Will Consumers Pay the Price for Living-Wage Factories?
With the signing of President Barack Obama’s executive order to increase minimum wage for federal contract workers, the issue of minimum wage was put firmly on the table for discussion in 2014. The administration has also called for Congress to increase the federal minimum wage for all American workers, a move that would translate into a raise for 17 million people. Behind the president’s campaign to boost “opportunity for all” this year is the idea that minimum wage should be a living wage — pay that is high enough to maintain a normal standard of living.
“Today, after four years of economic growth, corporate profits and stock prices have rarely been higher, and those at the top have never done better. But average wages have barely budged,” Obama said in his January State of the Union address. “Inequality has deepened. Upward mobility has stalled. The cold, hard fact is that even in the midst of recovery, too many Americans are working more than ever just to get by — let alone get ahead.”
For lawmakers and economists, the question is whether an increase in the federal minimum wage will cause employers to slim their workforces, thereby eliminating jobs and increasing unemployment. According to the nonpartisan Congressional Budget Office, pushing the minimum wage to $10.10 per hour would eliminate jobs for 500,000, or approximately 0.3 percent of the nation’s total workforce, while overall real income would rise by $2 billion for all workers. That combination of positives and negatives has created the fodder for a national debate — a debate centered around the intricate balance between labor costs, employment, prices for goods and services, and business performance. Living wage is by no means a debate unique to the U.S. But abroad, the questions plaguing leaders and economists are far more complex; for example, the garment industry of southeast Asia and the Caribbean must consider whether implementing a living wage would dampen demand of U.S. retailers for their products.
The horrendous conditions were many of the garments sold in the United States were thrown into the spotlight by several high-profile disasters in Bangladesh — a south Asian country that ranks as the world’s second largest garment exporter. In recent years, several deadly industrial accidents have occurred in and in the area surrounding Dhaka, the capital and largest city of Bangladesh; since 2005, factories that produce clothing for brands like Wal-Mart (NYSE:WMT), Abercrombie & Fitch (NYSE:ANF), Target (NYSE:TGT), Gap (NYSE:GPS), and J.C. Penney (NYSE:JCP) have suffered building collapses, fires, and a boiler explosion that have together killed more than 200 people and injured hundreds more. While unsafe working conditions have eclipsed the other aspects of the poor labor conditions in the garment industry, the added spotlight on these factories has also drawn attention to the low wages paid to those workers.