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Working In These Times

Friday, Sep 23, 2016, 11:43 am

Walmart, Nike and Others Decline to Back $40 Monthly Wage Hike in Cambodia’s Garment Industry

BY Cole Stangler

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This month, labor unions representing hundreds of thousands of garment workers proposed a hike in the industry-wide minimum wage from $140 a month to $179.60. (World Bank Photo Collection/ Flickr)  

Major Western retailers sourcing clothing from Cambodia—a country marked by authoritarian rule and regularly ranked as one of the world’s worst countries for workers—are declining to endorse a proposed hike in the garment industry’s minimum wage that amounts to roughly $40 a month.

Like many of its neighbors in Southeast Asia, Cambodia is a popular spot for American and European brands to subcontract production of textiles and shoes. It offers easy market access and, above all, cheap labor. Against that backdrop, garment and footwear exports have more than doubled over the past decade—with suppliers pulling in contracts from top-name corporations like Walmart and Nike.

But the industry is not without conflict. In recent years, its overwhelmingly female workforce has led mass strikes and protests to demand higher wages, and several workers were killed in a police crackdown in January 2014. Further tension looms. 

This month, labor unions representing hundreds of thousands of garment workers proposed a hike in the industry-wide minimum wage from $140 a month to $179.60. They’ve been met with stiff opposition from the factory owners’ lobby, the Garment Manufacturers Association in Cambodia, which countered with its own monthly minimum wage offer of $144.20. Many Western brands, too, have declined to endorse the unions’ proposal.

In These Times reached out to six of the top U.S. and European brands with contracts in Cambodia—Walmart, Nike, Adidas, Levi Strauss & Co., H&M and Gap Inc.—asking for their position on the unions’ proposed minimum wage hike. None of them endorsed the proposal. Walmart and Nike did not respond; Adidas, Levi’s, H&M and Gap all highlighted their support of ongoing negotiations.

"H&M welcomes a regular and transparent minimum wage setting process for the Cambodian garment industry," said Ulrika Isaksson, a spokeswoman for the company. "We strongly hope that the parties will negotiate in good faith and reach an acceptable agreement for all."

In 2014, H&M was part of a group that sent a letter to a Deputy Prime Minister in Cambodia, saying that workers “have the right to a fair living wage.”

Workers’ rights advocates believe that the U.S. and European brands should take a strong stance today.

“They should back labor unions’ proposed wages and they do have a responsibility,” said Irene Pietropaoli, a Myanmar-based consultant on business and human rights. “They are under no legal obligation to do so, but they clearly are key players in this debate and so have an ethical responsibility to show leadership, to influence the government when they can, to use their ‘leverage,’ to use the wording of the UN Guiding Principles (on Business and Human Rights).”

That landmark document, crafted and endorsed by the UN Human Rights Council in 2011, calls on companies to use their “leverage” to prevent “an adverse human rights impact” from taking place.

From labor’s perspective, that’s precisely what’s at stake. The Asia Floor Wage Alliance, an international alliance of trade unions and labor rights advocates that focuses on the garment industry, has calculated Cambodia’s “living wage” to be $283 a month—far above what local unions are demanding.  

However, economic interests get in the way of such a rate, explained Auret van Heerden, senior advisor with the NYU Stern Center for Business and Human Rights and former president of the Fair Labor Association.

Suppliers are reluctant to hike wages because, for one, there’s no guarantee their buyers will absorb the higher labor costs. What’s more: garment factories typically operate on short-term contracts, lasting just a few months. If a factory owner decided to unilaterally raise pay, he risks losing future business. A buyer might react by sourcing elsewhere in Cambodia—or by simply finding cheaper labor abroad, in say, Bangladesh or Myanmar.

“A lot of the suppliers, privately, are accusing buyers, brands, of being really part of the problem because they’re cutting their prices on the one hand and they’re expecting them to absorb more costs on the other hand,” said van Heerden.

Of course, the brands themselves could simply sign longer-term contracts guaranteeing higher wages—but they don’t. And, at the moment, van Heerden explained, they’re likely reluctant to get involved in the minimum wage debate for fear of upsetting their business and political partners in Cambodia.

“If the brands do weigh in, they’re going to certainly antagonize government and the industry association, and they’re going to antagonize their own suppliers, frankly,” van Heerden says. “So they’re going to step on three sets of toes and not going to get any credit from the unions unless they want to sort of put themselves in bed with the unions, which is not a position they want to be in either. I can understand why they’d want to stay out of it.”

Erik Loomis, history professor at the University of Rhode Island and author of Out of Sight: The Long and Disturbing Story of Corporations Outsourcing Catastrophe, believes the brands could easily swallow a wage hike.

The companies’ latest filings with the U.S. Securities and Exchange Commission paint a general picture of financial health and sizable profits. They also show, in recent years, that some of the retailers haven’t hesitated to pour billions into so-called share repurchasing programs—massive investments in their own stock designed to inflate value and benefit shareholders. Last year, Walmart authorized a $20 billion buyback plan; Nike, for its part, recently completed a four-year $8 billion buyback spree; in February, Gap Inc. rolled out a comparatively modest $1 billion plan.

“Adding $40 a month to the minimum wage is really peanuts for these large companies,” said Loomis. “Let’s step back here. It’s $40 a month, not $40 a day or $40 a week. We are talking about a couple of dollars per worker per day.”

Cole Stangler writes about labor and the environment. His reporting has also appeared in The Nation, VICE, The New Republic and International Business Times. He lives in Paris, France. He can be reached at cole[at]inthesetimes.com. Follow him @colestangler.

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