An effective wage-setting process should be locally-determined and locally-owned. Local ownership can ensure that the owner maintains an interest in the community, which often results in better working conditions, be it wages, health or safety conditions.
Any wage increases or other investments must reach workers. Locally-owned wage-setting mechanisms, such as collective bargaining, are the optimal model for employers and workers to find wages that meet the interests and needs of businesses and workers.
However, employers and workers sometimes lack the capacity and knowledge to engage in effective collective bargaining. To build these capabilities, supply chain partners can co-invest in the needed tools and training.
Seeing the benefits of investing in worker engagement and productivity training, this will catalyze industry-wide changes promoting sustainable business practices within Vietnam.
Creating win-wins: Improving working conditions and profitability
What if all there was an open platform for all apparel and footwear industry stakeholders in Vietnam to shape a more sustainable sector? What if this platform could turn the race to the bottom on its head pitting manufacturers in a race to the top on pricing and manufacturing?
In 2016, IDH facilitated a pilot program that merged public and private interests, and leveraged the strengths and knowledge of all partners to create shared value. This Race to the Top was the first pre-competitive, locally-owned public-private platform in Vietnam to demonstrate the potential of sustainable manufacturing practices and better working conditions in the apparel and footwear sector.
IDH facilitated the program with a wide range of partners, including brands and technical experts, such as GAP, Levi’s, USAID, Better Work, and the Sustainable Apparel Coalition. The resulting program provided training in factories and developed systems for worker-management engagement.
Initial trainings helped management, supervisors and workers develop the soft skills, trust, and other skills needed to improve their work. By changing the way that workers and management interacted, they ultimately made factories more productive, improved working conditions, and generated higher job satisfaction and fewer unresolved grievances. The process resulted in Improvement Circles (ICs) where workers and managers discuss and solve workplace-related problems and develop opportunities for better productivity.
Improving communication is key to success
The factories that integrated the Race to the Top’s Worker Engagement program all showed improved productivity, as well as greater worker well-being and satisfaction. The trend was confirmed with reduced absence and turnover.
Follow-up surveys in the years after the program found that over 85% of workers still utilize the Improvement Circle method to resolve issues, discuss improvement opportunities, and demonstrate continuous impact. Research shows that the IC is still fully operational and integrated in the factory processes.
Since the launch of Race to the Top, participating factories have shown:
- An increase in worker voice and soft skills,
- Improved productivity and working conditions,
- And engaged employees at all levels of employment
Living Wage Action Guide
To explore how you can take action with your supply chain partners to close living wage gaps, please check the Living Wage Action Guide. In this free, online resource you can find more case studies, inspiring examples and practical tips.