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Bangladesh PM: Higher Wages Requires Higher Apparel Prices

Many industry experts have long predicted that real labor reform in Bangladesh would translate into higher apparel costs. Now, Bangladesh Prime Minister Sheikh Hasina is explicitly encouraging apparel buyers to raise the price of their products in order to make it easier for the government to persuade factory owners to increase wages.

The Prime Ministers remarks were delivered in a meeting with Michael Sommer, chairman of the German Confederation of Trade Unions in Dhaka and president of the International Trade Union Confederation. During that discussion, Hasina briefed Sommer on the all the progress Bangladesh has made toward labor reform, emphasizing the great strides made on the issue of wages. However, she conceded that if buyers would increase the price of readymade garments, it would make it easier for the government to pressure factory owners to lift wages.

Hasina is not the first to point out that salary reform would ultimately benefit from increased prices or might even require it.  Ismat Jahan, Bangladesh’s ambassador to the European Union, estimates that making garment factories safe will add about $0.10 to the cost of each garment. The total cost is estimated to be approximately $3 billion. He expects that Western consumers were be willing to bear the new cost increase. “I believe consumers in the West are ready to pay a small increase in prices for the millions of women who stitch for them in a faraway land,” he said.

However, there are dangers associated with elevating price levels too quickly. Jahan was also cautious about the prospect of increasing prices too much. ‘Realistically speaking, unless we can ensure fair pricing of the products, any significant increase of the salaries will not be practical in this highly competitive industry.”

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Paul Murphy, Ireland’s representative member of European Parliament, agreed that the costs of compliance would necessarily cut into profit margins. “Profits have to be cut into if workers’ rights in Bangladesh and other countries need to be protected.”

Last September, in a moment of surprising candor, Helena Helmerson, head of sustainability at Swedish retailer H&M, admitted that the company’s apparel prices may have to rise to accommodate higher wages for textile workers in developing countries like Bangladesh.

Speaking to AFP, Helmerson said that passing on wage increases to customers in the form of higher retail prices “might be a possibility,” at least in the long term. Her remarks have been seized upon as a watershed concession, interpreted as an unusually frank concession to economic reality. Viveka Risberg, a representative with the non-profit organization Swedwatch, commented on the significance of Helmerson’s remarks. “It’s the first time ever that they have said they were willing to raise prices and that consumers were now ready for that. It’s going to take years to get to a living wage in Bangladesh but I’m more hopeful now they have opened up to involving all the stakeholders–the unions, the workers, the suppliers and the government,” she said.

At least originally, H&M vehemently denied that an increase in wages would result in corresponding increases in retail prices. At the time H&M first announced its advocacy of a living wage, a company spokesperson said, “We don’t see that our road map on the fair living wage will have a negative impact on the price of our products. It is an investment in our customer offering and will benefit H&M long term. Wages are only one of several factors influencing the sourcing costs and prices in our stores.”