Minimum maximum

By: Daniel Besant - Posted on: March 1, 2014 | Current Affairs

Recent violence in Cambodia linked to protests over wage levels underlines the struggle between workers, governments and business owners

Dita Alangkara/AP
Workers protest in Jakarata. Dita Alangkara/AP

By Daniel Besant

While strikes and demonstrations over wage levels are a common feature in the process that hopefully leads to some sort of settlement, it is not often that demonstrators resort to hurling rocks and crudely made Molotov cocktails at security forces who meet the threat with assault weapons. Sadly, that is what happened early last month in Cambodia, when five protesters were shot dead and 40 others were wounded during unrest linked to the rejection of a raise in their minimum wage to $100 per month – $60 short of the total amount workers were calling for.

Any wage increase is of great importance to all the stakeholders in Cambodia’s garment- and apparel-manufacturing sector. The products being stitched in factories for big names such as Adidas, C&A, H&M, Esprit, Nike, Puma, Primark and Walmart, among others, represent the Kingdom’s biggest export  – 85% – and the sector is worth $5 billion a year. For the
business owners, profits will be cut. Those in government have to contend with risking the factories relocating overnight if the owners see better options elsewhere or the potential of continued unrest if workers’ demands are not met.

“Some countries may be afraid to raise the minimum wage as they fear that they will lose jobs or investment,” said Paul Collins, media officer at War on Want. “For example, in the garment industry, the government of Cambodia may fear that companies will shift production to lower-paying Bangladesh, while the Bangladesh government may fear that these companies will shift production to even cheaper countries, such as Burma or Ethiopia.”

Garment-factory owners and governments may say that higher wage costs may deter investment, but Collins is not convinced. “While many companies may threaten to relocate due to wage costs, wages actually make up a very small percentage of the final cost of any item of clothing,” he said.

In reality, there are many other factors in play, such as the number of garment factories in a country, how skilled the labour force is and how secure supply routes are. “The enduring importance of China as a major exporter despite its relatively high wage costs, compared to other Southeast Asian countries, is proof of this.” said Collins. Arguably, however, it is the workers themselves who have the biggest stake. Those workers are overwhelmingly young women, who travel from their home provinces to work long hours assembling products for foreign markets. According to 2012 research by Labour Behind the Label (LBL) and the Cambodian Legal Education Centre, the average worker earned around $82 a month. In order to keep sending money back to their families and pay for essentials such as food and rent, the women must work many hours of overtime.

Many of these women, according to LBL, are seriously underweight. Last year the workers’ rights group reported figures that showed 33% of garment workers are medically underweight, and 25% seriously so. In other words, these workers are starving themselves for their families.

In recent years, a slew of mass faintings have been reported in Cambodia – in one incident, more than 250 workers passed out at one factory. The faintings, attributed by workers to spirits, may have been caused by poor ventilation, mass hysteria, chemicals used in production processes and – more than likely – poor nutrition (or a combination of all of these things).

One definition of a fair minimum wage, according to the Universal Declaration of Human Rights, is this: Wages and benefits paid for a standard working week should meet at least legal or industry minimum-wage standards and always be sufficient to meet basic needs of workers and their families and to provide discretionary income.

In Southeast Asia today, there is a hodgepodge of policies and practices regarding the minimum wage. In some countries, legislation guarantees a threshold. For example, Malaysia introduced a countrywide benchmark at the beginning of last year, setting a minimum wage of $290 per month. In other countries, local governments call the shots, such as in Indonesia, where each provincial government can set the lowest rate for their jurisdiction.

In countries with a relatively competitive labour market, employers can afford to pay high rates for the best talent, and therefore a minimum wage is not so important. When a labour market is closed and faces education, productivity and skills challenges, then minimum wages help to ensure a worker can meet their basic needs, as outlined in the aforementioned definition.

“Essentially, minimum wages should be seen as wage that is a minimum that allows a worker to pursue a job and move on to better and more value-added and skilled work,” said Sandra D’Amico, managing director of HRINC (Cambodia) and vice-president of the Cambodian Federation of Employers and Business Associations. “No one should continue to live on a minimum wage their entire life. Importantly, minimum wages help to ensure minimum living standards are met and ensure that the broader labour force, typically with lower education, is not exploited.”

Stop. Listen. Collaborate: a weary-looking Indonesian carpenter listens to speeches at a rally to commemorate International Labour Day. Ed Wray/AP
Stop. Listen. Collaborate: a weary-looking Indonesian carpenter listens to speeches at a rally to commemorate International Labour Day. Ed Wray/AP

Further to ensuring that minimum living standards are met, setting a bottom line on pay has other benefits too, according to Chris Devonshire-Ellis, founding partner at foreign-direct investment consulting practice Dezan Shira & Associates. “The minimum wage laws  …  also assist with injecting some stability and regulatory content in what could otherwise become chaotic labour markets, especially in high-population-density countries,” he said.

However, it is not enough just to strive for a minimum wage for all. What governments need to do is help people move into better jobs. “It is simply non-logical to focus on minimum wage as a data point only,” D’Amico said. “To earn higher wages, unions in particular need to play a more significant role in the promotion of education, skills-building, and promoting new industries and jobs where they exist to help move the labour force up and not in the trap of minimum-wage employment all the time.”

Recent research by HRINC found that 60% of total employed persons of age 15 or older work in informal employment – that is to say they work in non-agricultural jobs that are not registered with a government ministry or any other Cambodian authority. Added to this, one-eighth of the population had not had any education and only 4% had graduated university. So, the need to build the nation’s skills is clear.

China has been touted as a good model for its policies on a minimum wage. It has a well-defined labour law and minimum wage levels have been increasing by about 15-20% each year. But China’s goal is different from a less-developed country such as Cambodia or Myanmar. Beijing wants to create a domestic consumer base of middle-class people and move away from an export-driven economy. However, as Devonshire-Ellis points out: “The problem here is that it is leading to wage increases across the board, not just at the minimum level, and is also causing inflationary pressures.”

The road that led to protesters in Cambodia being shot last month was a story of an increasing number of strikes. According to a report from news broadcaster Al Jazeera last month, there were 131 strikes in the Kingdom last year, compared to 31 in 2011. Only about half of these strikes achieved their objectives, and when unions are taken to court, the courts always rule in the companies’ favour, according to the report.

However, D’Amico maintains there was a willingness to increase wage levels over time. “In Cambodia specifically, there was a clear political and tripartite willingness to double minimum wages by 2018, which excludes mandatory allowances, overtime, productivity bonuses, etc,” she said. “The strategy was clear but unfortunately hijacked by politics, as opposed to being open to reasonable discussion and negotiation.”

This is a reference to the support of striking workers by the opposition Cambodia National Rescue Party, a move seen by some as one made for political gain, rather than a genuine, meaningful policy.

Taking a broader, longer-term view, Devonshire-Ellis is upbeat about the lot of workers in the region. “Asia is improving. It’s not fully there yet, and it will take some time, but the problems with worker mistreatment is being dealt with on a systematic basis,” he said.

“You have to create wealth before you can give more money, and wealth creation is growing in every country in Asia with the exception of North Korea,” he added.

 

Keep reading:

“Mending hearts” – Cambodia’s garment factories are synonymous with hard work, long hours and low wages. But among the assembly lines and dusty backstreets, couples are falling in love

“Land of broken dreams” – Every day, hundreds of men, women and children risk their lives mining for gems in a remote corner of Cambodia. A young miner and his father share their stories and struggles as they carve out an existence