Of late, the news pages are full of reports of ‘wage’ increase or demands for wage increase at various garment manufacturing destinations. While the Government of India is proposing to increase the minimum wage by an average of 25 per cent in all states, Vietnam’s National Wage Council has voted in favour of a 12.4 per cent increase of minimum wage from the coming year (2016).
As momentum picks up, thousands of workers in Indonesia recently staged demonstrations across the country in pursuit of higher wages and improved labour laws, demanding 22 to 25 per cent increase in the minimum wage for 2016 and lower prices on essential goods, including fuel. Similar scenes are being witnessed in many other Asian countries also.
In August last year, the Bangladesh Minimum Wages Board after long negotiations, announced a 76 per cent increase in garment workers’ pay, applicable to all seven pay grades. Since then, the debate is on as to how this raise in wages is impacting competitiveness, and the actions taken by various companies to off-set the increased cost of production.
I have already voiced my concern over the proposed wage hike in India, the observations can be read in detail under the BeyondBD pages in the current issue. The situation could be as bad if not worse in Bangladesh, as the country is still riding the wave of business on the USP of being a low labour cost manufacturing destination. After the wage hike last year, I remember the many comments that came in expressing despair at what many industry stalwarts called unfair increase without proper consultation with the industry.
Many predicted a slide in business, and China was a favourite case study in dwindling competitiveness set-off by fast increasing wage rates. Who can deny that the outsourcing model of garment retail is saddled on the back of ‘lowest manufacturing destination’?
As issues of labour rights and ethical sourcing gain ground, the clamour for wage increase is growing louder. However, ironically a wage increase does not necessarily translate into happiness for the workers. The most recent case in point is the implementation of the new minimum wage of US $ 2.80 per day in Myanmar, which heralded despair and frustration for a large section of the workforce with at least 1,000 factory workers losing their job as factory owners made efforts to cut down on the manpower costs.
Realizing the business implication of wage increase, Swedish retail giant H&M, is all set to introduce a ‘fair wage method’ in three of its supplier nations in Asia – China, Cambodia and Bangladesh, from where a total of 68 factories have been selected. The system is expected to be introduced in the current year and around 20 garment factories of Bangladesh will participate. The programme aims to help improve productivity, factory conditions and combat unrest at the plants related to wage issues… A cohesive approach to wage increase is the only way forward and I am happy that H&M has shown the way.
