Living Audit Methodology - Further Information

This page includes some further useful information in relation to the methodology for the audit that our external human rights and supply chain consultants conducted in relation to Ningbo, Zhejiang province, China. Its purpose was to determine whether workers in Lorna Jane’s single tier 1 factory (located in this city) are being remunerated in accordance with a living wage. The audit last occurred in June 2022.

The living wage was calculated on the assumption of a single worker living and working in the specific city.

In determining the type (and associated cost) of foods eaten, a standard healthy diet was selected based on a combination of the World Health Organization’s sample adult diet and the Chinese Nutrition Society. The recommended standard diet (and associated cost) was based upon a single adult worker.

Dietary information was also cross-referenced with information from China’s National Bureau of Statistics relating to household consumption of certain food groups in an effort to represent the selected food groups in a manner that is broadly consistent with general food consumption habits throughout China. The quantities attributed to each food category was also cross-referenced with a peer-reviewed study on the living wage in Shenzhen, China.

In terms of calculation of overall expected food costs, 30 days (rather than the 20.8 working days/month) was selected as workers must eat every day of the month, including outside of working hours. No variation was allowed for in relation to potential differences in caloric intake on working versus non-working days.

The cost of beans, cooking oil, sugar and tea was regional. No publicly available data for the specific region was available.

The subject factory has a program of providing on-site food for all of its workers. A deduction in the necessary funds required by workers to reflect this program was applied.

Housing costs were based on publicly available rental data for Ningbo city. The sample house for this purpose was a one-bedroom apartment located a reasonable distance outside of the city centre (as this is relatively cheaper than apartments in the city centre). These dwelling characteristics were also selected based on the assumption that the sample worker is living alone.

Utility costs were also based on publicly available data for Ningbo.

A five per cent (5%) margin was allocated to represent the ongoing expense of minor repairs. This was calculated from the utilities cost as publicly available data on utilities only included the cost of electricity, cooling, water, heating and garbage.

There was minimal publicly available data on the average cost of basic clothing and footwear required for a single worker. Instead, per capita annual expenditure of private households in China (2020) was used. According to this data, approximately 1,703 yuan was spent on clothing and footwear in the Zhejiang region.

Employee healthcare contributions are also part of social insurance in China and has been accounted for with a 2% deduction for calculating the net living wage figure.

For transport, it was assumed that workers do not live within walking distance of the factory, but rather travelled to and from work each day via public transport. The figure for transport was set at the cost of a monthly pass in Ningbo.

Estimated monthly communication costs were derived in relation to internet usage, without allowance for the upfront costs of device/handset acquisition.

Internet messaging apps that are popular in China include WeChat, QQ and Momo. Accordingly, internet connection costs were prioritised as the likely main form of communication (and associated expense).

In determining the share to attribute to recreation and culture, data was used from the Chinese National Bureau of Statistics. The Per Capita Consumption Expenditure of Households by Region (2020) provides a breakdown per region of relative consumption of such activities. The expenditure for ‘education, culture and recreation’ was then divided in half (50%) to account for the fact that only ‘recreation and culture’ was the focus.

An additional 5% of the total net living wage has been added to account for Additional Funds for Emergency.

Family ties in China are culturally significant, including the provision of material assistance to parents, (including those living in a different city/region). An additional 5% figure was attributed for this aspect of the living wage.

National taxation rates on personal income were used to estimate the amount of monthly tax payable.

Annual taxable income in China is set at 3% for annual taxable income between 0 to 36,000 yuan and 10% for between 36,000 and 144,000.

The key social insurance rates for China focused on in calculating the gross living wage were pension (8%), medical (2%) and unemployment insurances (0.5%).