Cambodia on Tuesday raised the minimum monthly wage for workers in its key textiles and footwear industry by $2 to $194, effective January next year, shy of a $12 rise sought by major unions.
Factory wages have long been a difficult balancing act for Cambodia’s government, to keep costs competitive for investors and brands while satisfying influential unions representing 700,000 workers, which have held strikes in previous years.
Worth $7 billion a year before the pandemic, the fashion industry is Cambodia’s largest employer and provides vital income for rural families, in making apparel for brands that include H & M, Adidas, Nike, and Gap.
The new wage announced by the labour ministry would be a struggle to measure on, said Pav Sina, president of the Collective Union Movement of Workers.
“I request all relevant stakeholders, the employers and therefore the government, to consider the possibilities of adding more to the workers’ wage,” Pav Sina told reporters.
However, Kaing Monika, Deputy Secretary-General at the Garment Manufacturers Association of Cambodia (GMAC), said the raise can be problematic with operating costs also expected to rise.
“Even a $2 increase would have a negative impact,” Kaing Monika told.
Kaing Monika said employers would spend more on pension and healthcare contributions and workplace measures to counter Covid-19, including up to $4 monthly per head on tests.
As of April, garments and textiles were no longer Cambodia’s dominant export product, with agricultural goods and other new products on the increase, such as luggage, which is free of duties within the US, according to the planet Bank.
Cambodia’s exports of travel goods to the US market were worth $3.5 billion in 2020, up 3.6% from 2019.
That compared to $2.6 billion to the European Union, a 35% contraction, in part due to a partial withdrawal of preferential EU tariffs over human rights and political concerns.