Wage-related interventions for workers who earn low wages

Suggested audience: Top Leaders, Corporate Citizenship Professionals, Supply Chain

Takeaway: Multinational corporations can exert positive social impact without compromising their bottom lines by implementing wage-related interventions in their supply chains to increase worker earnings.

Researchers considered more than 6,100 factory-year observations from approximately 1,800 unique factories in nine countries from 2012-2019. Factories were suppliers for a large multinational garment retailer. Researchers measured factory worker wages and analyzed the effect of wage-related interventions in the supply chain.

Wage-related interventions in the study included Workplace Dialogue Programs, which seek to improve dialogue between the employer and worker representatives (e.g. trade unions and/or other representative bodies at the enterprise level), and Wage Management Systems, defined as a set of policies, processes, and practices such as electronic payments, establishment of HR rep positions, etc., progressive job description (more compensation for greater demonstrated skill/productivity) designed to provide workers fair compensation and opportunities to increase their wages.

Researchers studied how wage-related interventions impacted factory workers’ base wages (i.e., wages earned during normal work hours). This is important because many workers earning low wages will take on more overtime hours to increase family income, putting homelife and well-being under stress.  In addition, they examined non-wage outcomes such as factory order volume, supplier price competitiveness, overtime pay, and total employment. Research controlled for country-specific economic trends. 

Key findings:

• Wage-related interventions were associated with an employee wage increases.
• The estimated wage impacts were many times greater than the firm’s investment in the interventions.
• Wage-related intervention programs were associated with an increase in units ordered from participating factories, suggesting a deepening of the commercial relationship in recognition among purchasers of adoption of wage-related interventions.
• Researchers found no evidence of declines in suppliers’ overall price competitiveness.

This finding suggests greater labor productivity during normal hours.