Study Says More Wage Hikes May Hurt Garment Industry Higher Minimum Wage Will Hurt Garme

While recent wage improvements for Cambodian garment workers have helped some in the short run, more legislated in­creases could actually hurt the industry and put more people out of work, according to a recent study conducted by international experts.

Meanwhile, labor supporters say concerns over the minimum wage pale in comparison to other problems in the garment sector such as corruption and abuse of workers’ rights. Finance and trade experts met Monday for the first of two meetings to discuss the government’s participation in a program called the Integrated Framework for Trade-Related Technical Assistance.

A draft report, prepared by a team of experts from the World Trade Organization, the World Bank and other consultants and agencies, raised the minimum wage issue and it was discussed during Monday’s meeting.

Increased minimum wages have been a rallying point for Cam­bodia’s labor unions, who last year executed effective strikes and raised the minimum wage to $45 per month.

“It doesn’t help people who might get a job through garment sector expansion,” said Sandy Cuth­bertson, team leader for the study group that visited Cam­bodia earlier this year to conduct studies and surveys aimed at increasing Cambodia’s potential for access to global markets.

“Legislating increased wages does not help people without jobs and in the long run does not help people with jobs,” according to the draft report prepared by the Integrated Framework team.

“Investors contend that these minimum wages are discouraging further investment and further employment expansion,” the team reported.

“The evidence from other de­veloping countries is that high minimum wages reduce employment opportunities in modern man­ufacturing and service sectors and crowd workers into low paying, low productivity jobs in the urban and rural informal sectors,” they wrote.

Calling the wage issue “still open to debate,” Minister of Commerce Cham Prasidh said at Monday’s meeting the government had to balance workers’ rights with the maintenance of a competitive industry.

“Touching the minimum wage is a very sensitive issue,” in a coun­try where many of the workers are illiterate or ignorant about their rights,” he said. “Some work­ers do not even understand how much they are supposed to be paid.”

Garment investors said the strikes hurt potential investment in the country. But labor representatives claim that the government needs to solve other problems that are harmful to the garment sector, not the least of which is corruption.

“We could provide workers with a $20 per month [raise] if we cleaned up corruption,” said Chea Vi­chea, president of the Free Trade Union of the Workers of the Kingdom of Cambodia, the country’s most active union.

Corruption costs garment factories as much as $70 million per year in unofficial costs, the Cam­bodia Development Resource Institute reported earlier this year. In addition, high value-added tax and high costs for electricity, transportation and water all create problems for investors, Chea Vichea said.

When garment companies are looking for prospective countries to invest in, labor costs are a minimal factor, said another labor union expert, speaking on conditions of anonymity. He said in­vestors are more interested in access to the US market, which Cam­bodia has as a result of a quota agreement with the US.

“You hear this everywhere,” he said of the minimum wage concerns. “It’s all nonsense. It never happens.”

Last year’s minimum wage increase didn’t drive away any factories that were more affected by the slowdown in the global economy. Claims that wage hikes are detrimental to the economy fail to take into account the effects of higher salaries when they are brought home to the countryside by workers. These secondary  effects are also important in any overall analysis of the garment sector, the expert said.

 

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