Intense competition between suppliers and a lack of transparency about brands’ interaction with suppliers result in a power imbalance that enables the brands to dictate the terms of their agreements. During the pandemic, this power imbalance was manifested by some brands’ use of force majeure provisions (and the warning that they might do so in some other cases) and the renegotiation of terms that enabled brands to delay acceptance of products, extend payment terms, and apply further discounts on orders already placed. All of this squeezed Bangladeshi manufacturers.
During our interviews, a senior representative of the London-based Business and Human Rights Resource Centre noted that, during the pandemic, research showed “that suppliers are being pressured to accept lower prices than ever before and brands are leveraging the desperation of suppliers, using the crisis to get even cheaper prices, which is alarming, and it is causing further issues in terms of suppliers’ cashflow, and that has a knock-on effect on the workers, even in terms of affecting the suppliers’ ability to be compliant with labor standards.”
What compounded the problem was that Bangladeshi suppliers were expected to cover the costs of making improvements in their factories and granting paid leave where appropriate, with insufficient financial support from the government and no direct assistance from the brands. Coupled with a decrease in orders, suppliers were struggling to meet the new health-and-safety guidelines intended to protect workers from transmitting Covid-19 while in the factories. Factories had to be redesigned through reshaping the factory floor to ensure social distancing, providing workers with sanitizers and personal protective equipment such as gloves, and building washing areas. All of these expenses were the responsibility of the suppliers.
For workers, the effects of the pandemic on the RMG sector meant layoffs for an estimated 10 percent of the workforce, furloughs for most during the government-imposed lockdown, and a heightened level of uncertainty for everyone. Pregnant women were often singled out for layoffs, the consequence of which was that companies did not have to pay maternity benefits to the women.
Furloughed workers were legally entitled to receive 65 percent of their pay during the first government-imposed lockdown (lasting from March 26, 2020, through late April 2020), but this still meant a 35 percent pay cut during this time. By the end of May 2020, Bangladeshi workers had lost nearly 30 percent of their wages, estimated at US$502 million. The dramatic economic shock experienced by workers resulted in serious compromises in consumption and asset depletion.
In a separate University of California, Berkeley-BRAC study from mid-2020, 82 percent of the Bangladeshi workers interviewed said the income they had in April-May 2020 was less than their income in February 2020. In addition, 77 percent admitted that it was difficult to feed everyone in their household, while 69 percent of the workers said that they ate less protein-intensive foods (meat, fish, eggs and milk) from February to May.