Wage Inflation Sweeps Southeast Asia

The region has seen double-digit increases in regional minimum wage levels over the past year.

SINGAPORE — One afternoon last September, about 1,000 textile workers marched through Myanmar’s commercial capital of Yangon, demanding higher wages. It was an unprecedented show of labor activism in the hitherto authoritarian country, but the striking workers were just one group in a growing number of Southeast Asian industry employees agitating for better pay.

Wage inflation has swept across Southeast Asia. While salaries for garment workers here are still generally lower than those earned by their counterparts in China, a slate of recent legislation has meant double-digit increases in regional minimum wage levels over the past year. These pay raises come as China unveils its own plans to raise its minimum wages by 2015.

In January, Thailand’s government hiked the minimum wage in 70 cities across the kingdom by approximately 80 percent to 300 baht, or $10.08 at current exchange, per day. This followed a similar increase in eight more developed districts last year.

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Similarly, authorities in Jakarta last month increased basic pay levels by more than 40 percent to 2.2 million rupiah, or $227.11, per month. In September, Cambodia’s government implemented a $73 monthly effective minimum wage, up from $50 as recently as 2009.

Salaries are likely to continue rising. According to the Source Association of Southeast Asian Nations Full Service Alliance, an industry group, wages in Vietnam are due for review by its government in March and apparel workers in Laos and Cambodia have begun pressing for an increase in their salaries to $120 per month, a roughly 50 percent jump in both countries.

Many garment factory owners aren’t happy with the wage spikes and the haphazard way they say the increases have been carried out. In Jakarta and Thailand, the increases were announced after the electoral victories of populist governments in 2012 and 2011 respectively, leading to grumbles that they were politically motivated.

“This year is already hard because of the crisis in Europe and wages are another [problem],” said Luv R. Mahtani, director of Bali Nirwana Garments, a 1,500-man factory just outside Jakarta. “The government allows us to apply for a waiver if we’re labor intensive but it’s a long process and [the waiver is] only for 6 months or a year, so what’s the point?”

“Some factories are still fighting to stay alive but I’m sure there will be some that will be closing down in the second half of this year because they cannot bear the wage increase,” said Sukij Kongpiyacharn, president of the Thai Garment Manufacturers Association, in a telephone interview. “The Prime Minister has appointed a cabinet member to oversee a remedy but there is not much that they can do to help the [worst] affected.”

Some operators with diversified holdings however, welcomed the wage hikes.

“It’s a good thing because it’s leveled the playing field, so our time can be used to focus on internal efficiencies such as how we process orders and become more sustainable,” said Mark Lee, chief executive officer of Sing Lun Holdings, a Singapore-based apparel firm which has invested in factories across Indochina for the last five years. “If we look at improving in other ways, buyers won’t move just so that they can save 10 cents on a piece of apparel.”