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In this guest blog, Dr Nik Hammer of Leicester University's Centre for Sustainable Work and Employment Futures and a member of ETI's working group on the Leicester garment trade explains that low paid, precarious and informal employment is commonplace in a UK industrial sector shaped by new regulatory regimes and global manufacturing trends.
This blog was first published by SPERI/OD (Sheffield Political Economy Research Institute/OpenDemocracy) on 9 August 2016
What are the dynamics that push wages in UK apparel manufacturing well below the national minimum wage (NMW) and violate basic work and employment standards?
Even if the clothing industry is one of the sectors most exposed to the vagaries of the global market, would one not expect that a developed institutional context safeguards minimum employment rights?
Have worker rights campaigns not tried to address the gaps in the social regulation of global value chains and, particularly in developing and emerging economies, developed groundbreaking campaigns to halt the race to the bottom in employment and working conditions?
See, amongst many others, the Clean Clothes Campaign; Worker Rights Consortium; and Ethical Trading Initiative in the UK; and the Accord in Bangladesh established following the Rana Plaza disaster.
A boom...
Interestingly, it was precisely in the aftermath of the financial crisis that UK apparel manufacturing has seen a resurgence. Growth in real gross value added above 10% (2008-14), as well as 39% (2008-13) in the East Midlands, the largest sourcing hub.
This might come as a surprise after the long decline of the industry.
In fact, the increase in production and the concentration on a few near-sourcing locations in Northern consumer markets is a complement to off-shoring to the Far East and South East Asia.
While bulk orders would be placed in countries with low labour costs, products that are highly responsive to consumer demands tend to be sourced at home, allowing Fast Fashion orders to be delivered to shops within 10 days.
This process, however, had significant distributional implications: between 1997-2015 consumer prices fell by 3.5% every year at the same time as factory gate prices rose by 0.9% (well below the figures for manufacturing as a whole). So, how could these price pressures be accommodated and who has paid for it?
... enabled by the informal economy ...
Research on the working conditions in the UK’s largest Fast Fashion sourcing hub, the East Midlands (to be published in the Industrial Relations Journal under Near-sourcing UK Apparel), has highlighted an average hourly wage of £3 per hour (at a time when the national minimum wage stood at £6.50).
Workers, mainly women of British-Asian background, are employed without contract but available ‘on tap’ ("The job is as and when required" as one of our respondents put it).
And working conditions vary according to the degree of vulnerability of different groups of workers but range from inadequate health and safety standards to verbal abuse, bullying, threats and humiliation.
In the East Midlands alone, this amounts to a defrauded wage sum of £1 million per week. Perhaps unsurprisingly, this form of flexible, precarious and informal employment leads to significant working poverty, with a reported average monthly wage of £584 and a weekly household income of £229.
So, why did workers stick with such jobs?
Interestingly, over half the workers in our sample held British citizenship but still felt unable to escape this work as they only spoke English with difficulties.
As regards the non-British workforce, factory visits by the Border Agency continue to highlight the existence of different degrees of unfree labour in the industry.
... and new paradoxes of regulation...
This situation emerged as a product of changes in the enforcement regimes of employment standards as well as the restructuring of the UK apparel value chain (and similar developments can be observed in other countries in the Global North).
At the same time as the state put all its money on ‘responsive’ forms of regulation and enforcement – in a so-called Better Regulation initiative that saw significant reductions in resources to control and to fine violations of work and employment regulations – the manufacturing landscape has shifted dramatically.
Leading brands with significant manufacturing experience have ceded their place to discount retailers, general retailers that developed their own clothing brands, the rising importance of online portals and the emergence of online-only brands.
A producer market dominated by manufacturers employing 2,000 workers plus has given way to an average firm size of 10 employees.
Last but not least, organised labour has lost touch with the workplace, now largely characterised by a new wave of British-Asian entrepreneurs and workers, a lot of them operating at the boundary of the informal economy.
... has led to a stunning gap ...
Our research highlighted a stunning gap between the omnipresence of regulatory actors in the workplace and the degradation of work and employment.
97% of the workers surveyed witnessed an inspection by brands in their workplace ‘over the last year’, by the tax authorities (37%), by immigration authorities (47%), while 27% experienced inspections of working conditions (typically by social auditors).
Thus, a clearer picture of regulatory bias emerges: as the enforcement of work and employment standards has shifted from control to collaboration with seemingly compliant firms, it has, in the same breath, ceded the control imperative to lead firms, leaving vulnerable immigrant workers as the only remaining focus of hard forms of enforcement.
The responsive regulatory strategy, however, suffers from a number of fallacies.
- First, shifting from policies of control to collaboration does not mean that the latter emerge at the push of a button. For a start, neither manufacturers nor workers have any kind of effective collective voice in the UK apparel industry.
- Second, requiring lead firms to carry out basic control functions instead of the state creates a whole set of new conflicts of interest and practical difficulties. Who would happily pick up the tab of the 3.5% decline in clothing prices? Judging by established power relations in the value chain, price pressures will be passed to the workers.
- Finally, it is erroneous to see employment standards simply as a function of a robust enforcement policy, regardless of their actual focus on compliance or collaboration. Work and employment standards need to be seen in the context of an industrial relations system and an industrial policy.
... that urgently needs addressing
Industrial relations and industrial policy might not be all parts of the puzzle but are certainly indispensible ones if the aim is to reduce the polarisation between financialised lead firms at one end of the value chain, and labour cost competition in the informal economy on the other end.
Labour market exploitation has become indigenised over the last decades and goes far beyond a problem confined to vulnerable migrant workers.
Creating voice mechanisms for workers is crucial to hold the new private regulatory actors to account, as well as to harness workplace participation for strategies of industrial upgrading.