Cambodian garment workers' pay increase raises fears of reduced orders

Will Green is news editor of Supply Management
18 November 2014

A 28 per cent pay rise for garment workers in Cambodia has raised fears that western buyers will start to look elsewhere, according to analysts.

Maplecroft said the decision by Cambodia’s Labour Advisory Committee to raise the minimum monthly wage to $128 (£82) would please neither manufacturers nor unions, which were pressing for $140 (£89).

John Thompson, senior analyst at Maplecroft, said: “Despite pledges from western retail buyers that a wage increase would not result in decreased demand, domestic manufacturers and the state fear that rising labour costs will lead to a reduction of orders.

“Asian buyers are less likely to tolerate rapid increases in labour costs, and may look to source elsewhere.”

Thompson said Myanmar’s emerging textiles sector was attracting foreign interest while labour costs were competitive in Bangladesh and Pakistan.

On the other hand he said workers faced “rapidly escalating living costs” and the rise “will do little to nothing to change independent union demands that the government continue to rapidly increase wages”.

“Labour unrest may settle temporarily. However, long-term trends in Cambodia show that the wage increase, while it is significant as a percentage of the total wage, will do little do reduce the rate of strikes or end the chronic brinkmanship between the state, manufacturers, and independent unions,” said Thompson.

“If [these parties] are unable to address the underlying drivers of industrial unrest and calm the nerves of international buyers, Cambodia may eventually slip from its position as a manufacturing powerhouse in southeast Asia.

“Furthermore, another catastrophic incident, such as deaths of garment workers during clashes with the police in January 2014, would raise the stakes further and seriously undermine investor confidence.”

Last year H&M said it was attempting to help resolve a dispute between workers and factory owners in Cambodia, where it sources clothes.

       

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