The Role of SMEs in Global Production Networks: A Swedish SME’s Payment of Living Wages at its Indian Supplier
Key Insights for Managers
This case study of a Swedish SME (Nudie) and its Indian supplier found that increasing worker pay to a living wage led to greater worker satisfaction, improvements in productivity, and better product quality. The living wage was calculated by consulting local NGOs, labor unions, international certification bodies, and factory workers, and paying living wages was part of the agreement negotiated between the buyer and supplier. Author Niklas Egels-Zandén discovered that paying living wages in the form of a bonus led to tax savings for SMEs and allowed workers to directly receive these “gift” payments. Having only some factory workers receive such pay increases led to “internal grievances and conflicts,” and thus adjustments were made to ensure all workers at the site received the increase. The study is based on 20 interviews with buyer representatives (Nudie) and 52 interviews of managers and workers at the supplier in Tiruppur, India (Armstrong) conducted during 2012 – 2013.