Labour cost comparisons can be a vital tool to judge the average cost that goes into making of a product in a particular area. They can be equally handy in deciding where to relocate or open a new production unit. Werner International is a management consulting practice that specializes in production management, processing technology, management information, material yield, personnel training and garmenting, and has an exclusive expertise in the fibre, textile and fashion industry.
Globally active since 1939, it recently came up with its yearly labour cost comparison for Primary Textiles for 2008. While these labour cost comparisons have totally ignored the Garment Industry, Shlok Hariramani and Team StitchWorld speak to Alain Mathieu, Executive Vice-President, Yarn & Spinning Expert, Werner International, who discusses why and how such studies can be fruitful for the industry.
With the textile labour cost comparison survey for 2008 released by Werner International many interesting revelations were discovered. The survey covering majorly textile spinning, weaving and finishing companies across the globe also quantifies the working conditions prevalent in the country.
The general trends in the report show that Switzerland is still in first place with the highest hourly labour cost (US $ 40.75 per hour) in the Textile Industry, a position it has held almost continuously since 1987. While the EU countries have grabbed 15 positions among the top 26 labour expensive countries, US was ranked at 13 with labour rate of US $ 17. India at US $ 0.85 per hour, however, was among the lowest 5 labour-expensive countries which shows that till today, it can utilize its labour cost-effectiveness, as compared to China (US $ 1.5 per hour) – 77% more expensive than India. Pakistan and Bangladesh were the countries which paid the least to their labour force.
Textile mills in India, when compared to their counterparts in other parts of the world, operate for highest number of working days (357) in a year, despite several public and gazetted holidays
Employee Morale, Absenteeism and Quality Issues
While the comparison between these labour rates seems to bring out a clearer picture of what’s going on and in which place with their labours, there is yet a lot to be explored in order to clearly judge the labour situation and how it contributes to the cost of the product.
The parameters such as working hours indicate how long a worker remains at the work place, and thus in turn how much tired he would be. A direct co-relation of this can be seen in the absenteeism rates and thus employee morale which usually reflects in the quality delivery. With Malaysia and India topping this list with the highest working hours per operator per year of 2320 and 2318 hours, respectively it is no wonder why we have such kinds of problems as employee morale, absenteeism and above all quality issues cropping up often. However, more production is obvious as the working hours per year are very high, a factor ideally suited for mass production. Textile mills in India also operate for maximum working days in a year in India – 357 days – despite many public and gazetted holidays.
Shift premium percentage is the percentage of wage earned by a worker over his wage if he stays for more than a shift. Among the South Asian countries, Bangladesh pays the maximum shift premium of 100% for a second shift or a night shift, while no premium is paid for working on weekends. Pakistan, it seems, does not believe in shift premiums as it has no provision for it. India offers 6% premiums for those working in the night shifts, while the pays in the second shift or weekends remains the same.
A need for such a survey is much needed for garment sector. The buyer would know where to source the garment from. Moreover, the cost-competitiveness and working conditions of the labour would be clearly visible on the survey, as the overtime rates and shift premiums are clearly specified for every country. Such a survey even within India would prove fruitful as it would indicate areas where there could be most cost-effective production, clearly presenting a clearer cost-benefit analysis to the industry assisting entrepreneurs to choose location for new ventures as well as in relocating their existing ones.
While many parameters are included in the labour cost comparison, there could be many other parameters which would be required for the Garment Industry if the vivid and complex nature of our work force has to be understood. The nature of the work force, i.e. whether the labour is on wage or on contract, is the labour working on piece rate or fixed/hourly wage and whether the labour in the region is cost-effective or not, is important factor.
Salary and benefits information is of significant value to management for a variety of reasons including retention of key and critical staff and ability to recruit skilled employees
For example, labour cost in two places ‘A’ and ‘B’, might be same and look cost-effective. But the moment we come to know that ‘A’ has piece rate system and even in low production per hour the labour earns still the same amount as in ‘B’ which has higher production, place ‘A’ would be less preferred. Production and mode of payment system will then play a vital role. A simple way out to express such variations will be to express both modes of payment, i.e. piece wage rate as well as hourly fixed rate. Even though some factories might be using a combination of both, it may be full of complexities.
Apart from labour rates, there could be something else which could be desirable by the industry. For example, the man-machine ratio, supervisor to operator ratio and even the average qualification of supervisors to operators would be soughtafter. This information when put across properly would be able to present the true scenario within an average factory in a particular region. A higher man-machine ratio will mean less level of automation, while a higher supervisor-operator ratio will mean more time spent with operator and hence, better methods. Qualification of operators and supervisors can present the overall understanding of the methods by the work force.
Salary and benefits information is of significant value to management for a variety of reasons including retention of key and critical staff, ability to recruit skilled employees, contributing to management and taking strategic decisions.
Employers have typically not shared such information with a broader audience although it is evident. The need to better understand skills, remuneration and compensation more broadly, has led employers to start sharing information informally so that they can make effective decisions. However, this information would also be valuable to others, including trade associations, policy makers and universities. The better they understand what jobs are available and what skills are required to fill these jobs, and the associated compensation, the better they can ensure a supply of graduates with the right skills, and set expectations for graduates and university-goers of what they might expect when they leave university.
The first step has already been taken by StitchWorld. It looks forward to such country-wide survey of our very own industry, and expects that the industry will extend its support, as it always has been.