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Cambodia Raises Garment-Worker Monthly Minimum Wage

Starting in 2023, Cambodia’s garment, footwear and textile workers will receive a new monthly minimum wage of $200, an increase of 3 percent from the previous floor of $194, authorities said Wednesday.

The Ministry of Labor said that a tripartite committee of trade union, manufacturer and government representatives had overwhelmingly voted for $198 but Prime Minister Hun Sen ultimately decided to round up the figure. With the inclusion of fringe benefits for regular attendance, transportation, rent and seniority, workers can expect to receive a monthly income of between $217 and $228, it added.

“This is a good sign for our workers, and I believe that the wage hike will contribute further to improving the livelihoods of our workers,” labor minister Ith Samheng told reporters after the vote. “I appeal to food vendors, and landlords, in particular, not to increase prices or room rent. I think it is not appropriate and it may affect the workers’ daily lives.”

During negotiations, Cambodia’s workers’ unions had asked for between $210 to $213. Inflation, which hit 7.8 percent in June on a year-over-year basis before falling to 5 percent in August, they argued, has caused food and fuel prices to spiral, leaving workers in a more desperate position than usual.

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The Garment Manufacturers Association in Cambodia (GMAC), the trade organization for factory owners, countered with an opening bid of $196, before making $197 its final offer.

Nang Sothy, co-chair of the private sector and employers’ representatives, told the Khmer Times that the $200 minimum wage was “good and appropriate” because it won’t dissuade foreign companies from investing in the country. Some factories, he said, could face closure if the minimum wage topped out at $215.

“Costs for our logistics, shipping companies and ports must also remain competitive for Cambodia to compete with neighboring countries too,” Sothy said while urging the government to bolster the sector’s ability to make more high-value goods through training and capacity building.

Pav Sina, president of the Collective Union of Movement of Workers, said that he was generally happy with negotiations, even though the minimum wage the unions had sought was not met.

“Whether the minimum wage for 2023 is enough for the workers’ expenses or not, the policy of increasing the minimum wage every year is a good mechanism,” Sina told the outlet.

But Kheng Sokhoeun, a worker at Ying Hy factory, said the $6 increase was disappointing, though it was better than nothing.

“It will pay for some things like food for two days,” Sokhoeun told the Khmer Times. “I’lI try as much as possible to work overtime so that I can earn more each month. When I work really hard, I can earn between $260 and $280 a month.”

Before the additional cost pressures arose, Cambodia’s garment workers made less than 30 percent of what constitutes a living wage, according to The Asia Floor Wage Alliance, which estimates that the sum should be closer to $701.

“The $200 is not equal to the consumption costs of workers,” Ashley Saxby, Southeast Asia coordinator at the nonprofit, told Sourcing Journal. “Wages have not kept pace with the rising cost of living for years and many workers have to take on debt to meet their basic needs. Many workers were pushed below the poverty line during the Covid-19 pandemic and are struggling to recover financially.”

Even though the $213 workers had asked would have been a “far cry“ from the living wage, it would have had a significant impact on workers and their families, she added.

“Suppliers in Cambodia have recovered significantly while global fashion brands have hardly felt any impacts. Brands, in particular, must stop hiding behind the insufficient national laws of production countries and pay a living wage,” Saxby said.

Cambodia’s $7 billion garment sector is the nation’s largest employer with 800,000, mostly female, workers making goods for Western markets. The garment, footwear and travel goods industry exported $6.6 million of goods during the first half of the year, a 40-percent year-over-over increase, according to a report from Cambodia’s department of customs and excise.

The economic slump in the United States and Europe has the industry bracing for impact, however. Speaking to the Phnom Penh Post last month, GMAC secretary-general Ken Loo said that the increasing likelihood of recessions in its biggest markets has triggered “serious concern over the export situation for the second half.”

Many GMAC members, he added, have reported reductions and revisions in orders. To cope, a quarter of them, or around 170 factories, were looking to partially suspend operations or ask employees to reduce their hours in September, Loo said.

He also expressed hope that the United States will reauthorize the Generalized System of Preferences (GSP) for Cambodian-made travel goods such as luggage, handbags and purses, allowing them to enter the American market duty-free. Without GSP, buyers are taxed between 10 percent and 30 percent on those products. Clothing and footwear, which have never benefited from GSP, are subject to tariffs of between 13 percent and 19 percent.

“We have been coping well since the expiration of the GSP. However, we are currently impacted by the economic slowdown as well as an inventory glut in the West,” Loo said. “We hope that the GSP will be renewed soon.”