Worker Rights and the Pricing and Sourcing Squeeze in Global Supply Chains

Myriad state and non-state social compliance programs have sought to address worker rights violations in global supply chains. Yet certain practices persist and in some cases have become more pronounced. Notably, wages remain chronically low and forced and excessive overtime remain endemic. We argue in this paper that some of the root causes for these problems can be found at the top of the supply chain in how lead firms price their production contracts and administer their sourcing practices with their global suppliers. We first explore this argument by examining the price paid per square meter of imported apparel to the U.S. by the top apparel exporting countries in the world. What we find is a decline in real dollar terms of prices paid by lead firms to suppliers of over 46% since the late 1990s.

These quantitative findings are complemented by field research in Bangladesh, which allowed us to explore in detail how declining prices paid by lead firms appear to have contributed to a lowering of the price paid to labor per unit produced and a lowering of supplier factory profit margins. We also found evidence of how short production order lead-times and dramatic fluctuation in contract volumes contributed to chronic overtime, as well as unauthorized outsourcing. This is not to say that all employers are struggling economically, or that all worker rights abuses are the result of lead firm practices. Certainly, there are many employers who have accumulated significant wealth in the sector, and workers’ rights violations are often the result of abusive local employers and state representatives. But the evidence suggests that lead firm pricing and sourcing dynamics are also a very significant contributing factor to worker rights violations.