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Everybody wants strong social protection systems. Who pays for them?

Jason Judd
Jason Judd at Cornell University’s Global Labor Institute

The global fashion industry was one of the sectors hit hardest by the COVID-19 pandemic, highlighting the need for effective social protection systems for workers. A new paper by Cornell University’s Global Labor Institute, however, concludes that while the industry agrees more social protection is a must, nobody wants to pay for it, say Jason Judd and Matthew M Fisher Daly, co-authors of the report.

  • The COVID-19 pandemic was a stress-test for weak social protection systems for millions of apparel workers.
  • Climate breakdown will accelerate where production is concentrated and social protection systems have to be built or strengthened now.
  • The lack of agreement on big social questions, such as who’s going to pay for workers’ protection systems, is not new, but the tension is a sign of the heightened clarity about the costs of supply chain crises.

January 2023 marks the third year since the COVID-19 pandemic upended life around the globe. National lockdowns called for unprecedented changes in virtually everybody’s daily routines. National economies seemed to temporarily shut down, triggering disruptions in global supply chains at a massive scale.

Global fashion production was one of the hardest-hit sectors. Brands and retailers in the thousands closed their doors. In their panic, some major European and American brands cancelled orders already completed by their manufacturers and en route to their buyers. The result was closures, layoffs and furloughs affecting millions of workers in Asia, the source of 55% of the world’s apparel and footwear exports.

A new paper by Cornell University’s Global Labor Institute and the U.N.’s International Labor Organization (ILO) asked leaders of the global fashion industry to reflect on the pandemic’s impacts. The answer was this: the shuttering of factories meant that millions of apparel workers went without pay, and many went hungry because social protection systems—furlough rules, unemployment insurance, and enforcement of severance payments—were inadequate in some of the fashion industry’s favorite production centers.

There were debt payment deferrals or tax holidays in many countries to help support business operations. And in fashion production centers such as Ho Chi Minh City, emergency income support and vaccination roll-outs helped some workers get back on their feet. But in Bangladesh, second only to China in apparel exports to the European Union, there was no social protection system for workers. In Cambodia, monthly payments of up to $70 to furloughed workers amounted to 37% of the minimum wage.

There is agreement that these ad-hoc policy measures were not enough. One European brand manager said: “We work in one of the most unregulated industries. There is no minimum standard [for social protection]. We really need it to raise the bar for the whole industry and labor conditions.” In the words of a Southeast Asian union leader, “the global apparel industry [was] collapsing because of this thing [COVID-19], and the brand tried to be the victim, the supplier tried to be the victim, and the government tried to be the victim. And then we, the workers, we’re under those people.”

All the leaders we spoke with—trade union leaders, sourcing directors, regulators, factory managers—agreed there was a need for stronger social protection systems.

But nobody seems to want to pay for it. Unions want to negotiate contributions from governments, employers, brands and the World Bank. A Southeast Asian manufacturing association representative said that funding from international development partners was lacking. North American and European brands said that funding was the responsibility of national governments which “could do a lot more” and that unions and campaigners cannot “continue to look at the private sector as… ‘the primary source of social protection.’” National government leaders argue that adding new social programs makes their industries uncompetitive.

So, who should pay for effective social protection? The lack of agreement on big social questions in the global apparel trade is not new. But the new tension is a sign of the heightened clarity about the costs of supply chain crises. It is also a sign of a deterioration in the terms of trade during the pandemic between some fashion brands and the manufacturers supplying them.

Based on our conversations, protections for workers and manufacturers need national systems that work and global support for building them. That global support in Bangladesh—a priority for fast-fashion brands because of their dependence on it—is shaping up and includes money from European governments and brands such as H&M (STO:HM-B), Bestseller and Uniqlo, owned by Fast Retailing (TYO:9983), and lots of technical help from the ILO.

But Bangladesh’s social protection system is a pilot limited to workplace injuries. It comes almost ten years after the Rana Plaza disaster killed 1,132 apparel workers and injured many more. Brand support is voluntary. Funding of the pilot comes from overseas development aid. How does a new scheme with so many contingencies grow into a robust system that workers can count on? And how long should workers have to wait?

Lasting change in the global fashion industry seems to require a combination of tragedy and new terms of trade. The wide swathe that the pandemic cut through the lives of apparel workers certainly counts as tragedy. New terms of trade might mean writing social protection into new mandatory human right due diligence requirements in the European Union. Does a German or Spanish fashion retailer that buys apparel in countries that operate without basic, functioning systems for social protections qualify as a sustainable business? Probably not. Do these gaps in basic protections for workers show up in most brands’ sourcing strategies and in investors’ ESG ratings? Not yet. The fashion industry can lead by calling for regulators to write effective social protection systems into their short-list of must-haves for sustainable business.

The answers to all these questions matter more by the day. The COVID-19 pandemic was a stress-test for weak social protection systems for millions of apparel workers. Climate breakdown will accelerate where production is concentrated—Bangladesh, Cambodia, India, Pakistan, Vietnam—and social protection systems have to be built or strengthened now. Negotiations for new investments in these systems would limit future loss and damage.

Learning from Crisis: Apparel industry experts on mitigating the Covid-19 pandemic and futurecrises was co-authored by Jason Judd, Matthew M. Fisher-Daly and Sarosh Kuruvilla for Cornell University’s Global Labor Institute.

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