Sourcing Costs Climb: Wage Increases Set to Affect 2018

Print Friendly, PDF & Email
Wages Rising Worldwide Placeholder
Wages Rising Worldwide

Labor rates are rising and sourcing may get pricier.

2017 saw a continuance of workers, unions—and even some companies—pushing for living wage pay, and though many countries didn’t quite make it to that threshold, quite a few key sourcing countries will see wage hikes in 2018.

Here’s a look at what’s risen and what’s rising. Click on each colored country in the map above to find out what the wage hikes will be or what the current wages are in the countries without impending pay increases.

Mauritius

The latest sourcing country to see its wage rates rise is Mauritius, where garment workers will take home 9,000 Mauritian rupees ($264.60) a month starting in January—that’s a 125 percent increase over the 4,000 the average textile sector worker was earning, according to the IndustriALL Global Union. Officially, the minimum wage will be 8,140 Mauritian rupees ($239.32), but various compensation payments from the government should see take-home closer to 9,000 rupees for a 45-hour work week.

Mexico

Mexico is making moves to improve conditions for its low-wage workers, starting with a general minimum wage increase to 88.36 pesos ($4.73) per day, from the current 80.04 pesos ($4.28). The increase—which is above the country’s current inflation rate of around 6.4%—took effect on Dec. 1.

Bangladesh

The Bangladesh Garment Manufacturers and Exporters Association wants to establish more reasonable wage standards for the country’s ready-made garment sector—and any potential shifts could come with a wage hike, too. The BGMEA has asked the government to form a wage board for workers in order to review existing rates, establish a monthly minimum wage, and potentially create a framework for more regular increases. Workers’ wages in Bangladesh haven’t increased from the current 5,300 taka ($63) rate that took effect in 2013. The BGMEA is urging that the current wage be doubled in line with the rise in cost of living since 2013, which would bring the wage rate in the country to 10,600 taka, or $126 a month at current exchange rates.

Cambodia

Sourcing costs in Cambodia are continuing to climb and 2018 will bring with it a higher than expected 11 percent uptick in labor costs, taking monthly pay rates to $170 from $153.

The Cambodian prime minister passed a benefits package in August that includes a wage increase for workers, plus free healthcare and free access to public transport—which manufacturers will have to foot the bill for. Naturally, the increase has factory owners concerned for how they’ll pay what, collectively, may amount to another $10 million a month for worker wages and $3.5 million more a month for health care.

This increase follows a 9.2% jump that took effect at the start of 2017, which followed a 9.4% hike the year before.

Separately, the Cambodian government is working out a draft Law on Minimum Wage, which critics have said could protect the government from pressure to implement further wage hikes, and the proposed incremental rate that will grow gradually could make it more difficult for workers to ever reach a living wage. The International Labour Organization has since called for dialogue on the proposed wage law to clarify certain provisions it agreed could have the effect of restricting freedom of expression and the debate on minimum wages.

India

India appears to be mulling doubling its minimum wage, which local stakeholders say could cripple the sector.

The country’s Union Cabinet approved a new Wage Code Bill in July, which would ensure a national minimum wage by integrating four labor related laws, taking workers’ current monthly wages from 9,000 rupees ($140.59) to 18,000 rupees ($281.19). The staggering potential increase, according to India’s Apparel Export Promotion Council (AEPC), has already impacted the booking of export orders and given foreign buyers pause. The cost of wages in India’s garment sector already hovers around 30 percent of freight on board, which is higher than in other sourcing countries.

“The apparel industry is already passing through a challenging phase due to slowdown of the world economy,” AEPC chairman Ashok G Rajani told The Economic Times. “In the present stressful and challenging times, any additional burden on account of doubling the minimum wages from the present about Rs 9,000 per month to Rs 18,000 will make garment manufacturing unviable and unsustainable in the future.”

Myanmar

Factory workers in Myanmar have been protesting as they seek a 55 percent increase in wages, carrying their daily pay from the current 3,600 kyat ($2.65) to 5,600 kyat ($4.12). That means monthly wages, based on an 8-hour work day, six days a week, would jump from roughly $67 to about $99.

The country’s Minimum Wages Act of 2013 stipulates that the minimum wage must be reviewed within two years of its last change, which in this case was in 2015, so workers are becoming riled up as they feel the government is overdue in reviewing their pay. The National Minimum Wages Committee had promised to come up with a proposed minimum wage by the end of 2017, though workers have already threatened ongoing labor disputes should nothing come of that promise.

El Salvador

El Salvador’s Minimum Wage Council approved the country’s largest ever minimum wage increase last December, and it took effect last January.

In one go, the country raised the minimum wage for apparel sector workers by roughly 29 percent, bringing their monthly wages to $295.20 from $210.90. Minimum wages for the country’s lowest paid workers rose 102 percent.

Manufacturers in the country were given little advance warning about the increase, and some felt the move would hit the country’s competitiveness just as it was gaining more traction as a go-to for sourcing in Central America, but so far buyers’ eyes are still on El Salvador for growth.

Lesotho

Though nothing has been agreed to yet, workers in Lesotho have been demonstrating in demand for higher wages.

Currently, wages in the southern African nation are less than $100 a month, on average, and workers represented by the Independent Democratic Union of Lesotho are seeking a 21 percent boost in their wages from the $106 they’re making each month now, which would take their pay to $128.26.

Workers are also seeking full pay while on maternity leave (90 percent of workers in the country’s textile sector are women), improved health and safety conditions, workers’ rights and better labor dispute resolution. The government in Lesotho hasn’t responded to the workers’ demands, but they’ve said they won’t give up.

Kenya

In May, Kenya increased the minimum wage for its workers by 18 percent.

Workers had been seeking a 22 percent wage boost, but the settled on 18 percent brought their monthly wages to 12,926 Kenyan shillings ($125.31) from 10,955 shillings ($106.20).

Inflation in the country has rose as much as 11 percent in 2017, so the wage increase likely only slightly moved the needle for workers.

Turkey

Turkey’s minimum wage went up nearly 8 percent in last January, taking monthly pay from 1,647 liras ($478) to 1,777.50 liras ($516).

That rate was only effective through Dec. 31, 2017, so another similar hike may be forthcoming, though the country has not yet said as much.

Vietnam

Next year, wages in Vietnam will rise 6.5%.

The new wages, which will take effect from January 2018, will see monthly minimum wages increase from a range of $113 to $165 (depending on the region) reaching to a range of $121 to $175. This increase follows a 7.3% hike that took effect at the start of 2017.

Though it will be the smallest wage hike the country has seen, labor unions are concerned the increase still won’t amount to a living wage for workers and other stakeholders fear the higher labor costs will deter foreign investors who have already shifted their sights slightly from Vietnam in light of the Trans-Pacific Partnership’s collapse at least where the United States is concerned.

Experts have said the move to raise minimum wages may be a risky one on the Vietnamese government’s part and could weigh on the country’s competitiveness while neighboring nations have lower minimum wages, like Laos with $110 a month and an even lower $80 per month in Myanmar.

Taiwan

Last September, Taiwan’s Ministry of Labor announced a minimum wage increase that took effect last January.

Wages for workers went up to 21,008 New Taiwan dollars ($696.90) from 20,008 NT ($663.73), a 5 percent increase. Prior to this hike, Taiwan’s minimum wage went up on July 1, 2015, so another raise could be forthcoming within the year.

This content is for Annual, Monthly and Limited members only. You can read up to five free articles each month with a Limited Level Subscription. Please log in, or register.
Log In Register

Recent News

Uzbekistan Textile Industry Says It’s Well on the Road to Reform

Uzbekisyan is well on its way to eradicating forced and child labor from its cotton supply chain, and with it the stigma that has plagued the sector and causes many U.S. and European brands from buying the raw material.

This content is for Annual, Monthly and Limited members only. You can read up to five free articles each month with a Limited Level Subscription. Please log in, or register.
Log In Register
Read more