Higher Wages for Sustainable Development?—Employment and Carbon Effects of Paying a Living Wage in Global Apparel Supply Chains

In this paper we explore how paying a living wage in global supply chains might affect employment and carbon emissions: Sustainable Development Goals 8 and 13.

The starting point of this paper is that sustainable development requires two simultaneous but potentially conflicting actions: that rich people buy less and poor people buy more. Put another way, sustainability requires real economic growth in poorer countries and lower material consumption in wealthier countries. The potential for conflict here comes from the interconnected nature of the global economy: all else equal, a reduction in consumption in wealthier parts of the world might damage growth prospects in poorer parts of the world.

Previous work has advocated using wage increases for poorer workers to increase prices for wealthier consumers, thereby reducing consumption and associated environmental damage. However, the likely effects of such an approach remain unclear. Using an input-output framework extended with income and demand elasticities, we estimate the employment and carbon effects of paying a living wage to Brazilian, Russian, Indian and Chinese (BRIC) workers in the Western European clothing supply chain.

We find negligible effects on carbon emissions but a substantial increase in BRIC employment under 3 scenarios of consumer behaviour. Changes in Western European consumption lead to small decreases in global carbon emissions and BRIC employment. However, the increase in BRIC wages increases demand in BRIC. This increased demand increases production which largely cancels out the carbon savings and generates net increases in BRIC employment. We conclude by arguing that paying higher wages in global supply chains represents a good but not sufficient step toward achieving the Sustainable Development Goals.