Cambodia’s Critical Wage Battle

Arguments from both sides of the issue show a fundamental difference in perspectives between what a basic wage is and whether it should be a “living wage.”

with contributions from Cheng Sokhorng
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PHNOM PENH, Cambodia — Workers here are battling for a higher minimum wage, a fight that took a bloody turn earlier this month when armed security forces fired live rounds into crowds of rioting workers, killing at least four people and injuring more than 30.

This story first appeared in the January 28, 2014 issue of WWD.  Subscribe Today.

While labor activists and workers contend that $160 a month is the wage necessary to address the basic needs of an average worker, the government and manufacturers believe that such a drastic increase would cripple the industry and scare away investors.

Cambodia’s minimum wage now stands at $80 a month and will increase to $100 a month in February.

Government officials maintain that overtime hours and bonuses will essentially meet workers’ demands for $160. More than the figures, the arguments from both sides show a fundamental difference in perspectives between what a basic wage is and whether it should be a “living wage,” a term often used to describe an amount a person should be making to maintain a decent standard of living.

RELATED STORY: U.N. Envoy Calls for Higher Wages in Cambodia >>

The Cambodian workforce — comprising more than 600,000 people, mostly young women — is not the only one in Asia rallying for higher wages. Workers across the region have become more aware of the crucial role they play in an industry that generates billions of dollars in revenue for the companies for which they are sewing clothes. Vietnam in December instated a 15 to 17 percent increase to its wages, to $90 to $128, depending on the region, while the Indonesian government said in November that it will up wages by 11 percent, and Bangladesh’s minimum wage rose 77 percent, to $68.

Generating more than $5 billion in exports in 2013, the garment and footwear industry is Cambodia’s most profitable. But while profit margins for manufacturers have risen steadily over the last two decades, workers’ wages remained mostly stagnant. Up until 2006, the government-mandated minimum wage sat at $45 a month despite inflation of about 3 to 5 percent each year. In 2007, it increased to $50, then to $61 a month in 2010, and finally to $80 in May. Following a record-breaking year of garment worker strikes, the government raised the minimum wage to $95 in December. Another nationwide strike ensued, and the government sweetened the deal by another $5 to lift the wage to $100 a month.

Workers and union leaders are still demanding $160 a month, an amount they believe accurately addresses the basic needs of an average employee. The majority of workers have returned to the factories, but union leaders have promised them they will continue pushing the government and manufacturers to come to the negotiating table.

As for the government’s position, a spokesman for the Ministry of Labor justified the use of military force to crack down on striking workers to restore order. He said the workers unhappy with the current offer of $100 are in the minority and that wage negotiations for 2014 are closed. According to union leaders and labor activists, the $160 amount is based on a study commissioned by the government in August that found workers spent $157 to $177 on their basic necessities. Expenses for food made up the majority of this amount, coming to about $80 a month, while an average worker would spend the rest of that amount on rent, utilities, transport and trying to support his or her family members.

For 38-year-old Seang Souphea, a seamstress at a bra factory, these figures check out, but there are also hidden expenses that come with daily life, she said. Currently, Souphea makes about $150 to $160 a month, but that take-home comes only after she labors for 10 to 12 hours six days a week. Her cramped living space (for $35 a month) is the standard accommodation for a garment worker in Phnom Penh, as is the food she eats for lunch, usually just a small bowl of rice with some meat. Yet a large amount of her income goes to the education of her two children, which has to be paid daily for each class they take, and for her family’s health needs, such as medication for her 70-year-old mother’s high blood pressure.

“If I don’t work overtime, I will not have enough money,” said Souphea, who shares a 67-square-foot room with her husband and two children. “I’m also worried that if I don’t have enough money, my children’s future will not be good because I won’t be able to pay for their schooling.”

She added that even a minimum wage increase to $160 would not be entirely sufficient for her family’s needs, but the wage increase must be more dramatic than what is currently proposed.

“Around $400 a month would be enough,” Souphea said, adding that her family has taken out a loan from a microfinance organization to get by. “Even if I get $160 a month, it won’t be enough, but it will be better than $80.”

The lack of agreement in the industry over the terms “living wage” and “human dignity” fuels this argument, said Ken Loo, secretary general of the Garment Manufacturers Association in Cambodia, which represents the nation’s more than 400 exporting factories.

“What is the definition of living with dignity — is that defined? It’s not,” Loo said, adding that the unions are portraying the figures of $157 to $177 in a misleading manner.

Since he was part of the government-commissioned working group that conducted the sampling in August, Loo argued that the amounts found actually represented how much an average worker currently makes, and not what is actually needed. Roughly $90 is enough to live on, and everything else is sent home to their families, he said.

“Obviously the workers cannot spend what they cannot earn,” Loo said, adding that bonuses for attendance and food and transportation will bring the real cost of the recent minimum wage rise to $117 a month for each worker. “There will always be factories that will close because they are running a loss the higher the minimum wage goes. And the higher the minimum wage is, the more factories will fall under this category.”

Even among workers’ rights organizations and activists, there are differing opinions on how wages should be calculated. Equitable Cambodia and international workers’ rights organization Labour Behind the Label did their own study in September on the average worker’s expenses and found that a suitable wage would be $154 a month. Peter Brimble, senior country economist of the Asian Development Bank, said the minimum wage should reflect inflation rates in the country, but took issue with whether expenses would accurately reflect what is considered a worker’s basic necessities.

“The expenses of an average worker are $150 [but that] does not necessarily mean that is what a worker needs,” Brimble said. “Obviously, the garment sector is singled out for special treatment, but living wage can be defined in different ways. Does it include your family? Does it include sending money back home?”

Malte Luebker, senior regional wage specialist for the United Nations’ International Labor Organization, said the ILO’s general position is that wages should be sufficient to cover a worker’s needs within normal working hours.

“Having said this, the needs of workers are not the only aspect that countries take into account when setting minimum wages,” Luebker said, adding the economic factors should also be considered. “So in practice, minimum wages often fall short of living needs.”

Dave Welsh, country head of the Solidarity Center, a labor rights organization affiliated with the AFL-CIO, said any wage increase from the government will often be met by external raises from landlords and food vendors.

“Almost all these workers are internal migrants. They all live in temporary shelters or in living conditions that are substandard, and they are eating food around the factories that are substandard,” Welsh said. “The rents and food costs are completely pegged to what the workers are making.…What we need is something dramatic to outstep these piecemeal increases, which isn’t permitting workers to save or live with any sort of decency.”

As a supervisor for a swimsuit factory, Son Sreymom’s wages are dramatically higher than the average worker’s, garnering a minimum wage of $170 a month. Working overtime almost daily, Sreymom can take home about $300 to $400 a month. Still, she said that is not enough. She rarely sends any savings home to her parents in the provinces, but considers herself luckier than most as she does not have to take out loans.

“I have a son, and I have to work overtime all the time to provide for him,” she said. “When I go to work, my husband takes care of my son, and when I come home, my husband will go out and work as a moto-taxi driver.”

She urged the government to reconsider negotiations instead of opening fire on workers again. From their apartment located down the street from where the Jan. 3 shooting took place, she could hear the shots being fired by security forces at their fellow workers, and Sreymom, with her husband and infant son, immediately fled to their home province in fear.

“They are protesting because their salary is really not enough for their living, and the government should consider at least increasing it to $130,” Sreymom said. “That’s better than killing workers.”

International pressure is mounting on Cambodia. Earlier this month, 30 clothing brands and retailers signed an open letter calling on Cambodian Prime Minister Hun Sen to hold members of the security forces accountable for the Jan. 3 shooting and to establish an “inclusive process” for determining the minimum wage. The signers included Wal-Mart, Tesco, Gap, Nike, Adidas, Hennes & Mauritz, Marks & Spencer and Inditex. Just a few days earlier, U.N. human rights envoy Surya Subedi made a similar plea, calling for “a decent standard of living” for workers and their families.

“[We] will continue to encourage all relevant parties to renew negotiations and to come to a mutually agreeable solution to this conflict,” said a spokeswoman for H&M. “We believe in negotiation where workers themselves decide what a living wage is for them.”


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