GLU Alumni Workshop in Manila, 7 - 14 August 2016

Minimum Wage in Cambodian

Garment Sector

Veasna Nuon

GLU Alumani

Contents

1. Overview and context

2. Cambodian garment industry

3. Minimum wage developments

4. Suggestions

Overview and context

• GDP and GDP per capita growth, but many still live in poverty

• Authoritarian government under domestic and international pressures

• Scored poorly in international rankings (govt effectiveness, corruption

index, rule of law and democracy)

Cambodia Vietnam Bangladesh Indonesia

Govt effectiveness 25.48 52.40 21.63 54.81

Control of corruption 12.50 37.50 18.75 34.13

Rule of law 99th 64th 93th 52th

Democracy Index in Selected Asian Garment Producing Countries, 2015

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Bangladesh 86 5.73 7.42 5.07 5.00 4.38 6.76

Cambodia 113 4.27 3.17 5.71 3.33 5.00 4.12

Indonesia 49 7.03 7.75 7.14 6.67 6.25 7.35

Vietnam 128 3.53 0.00 3.93 3.89 4.38 2.94

Cambodian garment industry

• Significant (value, employment, number of factories, market

destinations, ILO monitoring program, benefiting from trade

agreements)

Sector vs the total export

Garment sector wage employment as

share of manufacturing wage employment

Source: Huynh 2015, ILO ROAP

13%

14%

17%

27%

28%

28%

40%

47%

77%

0% 20% 40% 60% 80% 100%

China 2013

Thailand 2013

Philippines 2013

Lao PDR 2010

Indonesia 2014

India 2011/12

Viet Nam 2013

Pakistan 2012/13

Cambodia 2012

Cambodian garment industry (cont.)

• Key challenges

• Operation: (basic production, raw material import, low productivity, foreign ownership, high cost of transport, electricity, short term investment)

• Industrial relations (industrial unrest connected to wage contention, poor freedom of association with a recent adoption of new trade union law and collective bargaining and social dialogue)

• Beyond core labour standard (wage, working hour, labour contract, OSH, transport)

Minimum and living wage

developments

Minimum wage structure

• Institutional arrangements (tripartite body recommending the government who has

a final say on the amount)

• Use of 7 social and economic criteria

• Scope and coverage of minimum wage (only this sector)

• Occupation, skill or geographical variation (no)

• Annual adjustment

• Good enforcement but it is the common wage level due to a number of factors

Minimum wages in the garment sector

in ASEAN countries (USD)

Change in minimum wage -

2014 to 2016 (USD terms, per cent)

Bonuses and benefits

Bonus and Benefits USD

1 Attendance 10

2 Seniority 2 to 11

3 Housing/transportation allowance 7

4 Meals for voluntary overtime work per day 0.50

Source: http://www.prake.org/home/salary/minimum-wages

Minimum and living wage developments

(cont.)

• Significant increased over the past 4 years, but still among the lowest in

the region and far below sufficiency and living wage (the government

157-177 to cover basic needs and Asia Floor Wage Alliance 278.14)

• ILO monitors wage compliance but not living wage.

• No industry bargaining (no actual result yet from IFA and ACT) and

little workplace-based collective bargaining, the minimum wage is the

de facto ceiling

Minimum and living wage developments

(cont.)

• Annual revision but setting rather than negotiation.

• Contentious and confrontational demands between workers and

government/employers (biggest casualty of workers in Jan 2014)

• The weight given to labour compliance has been less in the post US-

Cambodia agreement period

Suggestions

• Key players, especially the EU and buyers, provides more interventions to

address workers’ issues (CLS and CLS+)

• Better wage determination mechanism and practices (genuine negotiation,

involvement of buyers, independence and unity of unions, capacity

development)

• Addressing freedom of association and factory or industry wide collective

bargaining