Toward fair compensation in global supply chains

The compensation element of the Fair Labor Code begins with this affirmation of workers’ right to fair compensation. In pursuit of the progressive realization of this standard, the FLA and its stakeholders (buyers, suppliers, labor rights advocates, and universities) are part of a global effort to improve compensation for workers.

As a contribution to this effort, FLA presents here a first-of-its-kind report, Toward fair compensation in global supply chains, detailing worker compensation data collected in 2015 by FLA in 124 factories (primarily apparel and footwear) in 21 countries.  

For each factory where FLA assessors collected this data, FLA has produced a chart depicting how much workers are earning, compared with relevant local compensation benchmarks, such as the legal minimum wage, World Bank poverty levels, and cost-of-living figures developed by governments, unions, NGOs, and others. Intended to place workers’ wages in a local context, these charts provide a snapshot of the purchasing power of workers’ current compensation at factories in each of the 21 countries appearing in the table below.

The report elaborates on the findings from its 2015 data collection. For example, FLA found that most factories assessed in 2015 had established wages near the legal minimum; with minimum wages set at or below World Bank poverty lines in Bangladesh, Sri Lanka, and Mexico, the report confirms legal minimum wage compliance to be an insufficient measure of whether workers are paid fair compensation.

In addition, the report examines the real value to workers of the compensation levels found during the 2015 assessments, converting compensation figures into “purchasing power parity dollars,” a standard used by the World Bank to compare incomes across countries and currencies. This analysis found that the purchasing power of average compensation in Bangladesh was the lowest of any country under assessment, falling below the World Bank poverty line for a three-adult-equivalent household. Average compensation in other countries cleared the poverty line, though purchasing power for workers remained relatively weak in Cambodia, Dominican Republic, India, Sri Lanka, the Philippines, and Jordan (especially for migrant workers). 

This report does not prescribe wage levels to be paid and does not endorse any sourcing country over any other. Rather, the report is intended to help all FLA member companies — wherever they are sourcing — achieve fair compensation throughout their supply chain, and to publicly present a first annual package of verified data useful to all stakeholders participating in global discussions on supply chain wages.