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H&M CEO Warns Higher Wages in Bangladesh Could Cause Brands to Back Out

Swedish fast fashion retailer Hennes & Mauritz (H&M) has continuously showed its support for better wages and working conditions in Bangladesh, but the company’s CEO, Karl-Johan Persson, recently warned that the increased employment costs could cause brands to cease producing in the low-wage nation.

And, according to Persson, that’s not something the country can afford to see happen.

In an interview in German newspaper Die Welt, Persson said he has stressed advocating for higher wages in meetings with Bangladesh’s Prime Minister Sheikh Hasina, but that the country needs to remember its competitive situation.

Bangladesh’s ready-made garment (RMG) industry accounts for around 80 percent of the country’s export income, so any mass exodus of brands manufacturing in the nation would be ruinous.

Over the last five years, the Bangladesh government has increased the monthly minimum wage for RMG workers from Tk 1,600 ($20.60) to Tk 5,300 ($68.25) in two phases.

“Many companies buy into Bangladesh, not just us. The country must also take into account that jobs could be lost to other countries,” Persson told Die Welt. “The garment industry provides four million jobs that are paid well in relation to other jobs. Textile workers earn about as much as a teacher,” he said.

Prime Minister Hasina understands the position the country is in and says the government is continuing its work to improve conditions and wage rates for garment workers.

At a meeting with Michael Sommer, president of the International Trade Union Confederation and chairman of the German Confederation of Trade Unions in Dhaka earlier this month, Hasina outlined plans to set up a “garment village” to provide a secure work place for the RMG employees, Bangladesh’s The Daily Star reported.

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But improving working conditions, and building and factory safety, and conducting continuous inspections all come at a cost that brands will have to contribute to.

Hasina told Sommer that if buyers pay higher prices for RMG items, it would be helpful for the government to put pressure on garment factory owners to increase wages of workers, according to The Daily Star.

At H&M, prices are kept stable despite suppliers paying higher wages, Persson said in the Die Welt interview. The company takes a hit on margins because of the increased costs but is able to sustain itself by sticking to its core of offering good quality and attention to sustainability, which has ultimately afforded the retailer continued expansion, Persson said.

Persson told Die Welt he thinks brands should continue to produce in countries like Bangladesh to help with job creation, but that responsible companies need to make sure that suppliers comply with rules of conduct and that agreed upon wages are being paid.