Factories paying workers digitally ‘provide better working conditions’ – Study

In a first study of its kind, data from nearly 3,000 factories across 58 countries reveals that paying workers digitally correlates positively with better working conditions.

Across the globe, factories that pay workers digitally are more likely to follow exemplary social and labour practices than those that pay with cash or checks. This includes offering wages that are equitable to the cost of living or providing bonuses when the company has a profitable year.

Yet 200 million people still receive private sector wages in cash in developing markets. Seven out of the 13 countries analysed in the study had higher digitization in the apparel sector than their country average access to bank or mobile money accounts, showing that the garment industry is a driver to accessing financial services.

To support the well-being of garment workers and help factories improve efficiency, the Better Than Cash Alliance and the Sustainable Apparel Coalition encourage more brands, suppliers, and factories to join the global movement shifting away from cash, keeping track of their performance to increase efficiency and transparency in their supply chains.

Recent data from the Higg Index from nearly 3,000 factories across 58 countries, representing 85 brands and retailer supply chains, reveals that paying workers digitally correlates positively with better working conditions.

The Higg Index is a suite of tools that enables brands, retailers and facilities of all sizes to accurately measure and score a company or product’s sustainability performance.

Across the globe, factories that pay workers digitally are five times more likely to follow exemplary social and labour practices than those that pay with cash or checks. This includes offering wages that are equitable to the cost of living or providing bonuses when the company has a profitable year.

The study shows that 67% of the factories pay workers digitally through bank accounts. The rest still use cash or check distribution — which is not safe for workers or businesses.

Globally, how are garment factories paying their workers?

There are also significant discrepancies between the countries. For example, 95% of factories in India pay workers digitally compared to 25% in Bangladesh.

The differences between the countries can be explained by the financial inclusion progress and development of digital payments across markets.

Sixty-nine per cent of adults worldwide had an account with a bank or mobile services provider, according to the latest World Bank’s global financial inclusion database. However, 200 million still receive private sector wages in cash in developing markets. Seven out of the 13 countries analyzed in the study had higher digitization in the apparel sector than their country average access to bank or mobile money accounts, showing that the garment industry is a driver to accessing financial services. For global brands, payments in cash mean less transparency to ensure workers are paid the right amount and on time. Factories bear the risks and inefficiencies of transporting, securing, and disbursing millions of dollars in bank notes to workers on payday.

Leading companies are starting to recognize the positive economic and social impact these efforts can have on the lives of factory workers. Workers gain life skills, independence, and confidence.

In 2017, H&M committed to paying its 1.6 million global factory workers digitally, as a way to improve workers’ lives and scale the company’s sustainability efforts. Similarly, earlier this year, Gap Inc. pledged to pay garment workers across its 800 global factories digitally by 2020 having already helped digitize salaries for 95% of its factory workers in India.

To support the well-being of garment workers and help factories improve their conditions, the Sustainable Apparel Coalition and the Better Than Cash Alliance encourage more brands, suppliers, and factories to leverage the updated Higg Facility Social & Labor module to assess their performance and join the global movement shifting away from cash, keeping track of their performance to increase efficiency and transparency in their supply chains.