Fairphone designs and produces smartphones with the goal of improving on all aspects of the electronics supply chain. The company creates long-lasting products that use sustainably sourced materials and takes a people first approach to business.
This means working with suppliers and workers across the supply chain to achieve better conditions and wages.
The electronics industry is well-known for its challenging working conditions. Just-in-time manufacturing, highly competitive markets, and pressures to deliver the latest model put pressure on workers, who endure unsafe working conditions, low wages, and limited ability to influence their work environment.
Fairphone works closely with its direct suppliers to enable them to make progress on living wages, this includes evaluations to determine the gap between what workers earn and a living wage.
Fairphone innovates to boost job satisfaction by partnering with suppliers to improve working conditions, ensure worker representation, and achieve living wages.
Working towards a living wage
Fairphone reviewed the living wage estimates from the Global Living Wage Coalition (GLWC) and Asia Floor Wage, and consulted workers through a survey and dialogue, before setting the target wage. Next, the company calculated how much they would need to pay in order to achieve this wage on their production line.
Fairphone determined that a fixed bonus of 1.50 EUR per phone would bring workers closer to a living wage and incorporated this into the product price. With a final shelf price of 450 EUR, the cost of paying a living wage accounts for just 0.33 percent of the total price. Each year the size of the bonus is re-evaluated to integrate new information and changes in living costs.
Making sure workers receive the full benefit
Some approaches to paying a living wage factor the living wage costs into overall production costs. While effective, this approach can lead to price escalation as each actor in the supply chain adds what’s needed to cover the additional costs. Fairphone relies on a monthly bonus program where they pay suppliers directly to ensure that the bonus gets directly to workers while avoiding price escalation.
Workers on the Fairphone production line were consulted on how to best distribute the bonus and opted to share funds among all workers in the factory. The Fairphone bonus is paid on a monthly basis on top of the regular salary to better accommodate any changes in the workforce, production line or otherwise.
The challenge of closing the wage gap
While Fairphone is committed to assuring a living wage for workers in their supply chains, the company is often just one buyer among many for certain suppliers. This means that the impact of their living wage contributions is blunted unless the other buyers also factor in living wage contributions. Strong, credible data on living wage gaps and transparent costs of production are integral to this effort.
Enlisting customer support for living wages
Fairphone users are well aware of the company’s commitment to a better electronics supply chain that considers every aspect of the business. The company is committed to transparency with consumers, so they know what it takes to achieve a living income and understand the benefits and limitations of the company’s approach.