Ninety per cent of fashion companies aren’t able to evidence paying any of the workers in their supply chains a living wage, according to the latest instalment of Baptist World Aid’s annual Ethical Fashion Report.

Living wages lie at the core of fixing the fashion industry. Workers who receive a living wage can quit a job where they are mistreated without fear of falling into poverty and can assert their rights without fear of harm to themselves or their family. But those who don’t are at risk of becoming trapped in exploitation or modern slavery.

So why are fashion companies underpaying workers?

Fashion Companies Are Taking Advantage Of Unethical Systems

Australia’s Modern Slavery Act launched in 2019, which means a significant number of businesses are now required to disclose their work addressing forms of modern slavery, including forced and child labour in their supply chains. Despite this impetus, the Ethical Fashion Report found that efforts to empower garment workers, and particularly the payment of living wages, continue to reflect the industry’s unwillingness to accept responsibility for garment workers’ wages.

Fashion companies have failed to take meaningful action acknowledging their responsibility for raising workers’ wages for some time. Some believe that as the factory employs the workers, the factory is solely responsible for determining the price they charge companies.

While it makes sense to some, it is wrong. Fashion is in a race to the bottom. If suppliers charge higher prices—resulting in a living wage for workers—many companies will simply find a cheaper supplier. This is not only a risk to suppliers who lose business if they don’t deliver competitive costs; it’s also a risk to producing countries’ economies that have minimum wages well below a living wage in order to protect industries like fashion, which drive strong exports. The reason you can buy a shirt for the same price as a chocolate bar is that costs are being cut along the supply chain. Usually, it’s the garment workers who are forced to work unpaid overtime or accept low wages to meet the demands of the companies whose clothes they sew.

Garment Workers Have The Least Power Of All In Fashion Supply Chains

When you’re making poverty-level wages on a temporary or zero-hour contract in an area with a high level of poverty, you know you’re replaceable. You know too, that your power to negotiate is severely limited.

This standard is so ingrained that a garment worker often counts themselves as fortunate if they can work six 12-hour days in a row and earn a wage sufficient to support themselves. The systemic reliance on overtime, skipping breaks, and sacrificing leave to cobble together a half-way sufficient wage has resulted in an industry where wage improvement programs struggle to get off the ground simply because good hours and reasonable pay are inconceivable luxuries for workers who’ve experienced exploitation for generations. The fear of falling into poverty, and not being able to support their family or community, is a huge obstacle to progress.

Intentions Are Good In Industry, But Action Is Slow

Despite the number of companies with a public commitment to pay a living wage to workers more than doubling in the last two years, Baptist World Aid found that action is still slow.

But the conversation is changing. Companies are increasingly being told by organisations like Baptist World Aid, governments, and importantly, shoppers, that they are not devoid of responsibility for garment worker wellbeing.

Companies can no longer hide behind the pretence of living wages threatening their businesses, as fears that paying living wages will raise the price of clothing have largely been debunked. Less than one per cent of the price of a piece of clothing typically goes towards wages. Researchers from the University of Queensland and the University of New South Wales found that closing the living wage gap for cotton and textile workers in India would only require an increase of around 20 cents per item for shoppers.

Paving A Way Forward

Issues that don’t require direct engagement with garment workers—including developing labour standards policies, tracing supply chains, and using more sustainable fibres—have seen huge progress over the last decade. Without worker engagement, there’s still a lot companies can do. They can make a time-bound, specific public commitment to paying a living wage; ensure responsible purchasing practices across their buying, planning and procurement teams; develop an implementation plan with practical steps such as calculating living wages for the regions they source from, and ringfencing labour costs in price negotiations.

On the flip side, actions that require direct engagement with garment workers, or union support, have seen far less progress, despite offering greater opportunity for raising wages. The challenge is that most fashion companies have limited leverage to influence their suppliers, because their production volumes don’t represent enough of total production for order prices to impact workers’ wages. Industry collaboration is the only way to success. Alliances like Asia Floor Wage enable companies to take meaningful action to increase wages in their supply chains. But all levels must engage, as fashion companies can’t demonstrate serious attempt to pay living wage if they don’t have accountability for living wages at senior leadership level.

To ensure that any efforts to raise garment worker wages are effective, the whole fashion industry needs to get on board. And right now, too many are still dodging responsibility. We as consumers can play our part by only purchasing clothes that have been ethically produced and convince clothing companies that the race to the bottom must become a race to the top. Clothing companies must strive to transform the fashion industry into one that is sustainable and fair. That’s a race where we all win.

This article was first published in October 2021 and has since been updated. Last updated September 2023.