Progressive Garment Factory, or Charity?

What’s the difference between a progressive factory and a charity?

Here’s the story, by Steven Greenhouse, for the NYT: A Factory Defies Stereotypes, but Can It Thrive?

…Ms. Castillo had long dreamed of a bigger, sturdier house, but three months ago something happened that finally made it possible: she landed a job at one of the world’s most unusual garment factories. Industry experts say it is a pioneer in the developing world because it pays a “living wage” — in this case, three times the average pay of the country’s apparel workers — and allows workers to join a union without a fight.

“We never had the opportunity to make wages like this before,” says Ms. Castillo, a soft-spoken woman who earns $500 a month. “I feel blessed…”

There’s lots that’s interesting, here, but what most struck me was the similarity between the factory described (which produces apparel under the label “Alta Gracia”) and the controversial (Product) RED campaign. As you may already know, (Product) RED is a project that attempts to leverage consumerism into charity, by donating a small portion of profits from certain consumer goods — RED-branded iPods, for example — to the Global Fund (to fight AIDS, tuberculosis, and malaria in needy countries). I wrote about RED here and here.

See the similarity? Red asked consumers to pay a premium so that money could be donated to the Global Fund. Alta Gracia asks consumers to pay a premium so that the money can be donated to the company’s workers. In both cases, there’s an attempt to advance a worthy cause (disease prevention on one hand, poverty alleviation on the other) by appealing to affluent consumers via value-laden branding.

Two questions occur to me.

1) Will Alta Gracia be subject to the same kinds of criticisms that (Product) Red has been subjet to? If not, why not?

2) It seems to me that the choice of workers as beneficiaries of the Alta Gracia scheme is but one option. Who are other potential beneficiaries of schemes like this? If RED helps out by donating profits directly to third parties (i.e., via the Global Fund) and if Alta Gracia helps out by donating higher wages to its workers, are there other parallel mechanisms that would work? Here’s an example. What if the company that owns Alta Gracia (Knights Apparel) were publicly-traded (instead of privately-held). And what if it gave shares to poor families, so that they could receive dividends when the company makes a profit? Would that be ethically the same thing? Would people who generally think profit-seeking is evil suddenly think profits are a good thing?

23 comments so far

  1. Jonathon King on

    The problem with your interpretation is with symantics.
    I’ve never heard your phrase “donated higher wages.” You work for a wage. Knights Apparel has raised wages for its workers. They work for that wage, even though it is three times the going rate in the worldwide business. Is that different than when Henry Ford raised the wages of his assembly line workers to an unprecedented $5 a day? Accepting a donation is not the same as working for a living wage. Getting paid a wage for producing a product is not the same as accepting welfare.

    • Chris MacDonald on

      Jonathan:

      Thanks for your comment.

      You’re right, of course, that we wouldn’t normally think of this as a donation. But structurally, it is. When one party, A, voluntarily gives money so that another party, B, can have more, that’s a gift or donation. So when you buy a product with a label that says “we charge more but the money is going to B”, you’re effectively making a donation, as far as I can see. Where’s the difference between this, and RED, other than the use to which the money is being put?

      Note that this is not supposed to be either praise or criticism of the scheme; it’s just an observation of the similarity.

      Chris.

  2. Susan K on

    There are many reasons why the comparison between RED and Knights is spurious.
    First, RED was largely a public relations campaign. The companies that support RED spent more on advertising their brands than they gave away in donations. The NY Times reported that (Project)RED spent $50 million in advertising and raised $25 million.
    Secondly, by no ethical standard can wages be considered a donation. No more than a mortgage is a gift. Wages are earned. They are payment provided in exchange of labor. In fact, workers will create value and productivity (t shirts) in return for the wages. Instead of donation, it’s actually an exchange. Very simple labor economics.
    Third, what Knights Apparel is doing is trying to change production practices through a “race to the top” example. Knights Apparel is cutting into their profit margin with the hopes that ethical production will its products a competitive advantage, which it will in my book. This may influence other apparel manufacturers to follow suit. This is what Dov Carney did with American Apparel.
    The donation issue doesn’t work either because Knights Apparel is pricing these T-shirts at an equivalent value of other similar tshirts, so consumers will not pay more.
    Lots of folks pay more for higher quality products- shade grown coffee, organic milk, cage free eggs, hand crafted shoes. Are these in any way “donations”?

    • Chris MacDonald on

      Susan:

      Thanks for your comment.

      Briefly:
      I’m not sure the company’s or project’s *intentions* make the difference.

      As for pricing: if workers are getting payed more, the money is coming from somewhere. Either consumers are donating the difference, or the company’s owners are. The final price may be the same as the price of SOME shirts — but it looks like they’ll be the same price not as generic shirts, but as shirts with Nike or other status-symbol logos on them.

      As for your final question: no, they’re not donations *IF* the product is higher quality. But in some cases they’re not, in which case consumers are either a) making a donation or b) paying for a status symbol.

      Chris.

  3. cheryl janisch on

    Chris,

    What you fail to explore is not whether 3rd world workers should be paid an adequate amount to cover their living costs + savings but when will it become the “norm”. Companies looking for cheap labour today are constantly on the move as countries like China now outsource to ‘lower wage’ countries. As the middle class continues to grow around the world all of us will someday be subject to buying a more expensive t-shirt – unless of course you foresee a t-shirt not having to be made by a human hand.
    Cheryl

    • Chris MacDonald on

      Cheryl:

      You’re right that I don’t explore that issue. It’s a short blog entry. But that issue doesn’t affect my analogy. In talking about RED, we should likewise discuss whether we have an obligation to transfer money to people suffering from disease. Whether there’s an obligation doesn’t change the fact that, structurally, there’s a donation being made.

      Chris.

  4. thegurney on

    I agree with Susan K about the race to the top. The phrase that stands out to me is “living wage” this has been calculated independently of Knights Apparel as a fair wage which allows people to live without having to go without basics every month. The price that we pay for goods should include the price of a “living wage” to the workers and just because someone is happy to receive a decent wage we shouldn’t get all excited about being charitable, its just a step towards treating people fairly. More and more companies are being pressured by orgs like the Clean Clothes Campaign to pay a living wage, it is a step in the right direction towards a fairer world where we pay what things actually cost and workers recieve a living wage- defintely progressive factory.

  5. Chase Brumfield on

    This threw me for a loop a tad…

    I, like some of the other readers, fail to see how paying workers a certain wage, whether that be above or below the normal threshold, could ever be considered a “donation.”

    In reality, it almost makes me angry to hear it phrased in that way. You run a company, you set a wage, your workers do the job, you pay them that wage. While company intention is a frivolous conversation, to use a campaign that basically says “we charge a premium for our products so that we can pay our workers more” not only comes off as sleazy, but disrespectful to both the consumer and employers.

    It cuts at the guilt of the consumer, and it undermines the value of the job that the worker is doing. The company is making a statement just as much by what it’s not saying as by what it is… ie: “We COULD pay our employee’s less, the job they do is not that difficult, the country their from – it’s the norm to treat human beings like commodities and cheap ones at that… so spend more money with us so we don’t do that.” It’s ridiculous and downright terrible.

    So, you want to build a charitable oriented garment plant? You could start by giving the individuals that work there the dignity of not being considered a charity case.

    Let them know they deserve a fair wage regardless of whether sales are up or down. That the work they do is important, and that they are the backbone of the company. Then advertise that you invest in your workers, and in their families, in their COMMUNITIES… not that you donate to them… but that you take part in improving their situation with them. O’ Your a garment plant are you? How about a garment plant that clothes their poorest employees…

    I could be way off here… but hearing about this made me pretty angry. Since when did a company paying it’s employees a “living wage” become something to receive a gold medal for? If you can’t create a sustainable business paying people fairly and not using tactics like this, then you don’t deserve to be in business.

    Give. Get. Give.

    • Chris MacDonald on

      Chase:

      Can you clarify… Is it this factory’s plan that bothers you, or my way of describing it?
      Thanks,
      Chris

      • Chase Brumfield on

        Not your way of describing it… this line is what really bothered me…

        “Industry experts say it is a pioneer in the developing world because it pays a “living wage” — in this case, three times the average pay of the country’s apparel workers — and allows workers to join a union without a fight.”

        Since when do we honor companies for doing things that should be required when considering the dignity of a human being? We’re going to call this company “pioneering” and honor them for simply doing the right thing? That’s like wanting to put someone on Newsweek for helping an old lady up when she falls down. Sure you could walk by, but the right thing to do is pick them up, and you shouldn’t expect a medal after you do it.

        I have a problem with companies leveraging ethical standards, to sell more products, when they should already be meeting these ethical standards regardless of profit margin, I have a problem with companies undermining human equality through telling people “pay more for our products that way we can give our employees fair wages.” It’s like, “Ok a-holes, why not simply pay them a fair wage because it’s the right thing to do. Your telling us that you basically didn’t have to pay them fair wages if you didn’t to, and that’s just down right dispciable.

        I didn’t have a problem with the way you phrased it, I thought you wrote an interesting short article (hence my over embellished responses). I only have a problem with the content, organizations taking advantage of both employees and consumers, leveraging “the right thing,” into something they should get a pat on the back for.

        Does that clear things up?

        Give. Get. Give.
        Chase Brumfield

  6. Chase Brumfield on

    EDIT:

    “While company intention is a frivolous conversation, to use a campaign that basically says “we charge a premium for our products so that we can pay our workers more” not only comes off as sleazy, but disrespectful to both the consumer and employers.”

    – “Employers” should be “Employees” in my first post… That comes off confusing ;( sorry.

  7. Chris MacDonald on

    Chase:

    Thanks for the clarification.

    Of course, what you refer to as “simply doing the right thing” is incredibly rare. Very few companies do it. That certainly singles out this company for attention, if not for praise.

    Compare: would you admire someone who gave 20% of his annual income to charity? I would. But there are those who would argue that giving that much is an ethical obligation, given how much suffering there is in the world. So, by your reasoning, such a person wouldn’t deserve praise at all…even if he’s the only one around living up to his obligation. If that’s your view, there certainly is a kind of integrity to it, but I suspect most people would say that the one individual living up to ethical obligations does indeed deserve praise.

    Regards,
    CM.

  8. Chase Brumfield on

    I hear you, but as for the 20% charity example – this analogy simply doesn’t match up to the actual company story because, just as you mentioned, some people might say more or less than this is what should be “ethically obligated.” I don’t believe this is the case for the company example. I highly doubt you will find anyone who thinks it’s ethical to not pay someone a livable wage for work they do. But, this is besides the point. The point is not whether the person or the company “deserves praise” for what they’re doing, the point is that this company is leveraging their ability to, at any time, treat their employees just as crappy as the other companies (in order to sell more product). That’s the dispicable part to me. Sure, give the company kudos for paying a livable wage, I can live with that I suppose. But for that company to then twist that into a marketing ploy to sell more products feels like their taking the rights of their employees and hanging them out the window, threatening to drop them if consumers don’t pay a premium.

    Thanks for taking the time to share your thoughts on this… I appreciate respectful and thought provoking conversation.

    Give. Get. Give.
    Chase Brumfield

  9. Constance C. on

    Chris,

    First, I would like to thank you for presenting a thought-provoking post.

    In business terms, the higher wages paid by Alta Gracia are considered a direct cost in their cost of goods (COG’s) which cannot possibly be considered a ‘donation’ to their employees.

    To Chase’s comment, “Since when do we honor companies for doing things that should be required when considering the dignity of a human being?”, I believe he answered this himself in a later post. Unfortunately in today’s apparel industry, stories like this stand out due to the large number of factories that do not adhere to social compliance standards. If more companies were conducting business ethically, then stories like this would not be newsworthy.

    I appreciate hearing about companies that do conduct themselves ethically as I wish to support these organizations. If they did not receive publicity then it would be very difficult to learn who they are.

    Thanks again, I thoroughly enjoyed the read.

    Constance

    • Chris MacDonald on

      Constance:

      Thanks for your thoughtful comment.
      I’ll only suggest that if higher wages are voluntary, they’re an odd sort of “cost”. But technical definitions aside, when one person gives money to another and it’s not in return for anything, it’s very hard to distinguish that from a gift or donation (and that applies to the extra wages being paid here above the market price for such labour).

      Chris.

  10. Constance C. on

    Chris,

    Maybe the issue here is regarding the market price for the labour in question, which is often pitifully low. If the wages were raised across the board in these countries, then the “extra” money paid would not be above the market value. Therefore, the money in question would be earned, not a donation.

    I understand a living wage is relative to each country, but it is not a living wage in many countries unless the workers work many overtime hours.

    Just something to think about.

    Constance

  11. Richard Torgerson on

    I left this comment on the CSR wire talknack page, but I see a more robust conversation here so here you are:

    I believe there is a huge difference. Your questions presuppose that paying exploitation wages is the normal and expected thing to do, therefore paying a fair sustainable wage is charity. Further your questions also presuppose that consumers colluding with business to share the profit of worker exploitation through lower prices is normal, therefore calling the avoidance of doing so “paying a premium”.

    Finally, this company has invested in a workforce that will be healthier, more productive and more loyal than their competitors’. The experiment here is if the return on that investment (in higher quality, lower spoilage, higher employee retention, lower training costs, and higher reputation and consumer acceptance) can be realized sufficiently in a timely fashion.

    Thanks, RT

  12. Chris MacDonald on

    OK, let’s not call it “charity.” Let’s call it “voluntarily doing something good, maybe even obligatory, that pretty much no one else is doing.”

    That’s what (Product) RED is doing too, right?

    I’m more interested in the parallel than I am in the label.

    Regards,
    Chris.

    • Allan on

      So, if I could get away with purchasing a stolen item from a fence, but instead choose to pay more from a legitimate dealer, the difference in price would constitute a “voluntary” payment analogous to a charitable donation? Only if everybody else in my situation is buying from the fence?

      I’m trying to get at a issue that other commenters here are are coming at in various ways: whether your parallel depends on whether we can analyze Alta Gracia’s workers’ wages into a “really earned” component and a “gratuitous donation” component, and on what basis we can do that. In other words, does this analysis presuppose that the workers are morally entitled only to “what the market will bear” (and we’re not necessarily talking about an “ideal market” here), or is the claim that paying more than one has to is “voluntary” in the relevant sense irrespective of whether the recipient deserves or is entitled to some or all of that margin? The last reply implies the latter, but only if “pretty much no one else” is doing so. Either fork seems to lead to some interesting issues.

      • Chris MacDonald on

        Allan:

        No, buying stolen property is both illegal and unethical. I don’t defend either, regardless of how many people are doing it.

        The additional wages for the workers are neither a) legally required, nor b) *clearly* morally required. So, it’s an entirely voluntary transfer of wealth. In philosophical terms, it’s “supererogatory” (i.e., good, but “above and beyond the call of duty,” as it were.) Some people may think the workers deserve more — just like some people who buy (Product) RED stuff think that AIDS victims in Africa deserve access to drugs to treat their illness.

        It’s also worth noting another bit of arbitrariness in the Alta Gracia scheme: of all the poorly-paid people in the supply chain, this scheme only seeks to help the factory workers. What about the dock workers, truck drivers, file clerks, etc? Should we also try to figure out what’s fair payment for them, too? Who should do that?

        Chris.

  13. […] a recent blog entry about a project with similar intentions, see “Progressive Garment Factory, or Charity?”). « Business Ethics […]

  14. Chase Brumfield on

    “Some people may think the workers deserve more — just like some people who buy (Product) RED stuff think that AIDS victims in Africa deserve access to drugs to treat their illness.”

    -Wait… is this an arguable point? Are there legitimate viewpoints out there that don’t think people deserve access to drugs that could potentially save or lengthen their lives? I could see a “where does the line get drawn?” debate, I could not however understand a debate that hinges on “yes” they deserve it or “no” they don’t.

    This is also why it’s difficult for me to understand how paying someone a “fair wage,” whether other companies in the region are doing it or not, can be considered charity. Sure, we can discuss what a fair wage is, but should there really be a discussion over paying whatever that fair wage happens to be. And then we have a company trying to look self-righteous by calling it charity? Maybe I’m over simplifying…

  15. Chris MacDonald on

    Chase, it very much depends what you mean by “deserve.” Probably no one would disagree with these statements:

    “It would be good for all poor people to have more money.”
    or
    “It would be good for everyone to have access to proper healthcare.”

    But “deserve” implies that they are owed it, which necessarily raises the question of who owes it to them, and THEN things get much more contentious.


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