Interwoven: How the Better Work Program Improves Job and Life Quality in the Apparel Sector

Public Disclosure Authorized INTERWOVEN Public Disclosure Authorized How the Better Work Program Improves Job and Life Quality in the Apparel Sector Public Disclosure Authorized Public Disclosure Authorized © 2015 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, D.C. 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank Group with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, D.C. 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Design: Greg Wlosinski, The World Bank, General Services: Printing & Multimedia Photo credits: Cover photo: Manager checking quality of jeans with workers, Maseru, Lesotho. Photographer Jean-Pierre Pellissier ES, pg. iii: Two workers in front of a factory, Maseru, Lesotho. Photographer Jean-Pierre Pellissier Chapter 1, pg. 1: Worker looking across factory floor, Maseru, Lesotho. Photographer Jean-Pierre Pellissier Chapter 2, pg. 9: Worker sewing a shirt, Bình Dương, Vietnam, Photographer Nguyen Nguyen Nhu Trang Chapter 3, pg. 17: Worker working on jeans, Maseru, Lesotho. Photographer Jean-Pierre Pellissier Chapter 4, pg. 31: Worker speaking with management, Bình Dương, Vietnam, Photographer Nguyen Nguyen Nhu Trang Chapter 5, pg. 55: Workers leaving factory, Maseru, Lesotho. Photographer Jean-Pierre Pellissier Chapter 6, pg. 71: Workers packing products, Vietnam. Bình Dương, Vietnam, Photographer Nguyen Nguyen Nhu Trang Chapter 7, pg. 83: Worker inside a factory, Maseru, Lesotho. Photographer Jean-Pierre Pellissier Chapter 8, pg. 91: Workers walking their children to factory kindergarten, Bình Dương, Vietnam, Photographer Nguyen Nguyen Nhu Trang Contents About the Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii The World Needs More—and Better—Jobs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii How the Global Apparel Value Chain Works . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii Better Work: Stakeholders Working Together to Improve Job Quality . . . . . . . . . . . . . . . . . xv Working Conditions Inside Factories: Safer, Healthier, and More Collegial Work Environments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv Beyond Factory Walls: Workers Live Better Lives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvi Moving Forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii Chapter 1: Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Globalization and Job Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Background of the Apparel Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Better Work: An Innovative Model for Addressing Poor Working Conditions . . . . . . . . . . . 4 Overview of the Report Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Chapter 2: Apparel Sector Workers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Who Are Garment Workers? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Why Are Most Garment and Textile Workers Women? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 What Does It Mean to Workers to Have “Job Quality”? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Chapter 3: The Genesis and Evolution of Better Work . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Genesis of Better Work: The Cambodian Garment Industry and Better Factories Cambodia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Better Work Today . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Why Better Work Works . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Chapter 4: Improvements in Factory Working Conditions . . . . . . . . . . . . . . . . . . . . . . . 31 Initial Factory Working Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Impacts of Better Work on Working Conditions inside Factories: Evidence from Compliance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 The Better Factories Cambodia Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Beyond Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 A Comparison of Men’s and Women’s Feedback on Changes in Working Conditions . . . . 49 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 iii iv | Interwoven: How the Better Work Program Improves Job and Life Quality in the Apparel Sector Chapter 5: Improvements in Workers’ Lives Outside Factories . . . . . . . . . . . . . . . . . . 55 Well-Being and Poverty Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Communication Skills and Family Lives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Decision on Children’s Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Gender Equality and Women’s Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Chapter 6: Improvements in Working Conditions and Firm and Industry Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Working Conditions and Firm Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Human Resource Management Policies and Firm Performance . . . . . . . . . . . . . . . . . . . . . . . 73 Evidence from Better Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Chapter 7: Expansion to Other Factories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 In Search of Spillover Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Incentivizing Government Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Mandating versus Voluntary Subscription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Chapter 8: Policy Implications of the Quest for Better Jobs . . . . . . . . . . . . . . . . . . . . . 91 Conclusions about the Better Work Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Recommendations Moving Forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 Knowledge Gaps and Suggestions for Future Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 Appendix A: Data Analysis Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Appendix B: Organizations and Initiatives Working to Improve Working Conditions . . . . . . . . . . 109 Appendix C: Methodology for Conducting Qualitative and Quantitative Data Gathering ....... 113 Appendix D: List of Job Quality Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 Appendix E: Baseline Synthesis Report Profiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 Appendix F: Application of SWIFT’s Survey-to-Survey Imputation Method to the Better Work Program in Cambodia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 Appendix G: Gravity Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 iv About the Authors Aphichoke (Andy) Kotikula is a senior economist in the Gender Cross Cutting Solution Area of the World Bank Group, based in Washington, D.C., and has been in this position since 2013. He holds a PhD and MA in economics from Johns Hopkins University, and a bachelor’s degree in economics from Chulalongkorn University. Previ ously, he was a poverty economist for the South Asia region. Kotikula has worked on a range of issues in the areas of gender equality and poverty measurement. Milad Pournik is a consultant for the Gender Cross Cutting Solution Area of the World Bank Group. Previously, he has consulted for Management Systems International. He also served as research associate with the Global Gender Program at George Washington University. Milad has pub lished several papers including on women in peace and security, women’s political leadership, and CSOs supporting women. He received a master’s degree in Global Policy from the LBJ School of Public Affairs at University of Texas, Austin, and a master’s in economics and international relations from the University of St. Andrews in Scotland. Raymond Robertson is the Roy and Helen Ryu Professor of Economics and Government at the Bush School of Government and Public Service, Texas A&M University. His research focuses on the union of international, labor, and develop ment economics. He has published in American Economic Review, Review of Economics and Statistics, Journal of International Economics, Review of International Economics, Journal of Development Economics, and others. He serves on the advisory board at the Center for Global Development and was a member of the U.S. State Department’s Advisory Committee on International Economic Policy (ACIEP). He is currently the chair of the U.S. Department of Labor’s National Advisory Committee on Labor Provisions of Free Trade Agreement (NAC). His current work focuses on the effects of the ILO’s Better Work program in Cambodia and other countries, as well as other issues relating to the effects of globalization on workers. He received his PhD from the University of Texas after spending a year in Mexico as a Fulbright scholar. v Acknowledgements This report is the work of the World Bank Group’s Gender Cross Cutting Solution Area. The task was led by Aphichoke Kotikula (GCGDR) and Carlos Sobrado (GPVDR). The report was prepared under the guidance of Caren Grown (Senior Director, Gender CCSA). The main contributors to the writ ing and analyses are Raymond Robertson (Texas A&M University) and Milad Pournik (GCGDR). The team is also grateful to several others—Elisa Gamberoni (GTCDR), Javier Arias-Vazquez, Tomoyuki Sho, Florencia Paz (GCGDR), Nguyen Viet Cuong (National Economics University, Viet nam), Kelly Pike (York University), and Christian Ferrada (Central Bank of Chile and University of Chile)—for important contributions to specific sections and analyses. Additional support and comments were provided by Benedicte Leroy De La Briere, Lucia Hanmer, Maria Soledad Requejo, Jeffrey Daniel Eisenbraun, Amy Luin stra, Kevin Kolbin, Ros Harvey, and Sarah West. We also thank Pisey Khin and Nguyen Nguyen Nhu Trang (and their teams) for coordinating surveys in Cambodia and Vietnam. The Better Work country offices in Cambodia, Lesotho, and Vietnam helped facilitate field research and provided us with valuable contextual information. We want to recognize in particular the support of Esther Germans and Camilla Roman (BFC), Kristina Kurths (BW Lesotho), Hong Ha Nguyen and David Williams (BW Vietnam), and Dan Rees (BW director). The team acknowledges Gladys López-Acevedo (SARCE), Thomas Farole (GCJDR), Kim Eliot (CGD), and Arianna Rossi (ILO) for their work in conducting peer reviews; and the World Bank Group staff members and others for useful review comments and input. Communications coordination has been led by Sarah Jackson-Han (GCGDR) and administrative support has been provided by Ngozi Kalu-Mba and Mame Fatou Niasse (GCGDR). Funding for this study was provided by the World Bank-Netherland Partner ship Program (BNPP). vii Abbreviations AGOA African Growth and Opportunity Act BFC Better Factories Cambodia BSR Business for Social Responsibility (HERproject) BTTA Bilateral Textile Trade Agreement BW Better Work CCC Clean Clothes Campaign CP compliance point CPI consumer price index CSR corporate social responsibility CSES Cambodia Socio-Economic Survey DOL (U.S.) Department of Labor DPF Development Policy Financing EA enterprise advisor EICC Electronic Industry Citizenship Coalition EPZ Export Processing Zone ETI Ethical Trading Initiative FACB freedom of association and collective bargaining FDI foreign direct investment FGD focus group discussion FLA Fair Labor Association FTA free trade agreement FWF Fair Wear Foundation GAP Global Action Program on Child Labor Issues GATT General Agreement on Tariffs and Trade GDP gross domestic product GMAC Garment Manufacturers’ Association of Cambodia GSCP Global Social Compliance Programme GTSF Global Trade Supplier Finance IFC International Finance Corporation IFI International Financial Institution ILO International Labour Organization IMS Information Management System HRM human resource management LNDC Lesotho National Development Corporation MCC Millennium Challenge Corporation MFA Multi-Fibre Arrangement MI multiple-imputation MOLISA Ministry of Labour—Invalids and Social Affairs (Vietnam) MNC multinational corporation NGO nongovernmental organization OSH occupational safety and health PAC project advisory committee PICC Performance Improvement Consultative Committee PPE personal protective equipment PPP public-private partnership R&D research and development SHRM strategic human resource management SWIFT Survey of Well-being via Instant and Frequent Tracking TFP total-factor productivity TTWU Tailors and Textile Workers Union TUBWMETufts University Better Work Monitoring and Evaluation UN United Nations VCCI Vietnam Chamber of Commerce and Industries VGCL Vietnam General Confederation of Labour WDR World Development Report WRAP Worldwide Responsible Accredited Production WTO World Trade Organization ix Foreword Our 2013 World Development Report shed new light on the transformational role of jobs in rais ing living standards, boosting productivity, and promoting social cohesion. Jobs, it argued, are thus “what we earn, what we do, and even who we are.” At this juncture, the world faces a jobs crisis. More than a billion people of working age—mostly women—are absent from the labor force, while another 200 million are unemployed, most of them young. Some 600 million new jobs are needed by 2030 simply to keep employment rates constant. But as the 2013 WDR made clear, not every job helps lift people out of poverty, improves wellbeing, and benefits the broader community. Not every job raises aspirations along with living standards, spurring meaningful invest ment in the next generation. Yet what the world needs most is “good jobs,” defined by a worker in this study as “a job that makes me want to go to work every morning when I wake up.” Creating more good jobs for millions of pre dominantly female garment workers in develop ing countries is the mission of Better Work, an IFC-ILO-industry partnership launched in 2001. While the garment industry often provides a vital first step out of poverty—and an alternative to low-skilled agriculture and service work—it has long been associated with low wages, long hours, discrimination, abuse, and a variety of conditions that put workers’ health and safety at risk. Better Work trains local monitors to make unannounced inspections and bring factories into compliance with national laws and international standards through auditing and advisory and training ser vices. As of 2014, according to Better Work, the program had helped improve working conditions for more than 1 million workers in more than 1,000 factories across eight countries. This study set out to understand how exactly such improvements occur, whether better working conditions help empower female garment workers in factories and beyond, and whether and how improved conditions affect profits. Its findings are encouraging. Qualitative and quantitative study shows a correlation between better working conditions and improved performance, reduced turnover, and a more robust bottom line. For example, Nalt Enterprise, a Better Work factory in Vietnam, estimates that it takes up to three months for a new textile worker to reach full productivity—and that a 10 percent reduction in staff turnover would save 8.5 percent of total annual wage costs. Workers also reported a sig nificant spillover outside factory walls: Trained in communication, nondiscrimination, and dispute resolution at work, they were better at managing stress and overcoming traditional gender biases at home—with spouses reporting that they now shared not just household chores and responsibili ties but planning and decision-making as well. Creating more good jobs and tackling persis tent gender gaps are development imperatives if we are to achieve our overarching goals: ending extreme poverty and boosting shared growth. A progressive, efficient tax system benefits no one without jobs to produce revenue and growth, just as public services and state-of-the-art infrastruc ture fall short if they are accessible and useful to only half the population. This report highlights important links between better work and better lives for women and men, and better, more inclu sive and sustainable growth. We hope and expect it will spur further study and informed action. Nigel Twose, Senior Director, Jobs Caren Grown, Senior Director, Gender xi Executive Summary The World Needs More—and Better—Jobs One of the first steps that many countries have taken in the past hundred years to begin their development process is to produce apparel. The apparel sector is labor-intensive, which makes it an appealing industry for many countries as they seek to create jobs for their citizens. At the same time, this is a global industry, and buyers have become increasingly concerned about the working conditions of apparel workers. The sector has a reputation for low quality jobs. Low wages, long hours, high temperatures, excessive noise, poor air quality, unsanitary environments, and abuse (both verbal and physical) often characterize working conditions in apparel factories in many developing countries. Despite these risks, the apparel sector has an unusually high development potential because apparel workers tend to be women whose alter native options for employment are likely to be in the low-skilled agriculture and service sectors. Working in apparel can provide women with greater economic opportunities that enhance their agency. Therefore, for millions of poor unskilled workers, jobs in apparel manufacturing can be a first step toward escaping poverty. The challenge is to improve job quality in the apparel sector and thereby increase the chances that these jobs will both advance gender equality and reduce poverty. Drawing on a wide literature and some field studies conducted by our research team, we seek to answer three questions: (1) How can working conditions in the apparel sector be improved? (2) Do improvements in job quality affect gender inequality, improve worker welfare, and help alleviate poverty? and (3) Do improve ments in job quality boost firm performance? How the Global Apparel Value Chain Works The current structure of the global apparel trade involves many stakeholders (see Figure ES.1), all of whom have some stake in both improving xiii xiv | Interwoven: How the Better Work Program Improves Job and Life Quality in the Apparel Sector How Workers Describe Job Quality Defining job quality is important but difficult because jobs have many different char acteristics like pay and working conditions. This study aims to understand how work ers themselves see the key characteristics that shape job quality. Our field research in four countries (Cambodia, Kenya, Lesotho, and Vietnam) finds that job quality means largely the same thing. Certain economic characteristics such as good pay and benefits are prominent in workers’ minds, but so too are social dimensions such as respectful relations with managers and supervisors and work-life balance (facilitated by having reasonable work hours). Figure ES.1: All stakeholders in the apparel value chain stand to gain from Better Work (BW) • Reliable sourcing • Reputation • Cost eective audits Buyers • Competitiveness • Jobs • Enforcement capacity Government • Working conditions • Jobs and income • Gender equality Workers Factories • Access to markets • HR management • Productivity gain working conditions in factories and improving the performance of factories. • Buyers design products and bring them to markets. Maximizing profits is their priority criterion when choosing suppliers to produce their products. However, they also consider many other factors such as reliability, timeli ness, and quality of products. In addition, buyers also have an incentive to improve working conditions in developing countries when they face reputation risk. • Factory management or producers in developing countries may resist improving working conditions due to concerns about costs. If, however, such improvements lead to an increase in workers’ productivity, management may consider making the necessary changes. If the value of worker productivity increases more than the cost of the investment aimed at improving working conditions, then improving working condi tions can increase factory profits. • Workers have a clear stake in improving working conditions—both improvements in ambient conditions, such as temperature, air quality, and so on, and in workplace communication. Better working conditions improve workers’ quality of life and may also increase their productivity and learning. • Governments and the international commu nity have an incentive to improve working conditions. Aside from the concern that governments might have for their working population, governments also benefit by attracting foreign investment and boosting exports. Better Work: Stakeholders Working Together to Improve Job Quality In the past, people have tried to address concerns about working conditions in a confrontational way by pitting producers against workers or pit ting buyers against governments. In this regard, one of the innovations of the Better Work (BW) Program is to find common ground where all of the stakeholders can build upon their common values and goals in order to improve working conditions. The Better Work Program has its roots in the Better Factories Cambodia (BFC) program, established in 2001 as a follow-on from the 1999 U.S.-Cambodia Bilateral Trade Agreement. The free trade agreement (FTA) was the first to link improved labor conditions with greater market access. The BFC program benefitted all the key stakeholders by improving work conditions, supporting the growth of the apparel sector in Cambodia (benefitting all local stakeholders), and boosting developed world buyers’ reputa tion by sourcing from ethical workplaces. BFC has also helped to cushion the negative effects of external changes to the trading environment in the apparel sector (the end of the Multi-Fibre Arrangement quota system in 2005 and the global financial crisis in 2008–09). The program has grown substantially; as of December 2014, BW has reached over a million workers in more than 1,000 factories across eight countries (Bangladesh, Cambodia, Haiti, Indonesia, Jordan, Lesotho, Nicaragua, and Vietnam). How the Better Work Program Works The very first step of the Better Work program when it starts working with an apparel factory is the assessment stage. The Better Work program trains local monitors to go into the factories on Executive Summary | xv unannounced visits and assess working conditions. One of the goals of the Better Work Program is to bring the factories into compliance, not only with national laws, but also with international labor standards. BW is unique because its model not only entails auditing, but also advisory and training services. While different training modules are offered across different BW countries, they all aim to build the capacity of key stakehold ers to improve working conditions and factory productivity. Starting in 2015, BW is piloting a new operating model by offering advisory and training services prior to carrying out assessments. This change seeks to foster engagement with factories first and to help them initiate reforms prior to the formal assessment process. It also should help to feature BW’s advisory and training services more prominently and ensure that BW is known as more than simply an auditing exercise. Working Conditions Inside Factories: Safer, Healthier, and More Collegial Work Environments Factories in BW programs have seen improvement in working conditions. Over time, BW factories exhibit improved compliance with key national and international standards. These standards include safety, fire prevention, protective gears, accurate compensation, discrimination, and so forth. Workers themselves also report that factories are safer. In a follow-up survey after the introduction of the BW Program in Lesotho, workers reported occupational health and safety (OSH) as the area with the most improvement and attributed such an improvement to changes in workers’ awareness and factory policies. In addition, improved working conditions benefit male and female workers equally. The BW Program promotes behavioral change of workers and factory management through training and advisory services. The BW advisory services help to create Performance Improvement Consultative Committees (PICCs) in factories. Data from Cambodia, Lesotho, and Vietnam suggest that the creation of PICCs is particularly valuable (see box entitled “New Tool” below). In terms of training, the workers and managers we surveyed often expressed how they were able to use the knowledge gained through BW training xvi | Interwoven: How the Better Work Program Improves Job and Life Quality in the Apparel Sector New Tool: Performance Improvement Consultative Committees (PICCs) One of the innovations of the BW Program has been the formulation of Performance Improvement Consultative Committees (PICC). PICCs are groups made up of an equal number of both management and union/worker representatives who meet regularly to help resolve disputes within the factory and also try and improve performance of the factory in a collaborative way. In Lesotho, workers can raise their specific health and safety concerns through PICCs, which are heard by union and non-union worker repre sentatives, management representatives, and an enterprise adviser from Better Work. Success of PICCs: • The PICCs proved to be useful avenues in which to bring up problems, and to resolve them more effectively than previous mechanisms. • The PICCs not only helped improve industrial relations, but also helped to strengthen trade unions overall. • In the case of Vietnam, the success of the PICC model was such that it compelled the government to introduce a new labor code that obligated employers to conduct social dialogue in the workplace. to create safer, healthier, and more collaborative work environments. But Will These Improvements in Working Conditions Last? Research in Cambodia suggests that such improve ments are sustainable. A more detailed look into the data shows that (1) once investments are made to improve work conditions they are rarely reversed; (2) reputation-sensitive buyers make a difference as reflected by the fact that the factories they source from tend to be in greater compliance with national and international labor standards; and (3) important limitations still exist and the BW program has not proven to be a panacea for all of the garment sector’s problems. Firms Are More Productive Apparel factories may be hesitant to improve working conditions due to the initial investment required. However, research from this study has shown that improvements in working conditions can actually contribute to factory performance. As communication improves, workers and the management are better able to resolve disputes and therefore improve the performance of the factories. Profits, productivity, and survival all tend to move in a positive direction when work ing conditions improve as staff turnover and absenteeism decrease. In Vietnam, Better Work factories, which pay higher wages and invested in improving working conditions and complying with labor standards, have comparable profits to non-BW factories. The benefits of involvement with the Better Work program extend beyond the factory level to the country level. In this regard, the impacts on the economies of apparel-producing countries can be substantial. Comparing export data across the world, participating in the Better Work program is associated with significant increases in apparel exports—both to the world generally and to the United States in particular. This relationship holds true after controlling for relevant factors that may affect apparel trade. Beyond Factory Walls: Workers Live Better Lives For workers, the benefits of working in the apparel sector in general and to participate in the BW Program in particular, extend beyond factory walls. Participants are gaining lessons from the Better Work experience and training. And they are taking those lessons back home, improving the lives of their families as well. In Lesotho, workers often attributed BW training in financial literacy to improving their lives. Workers from Cambodia, Vietnam, and Lesotho reported that improved communication at home and decreased stress levels at work have contributed to their higher level of satisfaction with their family lives. Better communication in the households also enables families to make better decisions. In Cambodia, children whose mothers work in the apparel sec tor are more likely to attend school. Implications for Gender Equality Apparel jobs can help women gain more equality. Working in urban areas, in the formal sector, and in fast-paced and demanding work in garment industries can act as an agent of change in breaking old norms, such as the norm of women bearing the burden of household chores. In Vietnam and Cambodia—men and women alike—mention that the division of labor at home is equal. These norms have evolved; workers acknowledge that the equal arrangement they are experiencing now is different from their parents’ generation. Another measurement of gender equality is women’s agency in household decision-making, whether women take part in household decision-making or whether major decisions in the households are made jointly. In Cambodia, most married workers report that they make major decisions (such as about children’s schooling and finances) with their spouses. Interestingly, the longer they work in the apparel industry, the more likely they are to share joint decision-making power within their households. While working in the apparel sector can help women exercise greater agency, programs such as BW also have a role to play in promoting greater gender equality. In this regard, communication skills learned through BW training can be key in changing parochial norms. Equipped with com munication skills, women in the apparel sector negotiate new roles inside their home and in society. In most cases, quantitative results (in Cam bodia) and qualitative findings (in Cambodia, Lesotho, and Vietnam) confirm that women and Executive Summary | xvii men receive equal pay for equal work. In this regard, the use of productivity targets and piece rate remunerations may help explain the wage equality. Data from Cambodia also suggest that women earn more, but accumulate less wealth. In Cambodia, on average, women earn more than men; this difference can be explained in part by the fact that women tend to work longer hours than men (56 versus 54 hours per week). However, female workers do not appear to own more assets. This may be explained by the fact that female workers often mention using extra money to support relatives or children’s education. Moving Forward The BW program is not without flaws. How ever, it is a step forward and it has contributed significantly to improve working conditions in BW factories. It provides a quadruple win: to workers in terms of working conditions and overall welfare, to factory management in terms of factory performance, to countries in terms of increased exports, and to buyers, in terms of reputational gains. How can workers in other parts of the world experience better job quality? The issues raised by workers in other countries, such as Kenya, are concerns that a program such as BW is well equipped to address. In addition, improvements in working conditions may spread to other factories, either endogenously (on their own) or exogenously (being mandated or incentivized from other actors). How Can Programs Such as BW Be Expanded? One might wonder why factories have not imple mented such human resource management (HRM) techniques on their own, if there are so many benefits to factories’ productivity. Evidence of spillover effects—that factories will learn from other factories about HRM due to incentives related to improve productivity—has been mixed. Instead, active and creative policies are needed to scale up the scope of BW programs. Evidence has shown that incentives to governments of apparel-exporting countries can improve work ing conditions in textile and garment factories. A prime example is the creation of the Better xviii | Interwoven: How the Better Work Program Improves Job and Life Quality in the Apparel Sector Factories Cambodia Program. Finally, in order to ensure the sustainability of BW programs, local stakeholders need to gradually take ownership of program implementation. How Can Programs Such as BW Be Improved? While Better Work is not a panacea for all of the problems in developing countries or the apparel sector in particular, several lessons can be learned from the program’s experience. • First, the relationship between workers and management is a crucial aspect of working conditions and improving this relationship is not costly to implement. Across the sample of workers surveyed for this study, workers universally valued having a “good relation ship with management.” Improving the rela tionship between workers and management therefore represents a cost-effective way to improve job quality and motivate workers. In particular, training courses for managers can be designed with experience from countries that have been exposed to foreign direct investment (FDI) for some time. This can help prevent entrenched animosity between foreign managers and local workers, which can be difficult to remedy at a later stage. Mechanisms designed to promote healthy worker-management relations, such as the PICCs established by BW, have proven to be effective and can be used as a model for future programming. • Second, one of the key findings from the mechanism design literature is that trans parency tends to improve behavior. This not only encourages the employer and potential clients to address key areas in which they are failing their workers, but also empow ers workers in that they can see that their concerns are being heard. • Third, actively involving workers at all stages of the program cycle (development, implementation, and monitoring) is critical. As they are on the frontlines, their concep tions of job quality should ultimately be driving program aims. Data reviewed in our study finds that workers consistently cite occupational safety and health (OSH) as a significant area of concern. Although programs such as BW have contributed to making improvements in this area, more work remains to be done to ensure that basic health and safety standards are achieved for workers. Clearly, changes in working condi tions, especially with respect to safety and health, cannot come from efforts by factory management alone. It also needs cooperation from workers to change their behaviors. In this regard, advisory and training services can help to shift the mindset away from “com pliance for audits” to “self-improvement.” • Fourth, the benefits of certain program features may extend beyond improving job quality to positively impacting workers’ quality of life. Thus, future programming needs to carefully consider the needs of workers beyond their immediate workplaces. In this way, programs can expand their reach and tailor the content of training modules to help improve workplace productivity and enable workers to live healthier, happier, and more fulfilling personal lives. Stakeholders can also capitalize on life skills training to advance social change, particularly con cerning gender equality. Our primary data revealed a particular area of concern that future efforts would do well to address: the lack of access to finance for apparel workers. Financial products need to be adapted to better meet the specific needs and circum stances of apparel workers. • Fifth, convincing employers that improving job quality benefits their bottom lines as much as it does their reputations is critical. While this evidence exists to some extent, further business-related research demonstrat ing the positive effects that improved HR policies can have on productivity would be of great value. In this regard, collecting bet ter data for monitoring working conditions should be a priority. • Finally, in the case of the BW Program, pro active efforts are needed to expand its reach. Specifically, programs may need to publicize key success stories and come up with cre ative incentives to increase participation. Two possible avenues for promoting better job quality are: (1) to link improvements in working conditions with trade agreements Executive Summary | xix and (2) to leverage development finance in support of initiatives to improve working conditions. Although the BW program is focused on the apparel sector, our findings suggest that many other labor-intensive manufacturing sectors can also benefit from similar interventions. In any program seeking to improve job quality, program sustainability needs to be carefully planned to ensure sustained success in achieving program goals. Chapter 1: Introduction Highlights ▲ Job quality matters. Exports, especially of apparel, can improve welfare and reduce pov erty. While traditionally, policy makers have focused on promoting jobs as a development strategy, the number of jobs alone may not be sufficient to alleviate poverty. The challenge lies in improving job quality in the apparel sector, thereby increasing the likelihood that these jobs will both boost gender equality and reduce poverty. ▲ The apparel industry is known for being labor intensive with low barriers to entry for women relative to other global manufacturing sectors. ▲ The apparel industry is organized in a global value chain comprised of four main stakehold ers: buyers, governments, workers, and factory managers. These stakeholders play a role in and stand to gain from improving working conditions in the global apparel industry. ▲ This study focuses on the Better Work program as it is perhaps the most comprehensive attempt to improve working conditions in the apparel sector. The aim of the study is to understand how job quality can be improved and how improved job quality contributes to development outcomes. Globalization and Job Quality In developing countries, globalization is often experienced as, and therefore effectively defined as, foreign direct investment (FDI) entering coun tries to expand the export sector (Robertson et al. 2009). FDI, especially in manufacturing, can pro mote development (Moran 2006). In this regard, 1 2 | Interwoven: How the Better Work Program Improves Job and Life Quality in the Apparel Sector it is common, if not the norm, for developing countries entering global markets to concentrate in apparel manufacturing. Consequently, apparel manufacturing lies at the nexus of globalization, jobs, and poverty (Lòpez-Acevedo and Robertson 2012). FDI in apparel manufacturing and exports have an unusually high development potential because apparel manufacturing workers tend to be women whose alternative options are likely to be in low-skilled agriculture and service sec tors. Working in apparel manufacturing can also provide women with greater economic oppor tunities that enhance their agency.1 Therefore, for millions of poor unskilled workers, jobs in apparel manufacturing can be a first step toward escaping poverty. Traditionally, policy makers have focused on promoting jobs as a development strategy. How ever, jobs alone may not be sufficient to alleviate poverty. Job quality also matters. The low wages, long hours, high temperatures, excessive noise, poor air quality, unsanitary work environments, and abuse (both verbal and physical) in many developing country manufacturing workplaces are often cited as evidence that “sweatshop conditions” characterize production in relatively poor countries. Furthermore, harsh working conditions in apparel factories are central to a large and growing debate about globalization and labor standards (Elliott and Freeman 2003; Har rison and Scorse 2010; Locke and Romis 2010; Brown et al. 2011).2 Several organizations have responded to growing public concern over the issue by pressuring and working with governments and employers to improve working conditions.3 As the Gender at Work companion to the 2013 World Development Report (WDR) on Jobs makes clear, while jobs can add value to people’s lives, the specific jobs that are beneficial to women’s agency varies. In this regard, Gender at Work cautions that the possibility exists that 1 “Agency is the ability to make decisions about one’s own life and act on them to achieve a desired outcome, free of violence, retribution, or fear.” (Klugman et al., 2014, 13) 2 The debate stems from two opposite views. On one hand, some researchers argue that globalization might erode working condi tions and reduce labor compliance in export-oriented sectors. Others contend that free trade does not interfere with labor compliance. 3 See Appendix B for a list of organizations and initiatives working to improve work conditions globally. some jobs can actually diminish agency if they are exploitative or demeaning. Thus, this study recognizes that while jobs in the apparel sector offer a promising and realistic entry point for women into the formal labor force, these jobs may actually reinforce structural inequalities by further hindering women’s agency. For purposes of this study, quality jobs are defined as those that are characterized by pay and policies that increase both income and agency. Job quality is significantly influenced by factories’ human resource management policies. While the term human resource management (HRM) may suggest administration and bureaucracy to some readers, in developing countries, HRM policies are those that shape and define job quality. Ichniowski, Shaw, and Prennushi (1997) argue that changes in HRM practices can be viewed as another aspect of production technology akin to shop floor produc tion technologies. This implies that HRM policies can be shared, transferred, and learned just like production technologies. At the same time, it is risky, if not flatly inaccurate, to assume that all firms are aware of the best technologies at all times. There fore, helping to transfer HRM technologies has the potential to help firms in developing countries and positively impact people’s lives. Not only can effec tive HRM practices enhance working conditions, but also they can improve productivity, factory performance, and firm survival. Brown, Dehejia, and Robertson (2011) show that improvements in working conditions—measures of job quality—in Cambodia positively correlate with firm survival. In addition, Brown, Dehejia, and Robertson (2012) show that firms very rarely reverse improvements, further supporting the idea that changes are linked to firm survival. This study focuses on one of the most significant programs aimed at transferring HRM technology and demonstrates how this kind of technology transfer can help achieve development outcomes, especially for women. Background of the Apparel Sector The emergence of garment4 manufacturing indus tries in low-income and developing countries 4 Throughout this study, the terms “garment” and “apparel” will be used interchangeably. Chapter 1: Introduction | 3 Figure 1.1: Incentive Structure for Stakeholders in the Apparel Value Chain • Reliable sourcing • Reputation • Cost eective audits Buyers • Competitiveness • Jobs • Enforcement capacity Government • Working conditions • Jobs and income • Gender equality Workers Factories • Access to markets • HR management • Productivity gain allows women to take advantage of the opportu nities offered by employment. As Khosla (2009) notes that female workers themselves are best source of information on the contribution of working in garment factories. Even though jobs in garment industries are not the most desirable ones, many women find value in working in this sector. Amin et al. (1998, 195) write that “women themselves value the modern nature of their work, consider garment work to be a lesser hardship than most forms of agricultural labour, and value the auto