Abandoned? The impact of Covid-19 on factories and garment workers

There are few jobs that are as unpredictable and dangerous as that of a
garment worker. When things are going well and orders come in, it means
time pressure, piecework, verbal and physical abuse at the workplace and
still no living wage. When things are not going well, it means cancelled
orders leading to job loss, no severance package, no social or financial
net. In other words, the road to poverty.

After the global coronavirus outbreak, things are not going well, quite
badly in fact, for many garment workers around the world, but especially in
low-wage garment producing countries in Asia. As fashion stores in
developed markets have had to close temporarily, demand for clothing has
fallen accordingly. Brands and retailers have reacted quickly and cancelled
or postponed their orders. In many cases, they have even refused to accept
and pay for goods that have already been produced for them.

Thousands of factories closed; millions of workers let go

Suppliers in those countries have been hit hard: According to a research
report by Penn State University’s Center for Global Workers’ Rights (CGWR),
thousands of garment factories have already shutdown partially or
completely and millions of garment workers have been sent home, often
without the legally-mandated pay or severance.

A CGWR online survey of Bangladesh employers, administered between 21st
March and 25th March 2020, reveals the “devastating impact” the
cancellation of orders has had on the factories and their employees:
“Crucially, it illustrates the extreme fragility of a system based on
decades of buyers squeezing down on prices paid to suppliers: factory
closures, unpaid workers with no savings to survive the hard times ahead,
and a government with such a low tax revenue that it has very limited
ability to provide meaningful support to workers and the industry,” states
the research brief.

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The survey revealed that more than half of Bangladesh suppliers have had
the bulk of their in-process, or already completed, production canceled
since the coronavirus pandemic took hold. This is despite the fact that
buyers have a contractual obligation to pay for these orders. “Many are
making dubious use of general force majeure clauses to justify their
violations of the terms of the contract,” finds the report.

Abandoned? The impact of Covid-19 on factories and garment workers

Buyers abandon suppliers

The survey further revealed that more than 72 percent of buyers refused
to pay for raw materials like fabric and others that had already been
purchased by suppliers. More than 91 percent of buyers also refused to pay
for cut-make-trim costs. As a direct result of order cancellations and
lack of payment, 58 percent of the factories surveyed reported having to
shut down most or all of their operations.

Another consequence is that more than one million garment workers in
Bangladesh have already been fired or temporarily suspended from work. The
survey also clearly showed that almost all buyers (98.1 percent) refused to
contribute to the cost of paying the partial wages to furloughed workers
that the law requires. Consequently, 72 percent of the workers had to be
sent home without pay and more than 80 percent without their severance pay.
This despite the fact that many brands have “responsible exit” policies, in
which they commit to support factories in mitigating potential adverse
impacts to workers should they decide to exit.

The report concludes with recommendations by the CGWR, which do not only
apply to Bangladesh but all garment-producing countries. It points to the
fact that the crisis has hit the bottom line and cash reserves of brands
and retailers but that not all parties are equally situated to find the
liquidity needed to cover their expense. Thus, the report sums up, “the hit
on supplier factories, who generally operate on paper-thin margins and have
far less access to capital than their customers, is that much more extreme.
And the burden on workers – who very rarely earn enough to accumulate any
savings and who still need to put food on the table and possibly cover
unforeseen health expenses – is enormous”.

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Abandoned? The impact of Covid-19 on factories and garment workers

Recommendations for buyers

Thus, the CGWR recommends that companies with the greatest ability to
procure loans and benefits from government bailouts share those with their
suppliers. Suppliers, for their part, must also ensure that payments
received from buyers are used to cover all legally mandated wages and
benefits, including severance payments to dismissed workers.

At the same time, the governments of garment-producing countries, for
example Bangladesh, should continue to mobilise all the resources at their
disposal to subsidize suppliers and provide wage support to all workers
during the crisis.

Looking at the future, buyers should learn from this crisis to revise
purchasing practices to ensure proper social and environmental
sustainability. This includes order stability that allows for proper
planning, timely payments of orders and full respect for workers’ rights as
well as a costing model that covers the full range of social compliance
including living wages, benefits, severance pay, building safety, etc. In
conclusion, the CGWR reminds the industry that trillions of dollars are
currently made available in aid for businesses and workers in developed
countries and that the cost of maintaining the income for the world’s
garment workers represents only a small fraction of this.

Big fashion company show solidarity

On the buyers side, some appropriate steps are currently being taken.
For example, Swedish fashion group H&M has committed itself to stand by its
manufacturers: “We will stand by our commitments to our garment
manufacturing suppliers by taking delivery of the already produced garments
as well as goods in production. We will of course pay for these goods and
we will do it under agreed payment terms. This is in accordance with our
responsible purchasing practices and not only the case in Bangladesh, but
in all production countries,” said H&M in a statement on Tuesday.

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What effect the actions of individual buyers can have can be seen by the
response to H&M’s commitment: Since then, other major fashion groups such
as Inditex, Marks & Spencer, PVH, Target and Kiabi have also decided to
maintain their current production orders. Hopefully, other apparel
companies, fashion brands and retailers will follow.

Photo: Clean Clothes Campaign, illustrations: CGWR


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