legal minimums, and is thus deemed a threat to profits and shareholder confidence.

In addition, current international trade regulations as stipulated by the World Trade Organization (WTO) and filtered down to member states via European Union and US policies were identified as barriers that limit the legal means by which public buyers of electronics, like schools and governments, can put pressure on their corporate suppliers to protect human rights in their supply chains.

Activists must exert pressure for a living wage so that brands can no longer move from supplier to supplier in search of lower wages.

“The WTO regime for public procurement is based and focused on preventing discrimination and on maintaining equal national treatment,” Dr. Olga Martin-Ortega, head of the Business, Human Rights and Environment Research Group at the University of Greenwich in the UK, told Truthout. “So the way their legislation has evolved, and therefore the EU regulations have evolved to conform with this framework actually makes it really rigid to be able to introduce social conditions within the procurement process because the main underlying principles of the procurement process is actually protecting competition, protecting nondiscrimination, protecting equal treatment, therefore this is why it’s difficult to build in social conditions.”

Ortega concluded in frustration, “Human rights and international trade have traditionally been developed as opposed to each other, and therefore now what we’re trying to do is bring them closer, but we find these barriers because the trade system has been built to protect different interests that are not human rights.”

Yet, despite enormous barriers, the conference made it clear that progress toward achieving a living wage in the electronics supply chain is happening, albeit at a very slow pace.

Bhattacharyya, speaking on behalf of Global Living Wage Coalition, presented on the methodology used in a series of studies across several Chinese cities conducted in partnership with several electronics brands and commissioned by Social Accountability International. Once the studies are released, brands will have concrete figures calibrated to local contexts. Then, with a clear understanding of what their wage goals are, they can begin working with suppliers to achieve these goals.

Bhattacharyya emphasized that the location-specific living wage calculations that Global Living Wage Coalition produces are intended to be used by people at all levels of global supply chains and in the regulatory sphere, including by worker unions in processes of collective bargaining.

Many conference attendees cited the importance of listening to worker demands, which struck an ironic tone given that no workers or worker organizations from overseas supply chains were present, nor were they invited to the conference, according to Slob.

Martin-Ortega, speaking on behalf of Electronics Watch, emphasized the important role that large public buyers can play by pressuring corporations and their suppliers to make changes. Currently the organization is offering guidance to several universities and other public bodies across the European Union by providing wording for contract clauses that stipulate that the buyer has the right to engage in oversight and monitoring of what is happening in the provider’s supply chain, and by providing the research reports on the industry required to do so.

Martin-Ortega pointed out that the US government is the largest single public buyer in the world, spending as much as $350 billion annually on electronics. Currently there is no similar guidance and watchdog organization operating in the United States to help national and government buyers push for better labor conditions in global supply chains of electronic goods, even though watchdogs in the United States have been pioneers in other sectors such as apparel. The research group she leads in London is part of an initiative called the International Learning Lab on Public Procurement, which is exploring how public procurement can be used to make states comply with their duty to protect human rights in their own supply chains.

But real progress will require more than oversight by buyers. Overeem of GoodElectronics stated that “a cultural change” is needed among the large brands. She said this is possible, noting that Apple in particular has made its supply chain much more transparent in recent years. Increased transparency can enable governments, civil society and citizens to hold corporations accountable for what happens in their supply chains. Overeem also emphasized that activists must exert pressure for a living wage across the globe so that brands can no longer continue to move from supplier to supplier in search of lower wages.

Governments also have a crucial role to play in this global campaign for a living wage, Overeem said, adding that too often governments let their countries’ major corporate brands off the hook.

“If as the Dutch government you say living wage is one of the priority themes … then in your trade mission to China, go and discuss it,” she said. “And if they don’t want to discuss this, then let them feel that you don’t accept that.”

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