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2014: Global Sourcing to be More Costly as Worldwide Minimum Wages Continue to Rise

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It was a year of turmoil and general discontent in the global garment industry where workers and wages were concerned. Substandard labor conditions that led to building collapses, factory fires and deaths in Bangladesh provoked worldwide outrage over the plight of workers. Too-low wages spurred garment worker protests that, at times, led to temporary factory closures and stand-offs between owners and employees.

Where increases were, by worker standards, insufficient, disorder spread and the world saw more factory laborers fighting for fair pay.

Industry experts predict that 2014 will bring yet more wage hikes. Speaking at the Sourcing Journal Summit in November, Synergies Worldwide founder and president Munir Mashooqullah said the industry will see wage increases across the supply chain. “It’s going to be a domino effect,” he said.

Here’s a look at which countries will see higher wages in place for 2014.

Cambodia

Irate Cambodian garment workers are staging ongoing demonstrations against the recent $15 wage increase, taking the monthly pay rate from its current $80 to $95 to go into effect April 1, 2014. However, the streets flooded with displeased factory workers, angered over what they considered to be a miserly increase. Following protests, the Cambodian government offered to raise the rate to $100 per month instead of the original $95.

Under the original plan, the minimum wage will rise incrementally over the next five years, lifting it from its current $80 per month to more than $160 per month. In 2015, the monthly minimum wage is set to increase again by $15, then by $16 in 2016, $17 in 2017 and, finally, $17 in 2018.

Bangladesh

Bangladesh’s government finally agreed upon a new salary structure, which took effect Dec. 1, 2013. Labor Minister Rajiuddin Ahmed Raju announced that the new minimum wage would be set at 5,300 taka ($68), a 77 percent increase from the previous 3,000 taka ($39)–the lowest worldwide wage rate in the industry. The RMG industry had been seeking a wage increase to Tk 8,114 ($105) and workers staged often violent demonstrations, skipped work forcing factory closures and brought on general disquietude in the sector. The wage board revisited the rate hike several times before settling on the new 5,300 taka salary.

Vietnam

Workers in Vietnam will see a minimum wage increase to between VND 1.9-2.7 million (US $90-128) from VND 1.65-2.35 million (US $78-111) per month for 2014 depending on the region, a raise of 15-17 percent.

Labor unions in the country say the new rate still won’t be sufficient as the average cost of living is considerably higher and are instead proposing that the National Wage Council, convened last year, hike the minimum wage by either 24-36 percent or by 21-32 percent.

Indonesia

After a nationwide wage strike across Indonesia in early November, twelve province governors agreed to increase monthly minimum wages for 2014 by an average of 19 percent, which falls short of the 50 percent hike workers and labor unions were seeking.

Wages are set by province in the country and in Jakarta, governor Joko Widodo announced that the wage rate would go up to Rp 2.44 million ($199) from Rp 2.2 million ($179), which follows a 44 percent increase that took effect at the start of 2013. Workers surrounded the Jakarta administration office November 1 to protest their displeasure and fight for their requested Rp 3.7 million ($320) wage hike, citing that the new rate still doesn’t adequately cover the cost of living.

India

Delhi, a major garment city in India, announced new rates for unskilled, semi-skilled and skilled workers that took effect from October. 1, 2013. The government increased monthly minimum wages of unskilled workers from Rs 7,722 ($125) to Rs 8,086 ($130), semi-skilled from Rs 8,528 ($138) to Rs 8,918 ($144), and skilled workers will go from Rs 9,386 ($151) to Rs 9,802 ($158). This follows a previous wage increase in April 2013.

Wages in India are also set by province and while rates vary across the country, the trend has been toward increases. Karnataka has long been fighting for an increase to the minimum wage, which was last updated in 2009, but little has been done to implement a new pay rate. The government formed a sub-committee to negotiate a revision to the wages for the garment industry, which was to finalize the matter in December, but no update has since been published.

Pakistan

Pakistan Finance Minister Ishaq Dar announced in June 2013 that the provinces would increase the minimum wage to Rs 10,000 ($95) from Rs 8,000 ($76) per month, which took effect from July 1, 2013.

Haiti

The Haitian government approved a 12.5% increase in garment worker wages, raising the daily rate from 200 gourdes ($4.56) to 225 gourdes ($5.13) for an 8-hour day. The new pay is scheduled to take effect January 1, 2014 but the marginal increase has workers enraged over a raise they say is a setback compared to the 200 gourde minimum wage set in 2009 because the value of the gourde has decreased considerably. Many have responded with protests and vandalism prompting factory closures.

Workers had been demanding a 500 gourde daily wage but the Association of Industries of Haiti (ADIH) and apparel industry leaders dismissed the request stressing the need to continuously monitor the wage rate in order to keep the country competitive with nations like Cambodia, Vietnam and Bangladesh.

Turkey

Turkey announced a new 5 percent net minimum wage increase in December to 846 ($393) liras for the first half of 2014 to be followed by a 6 percent increase for the second half of the year, bringing the rate to 891 liras ($414).

The two-stage raise follows the 4.4% increase in 2013.

Egypt

The new government in Egypt said it would raise the minimum monthly pay for state employees from 700 Egyptian pounds ($101) to 1,200 pounds ($173) as of January 1, 2014. Some textile companies fall within the state-run sector and will benefit from the increase, while those in the private sector will be awaiting word on whether the wage increase will also extend to them.

Workers are disappointed over the new pay as some say that is the rate they had been seeking in 2010.

Brazil

Brazilian President Dilma Rousseff announced last month that the minimum wage in the South American nation would see a 6.78% increase to 724 reais ($308) per month in 2014. The raise is lower than the 9 percent increase for 2013.

Minimum wages in Brazil are adjusted based on a formula that considers the previous year’s inflation plus GDP growth over the past two years but some feel the pay hikes have outpaced productivity in the country and intensified inflation.

Morocco

The minimum wage for textile and apparel workers in Morocco increased slightly in December as the final installment of an incremental raise planned for the sector.

According to textile industry association, AMITH (L’Association Marocaine des Industriels du Textile et de l’Habillement), the hourly minimum wage increased to 12.24 Moroccan dirhams (MAD) (US $1.48) from MAD 11.97 (US $1.45) as of December 1, 2013. With benefits factored in, workers can expect to make a total of MAD 15.13 (US $1.83) on average.

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