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Wage Hike in Cambodia Rises Higher Than Expected

Next year, garment workers in Cambodia will be earning 11 percent higher wages. The agreed upon increase was higher than originally outlined, and workers’ unions—though pleased for now—have already committed to continuing the fight for fairer pay.

In August Cambodian Prime Minsiter Hun Sen passed a benefits package that would have seen workers’ wages rise from the current $153 per month to $168, an almost 10 percent jump. The final settled-on wage, however, was $170, an 11 percent jump. The higher rate followed Hun Sen’s stream of meetings with garment workers—who have largely protested his government and there’s a general election set for 2018. The new pay rate will take effect from Jan. 1, 2018.

The problem for Cambodia, as has been the case in many low-cost sourcing countries, is the battle between giving workers better pay and maintaining the country’s competitiveness.

As such, the country’s Ministry of Labor and Vocational training said, according to Reuters, that the Cambodian government will continue to hold off on taxing textile sector profits and will eliminate export management fees.

In the last five years alone, wages in Cambodia have increased more than 150 percent, climbing from $61 per month in 2012 to the present $153. If hikes continue at that clip, wages in Cambodia could reach $384 a month by 2022.

Not surprisingly, workers unions in Cambodia and garment manufacturers are divided over how the hike—and future hikes—will impact the country’s garment sector.

Pav Sina, president of the Collective Union Movement of Workers, said higher wages won’t make Cambodia less competitive. “The prime minister always adds it every year, this is appropriate to what we tried to achieve,” Pav Sina told Reuters, implying perhaps that the wage rate is climbing at an agreed-upon pace that’s in keeping with general inflation.

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Adding separately in local reports, however, Pav Sina said the hike was welcome but still insufficient.

“$170 is not enough for a decent living yet. However, it is a good start for this year to increase the minimum wage to this level plus other benefits offered to workers which are paid by employers,” he told Radio Free Asia.

Other benefits in the new package include free health care from employers and free access to public transport, which employers will also be expected to pay for or provide.

From the garment manufacturers’ perspective, the new wage rate could mean tough times ahead.

With the hike, Kaing Monika, deputy secretary general of the Garment Manufacturers Association in Cambodia, told Reuters, the minimum wage is “beyond the affordability of some of our members and the competitive level of the country.

Read more about global minimum wages: Interactive Infographic: Where Wages Have Risen, Are Rising or Could Soon Rise]

By comparison, minimum wages in neighboring Vietnam will rise 6.5% to between $121 and $175 (depending on the region) at the start of next year. In Myanmar, which is also close by, battles are ongoing for what could end up being a 55 percent wage jump, bringing the country’s monthly pay rate from $67 to $99, and making it a much more cost-competitive sourcing option than Cambodia.

For the year to date, according to data from OTEXA, Cambodia makes up a 2.6% share of U.S. apparel imports, compared to 14.4% from Vietnam and Bangladesh’s 6.6% share. Myanmar’s share remains too small on the global scale to say much about as a point of comparison.