PHNOM PENH, Cambodia — Manufacturers, unions and government representatives are facing off over the issue of worker compensation ahead of a minimum wage hike decision due this month — possibly as soon as this week.
A tripartite working group set up by the government voted last week to increase the country’s minimum wage beyond its current level of $100 a month. The group will present two amounts to the Labor Advisory Committee (LAC) to consider. The manufacturers say factories can only stomach a $10 increase, while government representatives have voted for the wage to be $121 a month.
Union representatives pushed for an increase of $40, but were unable to garner sufficient votes to best the manufacturers and the government’s amounts. This requested amount of $140 a month is considered a compromise, as they had originally demanded $177.
The standoff over wages is a familiar enough, but 2014 has been an especially tumultuous year for the country’s $5 billion apparel sector. At least five workers were shot dead in January by government forces during protests amid a nationwide strike for a higher minimum wage.
Since then, discussions have stagnated, and a lack of trust between unions and employers could make it difficult to keep workers at their stations if the wage increase is deemed insufficient. Some manufacturers say Cambodia has lost its competitive edge over neighboring countries.
Ken Loo, secretary-general of the Garment Manufacturers Association in Cambodia (GMAC), said he believes that the sector had been affected by the instability caused by demonstrations and wage talks. Third quarter figures show exports are down 4 percent to $1.61 billion compared to $1.68 billion in the same period last year.
“Before we even have a chance to compete on price we need to have stability,” he said. “We are more concerned about protecting the industry, ensuring that there is employment for the workers. And the way to do this is to ensure that the factories are not in financial distress.”
Part of the debate is fueled by the government’s lack of methodological wage-setting mechanisms. Previous decisions about minimum wage raises were shrouded in secrecy, increasing suspicions on both sides.
But since August, the Ministry of Labor, with the help of the International Labor Organization (ILO), gathered information to help LAC with a decision. That hasn’t made the topic any less sensitive: A presentation in September authored by the ministry and Malte Luebker, ILO’s senior regional wage specialist, stressed repeatedly that the amounts put forth were not suggestions for a revised minimum wage figure.
In that presentation, the poverty line in 2015 for an average worker was scored at $120. And although the minimum wage has risen in recent years, Luebker said a portion of that increase has been lost to inflation.
“While the minimum wage has more than doubled from $45 (2006) to $100 (2014), the impact of inflation means that the purchasing power of the minimum wage has increased by only 40 percent over the same period (from $45 to $63) in constant 2006 prices,” he said by email.
The presentation also showed that factories spend 60 percent of the sector’s $5 billion exports’ value covering expenses such as fabric, electricity and packaging material. The remaining 40 percent goes to labor and operating costs, and loan interest.
Meanwhile, Cambodia’s growth has slowed since 2000, while Bangladesh and Vietnam have accelerated their share of export markets. Luebker said “competitiveness and employment in the garment sector is an important consideration” when setting a new wage.
“However, it is difficult to forecast what the precise impact of a minimum wage increase will be. This partly depends on whether buyers are willing to absorb some of the cost increase,” he said.
In September, eight international brands — among them Hennes & Mauritz and Inditex — pledged to pay higher prices to factories.
Kong Athit, vice president of the Coalition of Cambodian Apparel Workers Democratic Union — one of the deciding parties within the LAC — said major brands ought to be part of the debate as they are profiting the most.
“The profits that come to the industry should be [enjoyed] by everybody,” he said. “The most important thing is to allow workers to live with dignity. That should be the aim of the government and it should also be the aim of the employers.”
Dave Welsh, country head of labor rights organization Solidarity Center, said a wage amount set too close to the poverty line would draw ire from workers, and is “unacceptable.”
He also blamed Cambodia’s waning attractiveness on the violence inflicted on workers and restrictions on freedom of assembly for independent unions.
“Historically, brands have come here because Cambodia’s PR benefits have been enormous,” he said. “[But] the whole concept of Cambodia being a ‘model industry’ has been ruined this past year.”