Phnom Penh, Cambodia — The International Labour Organization (ILO) appealed to global buyers sourcing from Cambodia’s garment sector to raise the prices they pay factories by 3 percent in order to absorb the recently instituted minimum wage of $128 a month for workers.
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The ILO said Monday that the minimum wage — which was upped from $100 a month and implemented in the new year — will mean that the salary an average worker takes home, including bonuses and overtime pay, will increase from $183 a month to $217 a month.
“The pay rise is expected to increase factories’ wage bills by approximately 18.7 percent,” said a statement by the group, which was dated January 1. “At the same time, the prices that Cambodian factories receive in their main markets have been stagnating or declining.”
Following months of deadlocked negotiation between manufacturers and unions in early 2014, eight clothing retailers — including H&M and Inditex — sent a letter in September to the Garment Manufacturers Association in Cambodia (GMAC) and Deputy Prime Minister Keat Chhon saying that increased wages will be reflected in the purchasing prices to their suppliers.
ILO’s Cambodia director Maurizio Bussi said his organization now wants the brands to “play their part.”
“This was a commitment made by the buyers, made publicly, and we are simply following up on it,” Bussi said, adding that other major brands sourcing from Cambodia should consider doing the same, as they are “part of the same business community.”
Prices would need to increase by 2.4 percent to 3 percent in order to absorb the increased wages, ILO said. An example is a T-shirt that currently costs 80 cents to make: 2 cents more from the buyer for such a shirt, which is likely to retail for $10, should be enough to cover the wage increase.
“This small increment could generate additional revenue of $160 million to support the new wage levels,” it said.
Ken Loo, GMAC’s secretary general, remained skeptical over retailers’ willingness to pay higher prices for the same items given that the country’s manufacturers have always had to compete for business by quoting lower prices.
“If you see the breakdown of the final selling price of any garment, you will know which stakeholder has the ability to pay. Our margin is razor thin, if any,” Loo said. “Ultimately, consumers are the ones who might have to pay. Unfortunately, it’s just a lot of lip service.”
He added that the eight retailers that signed the September letter only accounted for an estimated 20 percent of the industry’s business. All signatories were from either the U.K. or Europe.
Other major U.S. brands sourcing from Cambodia’s $5 billion garment industry, such as Gap, have called for a new wage-setting process to be established but have stopped short of committing to pay higher prices to their suppliers.