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New ILO Study to Explore a Minimum Wage for Myanmar

As Myanmar slowly emerges from years of tyranny, Western retailers are scrutinizing it as a potentially major garment manufacturer in the future. Its eventual maturity, though, as an attractive manufacturing destination for major retailers has been undermined by a ramshackle infrastructure and a dearth of adequately skilled labor. Now, the International Labour Organization (ILO) is commissioning a study investigating the possible effects of passing a minimum wage.

Speaking to just-style magazine, Dr. U Aung Win, vice-chairperson of the Myanmar Garments Manufacturers Association (MGMA), said, “Foreign investors are recruiting garment workers from locally owned factories by paying them higher salaries. This saves them from having to train workers, but it means that local factory owners must train new workers every month – or sometimes every day.”

According to Dr. Aung Win, the average worker earns somewhere between $110 per day and $150 per day. However, some earn as little as $70 per day.

Uneasiness about labor conditions, especially low wages, has prompted many Western nations to shy away from investment in Myanmar. Contradicting Dr. Aung Win’s estimates, the government reports that its average wage is approximately $100 per month, and evidence has surfaced suggesting this is a generous estimate. Some believe the wages, even at larger factories in Yangon, can be as low as $25 per month. Currently, Myanmar has no government mandated minimum wage.

Nevertheless, few think a minimum wage is Myanmar’s central labor challenge. The most pressing labor issue is a deficit of skilled workers, making it difficult for factories to compete for high-end contracts. Speaking to the Myanmar Times, Ma Myat San Win, director of the UMH company in Myanmar, said, “We just can’t get the human resources.”

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Factories are eager to hire and are generally willing to employ workers who come on the job with virtually no experience or skills, intent on training them when they get there. It has become routine for factories to offer new employees two-week workshops designed to provide quick introductions to a variety of skills like mechanical repair and quality assurance.

However, the retention of these workers has been problematic. U Khin Maung Aye, owner of the Lat War Garment Factory, also speaking to the Myanmar Times, complained, “We are always taking on new employees. We are held back from production while we get the workforce skilled up. But then, most of the trained labour will move from one factory to another where they get paid more salary — even if it is only 3 to 5 percent more.”

And now that sanctions on Myanmar have finally been lifted, three or four new factories per month have been sprouting into business, creating a torrid bidding war for laborers. U Khin Maung Aye said, “Most of the new factories coming here in 2012 and 2013 came without any labour force. So they try to poach other skilled workers from other factories.”

At least for the near future, there is little optimism regarding the prospect of Myanmar being able to compete with more sophisticated regional powers, U Myint Soe, chair of the Myanmar Garment and Manufacturers Association, said, “The products here might not compete with Vietnam’s products. Vietnam [has the manpower and skills] to produce 10 products, China can do 15 where we can do only five.”

Problematically, many of the more skilled workers in Myanmar often leave the country in search of higher wages. Some experts estimate as many as 1.5 million documented workers have made their way to Thailand. The number of undocumented could be as high as 1 million.

Still, there are causes for optimism regarding Myanmar’s future. Last July, the E.U. reinstated Myanmar’s status as a beneficiary of its Generalized System of Preferences program (GSP), permitting it duty-free access to the markets of its twenty-seven members. Also, the E.U. created a special joint task force with Myanmar to promote the environmentally sustainable manufacturing of garments.

Also, Myanmar currently has more than 300 garment factories employing 250,000 workers and some expect those numbers to double by 2015. But, Myanmar’s success hinges upon its perceived commitment to both economic modernization and political reform, two varieties of progress many of its potential investors believe can only be birthed in tandem. While Myanmar certainly benefits from the increasing costliness of China and the political precariousness of Bangladesh, it has become clear that its future prospects depend squarely upon its own improvement.

According to the ILO study in progress, a better understanding of Myanmar’s labor market is necessary given the influx of new foreign investment capital. Ford Motors, Chevrolet, Coca Cola, and GE are among only a few major Western companies that are pledging substantial sums for the purpose of establishing a long-term presence.