News / Economy

Cambodia Garment Wages Set to Rise as H&M Pushes New Approach

FILE - Cambodian garment workers sew clothes in a factory in Phnom Penh, Cambodia, Aug. 4, 2007.
FILE - Cambodian garment workers sew clothes in a factory in Phnom Penh, Cambodia, Aug. 4, 2007.
Robert Carmichael
— Swedish clothing giant H&M recently announced a program to boost wages for garment workers in its sub-contractor factories around the world, including in Cambodia, where the company is a leading buyer. H&M's announcement comes at the end of a turbulent year in the garment sector in Cambodia and elsewhere.
 
In the coming weeks, the Cambodian government will announce a rise in the current $75 monthly minimum wage for garment workers. The size of the increase is not yet known, but authorities are under pressure to improve wages and working conditions in the country's most important industry.
 
In part, that pressure is political. The opposition made astonishing gains in July's election, partly by promising to double the monthly minimum wage. That pledge won over many of the country's 400,000 garment workers, most of whom are young women who support their impoverished rural families.
 
There are other factors at play as well. This year has been a tumultuous one for Cambodia's garment sector, which has seen strikes and sometimes violent protests over wages, which have stagnated in real terms of late.
 
In October, H&M's CEO, Karl-Johan Persson, discussed wages with Prime Minister Hun Sen in Cambodia and met with local labor unions. Shortly after the visit, H&M unveiled a five-year roadmap intended, in part, to guarantee a fair living wage for workers and an annual review of workers' wages.
 
The plan will be put into effect next year in one factory in Cambodia and two in Bangladesh.
 
Anna Gedda, H&M's social sustainability manager, points out that as a major buyer, H&M has the ability to put pressure on suppliers.
 
“We are one of the biggest brands within this industry, and of course with that size also comes the responsibility. And we felt that we should really take leadership in this issue. And therefore we have developed this holistic roadmap towards achieving fair living wages at our suppliers,” explained Gedda.
 
Under the roadmap, H&M will pay its sub-contractor factories enough to ensure that workers earn enough to cover their basic needs - what it calls a fair living wage. It will also take steps to improve industrial relations, strengthen unions and work with governments to promote labor rights.
 
“We of course see this as an investment in the customer offering - we know that it's something that's important for our customers, but not least I would say that this is what we also think will be profitable and beneficial to us and the suppliers long term,” said Gedda.
 
Industrial disputes are nothing new to Cambodia's garment industry, which over the last two decades has grown from nothing to become a $4 billion a year export business. It is a pillar of the economy and the key foreign exchange earner. Most of its products go to the United States and the European Union. 
 
Although working conditions are difficult in Cambodia, they can be worse in some other garment-producing countries. That was highlighted in April when more than 1,100 workers died in the collapse of Bangladesh’s Rana Plaza building. The accident drew global attention and persuaded some brands of the need to make changes.
 
Dave Welsh, the country representative of the Solidarity Center, a non-profit affiliated with the U.S. labor movement, welcomes H&M's decision.
 
Welsh said it is no secret that the Cambodian government fears that buyers in the cutthroat garment trade might abandon the country should wages rise too fast. However, the roadmap laid out by H&M, a key player in the garment sector here, should help to alleviate those fears.
 
“I understand that concern [but] they have H&M now on record as saying not only will they not pull out, but that they are committed unilaterally to making sure that at least in their factories a living wage is paid. If four or five other brands were also to step up to the plate and make that commitment, then the government of Cambodia would really have no excuse in saying that this could be the model industry in applying a living wage for garment workers,” said Welsh.
 
H&M expects that by 2018, all 750 of the factories it uses will meet its standard, benefiting around 850,000 textile workers worldwide.
 
While some activists want H&M's program to roll out more quickly, it has been broadly embraced by labor unions.
 
Factories that undertake manufacturing on behalf of brands like H&M, Gap and Nike also support the program.
 
Ken Loo, secretary-general of Garment Manufacturers' Association in Cambodia, the industry body that represents the sub-contractors, also praised the plan.
 
“It's good because ultimately the buyers are the ones with the ability to pay, so if they're the ones pushing for it, it's good because it means that they are willing to pay more to the manufacturers, to the factories, and if they pay us more then we will have the ability to pay our workers more. So it's good. It's great,” said Loo.
 
Loo's members regularly complain that they are caught in a vice, with buyers pressuring them to cut costs and workers pushing for higher wages.
 
He warns that their enthusiasm for H&M's roadmap is predicated on it being funded by H&M and by any other brands that might sign up.
 
At the moment, it is not clear how that will work. H&M says it will not charge consumers more, which means the expense will be pushed further down the chain.
 
Some of it will come from H&M, which will increase what it pays its suppliers, but the Swedish firm also expects the roadmap will improve factories' productivity. Asked whether H&M would cover all increased costs or whether it expects sub-contractors to share the burden, Anna Gedda says that will be assessed on a case-by-case basis.
 
Another issue is how many other brands will follow H&M's lead. So far none has. Yet H&M freely admits that making the roadmap work, particularly in factories that it shares with other brands, will require them joining up, just as it will also require the support of unions, factories and governments.
 
Jason Judd, a technical specialist at the International Labor Organization, the United Nations' labor body, says the program will struggle unless other brands sign up. Judd believes they will eventually be compelled to consider it.
 
“It's inevitable that if the H&M program works as it's described, then other brands are going to feel the pressure because they're in many of the same factories. Also, government is going to feel the same pressure because the government is ultimately in charge of this wage-setting exercise and they're in the middle of one right now,” said Judd.
 
Meanwhile, Cambodia's garment workers are waiting to hear how much they will earn next year. Already some independent unions are threatening further action unless the minimum wage doubles to $150.

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