Garment factory owners’ cost in Cambodia is expected to rise by nearly 20 per cent, as a new wage structure came into effect from 1 January.
The new structure raises the minimum wage to US$ 128 per month from the earlier $100 per month. Including transportation, seniority and other bonuses, workers will be able to earn a total monthly salary of between $147 and $156 a month since January 2015, Labour Ministry said.
As a result, average wages (which include bonuses and overtime) in the garment industry are likely to rise from $183 to $217 per month, according to estimates made by the ILO’s Country Office for Thailand, Cambodia and Lao PDR.
The pay rise is expected to increase factories’ wage bills by approximately 18.7 per cent. It comes on top of earlier adjustments that have more than doubled the minimum wage since 2012, when it stood at $61. At the same time, the prices that Cambodian factories receive in their main markets have been stagnating or declining. For example, the US Bureau of Labour Statistics has calculated that prices for apparel imports from Asean countries have fallen by 4.5 per cent since June 2012.
In such a situation, global garment brands which source their products from Cambodia should play a part in helping the industry absorb the new minimum wage of $128 per month, according to experts from the ILO.
“In principle, factories can respond by increasing efficiency, using measures that range from better work organisation to energy conservation. However, our research shows that these gains are gradual and will only enable factories to cover a small share of the expected wage increase,” said Malte Luebker, ILO’s senior regional wage specialist.
“It is important that all sides work together to ensure Cambodia’s garment industry remains economically viable,” said Maurizio Bussi, ILO’s country director for Thailand, Cambodia and Lao PDR. “We call on the global brands to play their part. We have received encouraging signals that key buyers will honour the pledge they gave the Cambodian Government in September, and will reflect the new minimum wage in higher FOB prices for 2015.”
According to ILO estimates, global brands would need to increase the prices they pay to Cambodian factories by 2.4 to 3.0 per cent to cover the shortfall (assuming other costs remain the same). This would add about 2 cents to the price of a T-shirt that now costs 80 cents to make, and that might retail for as much as $10. On annual garment and footwear exports worth $6 billion, this small increment could generate additional revenue of $160 million to support the new wage levels.
The ILO estimates are based on an analysis of the detailed payroll records of more than 1300 workers. The sample includes production line workers, who on average earned $176 per month in 2014 (including allowances, skill bonuses and overtime payments), although one in five were paid $145 or less. By contrast, office workers such as accountants earn much higher wages, explaining the ILO’s higher estimate for the industry’s average wages across all occupations. (RKS)
