Sourcing Costs Climb: Wages That Went up in 2016

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Labor is easily the largest input cost in the sourcing sector, and as workers, unions and some forward-thinking retailers increasingly seek living wages for labor, production costs have increased and margins continue to get squeezed.

This year was less like last, with fewer countries raising their wages after the steep and fairly steady increases seen in the last couple years.

With chasing cheap becoming less and less the sole way to do business, brands and retailers are faced with increasing efficiency and improving productivity to keep costs manageable and business afloat.

Here’s a look at which countries watched wages increase in 2016.

The UK

The Living Wage Foundation raised the rate of pay for workers in the U.K. to ensure they earn what’s actually necessary for life in the country.

In October, the foundation announced that the U.K. living wage rate would increase 2.4% to 8.45 pounds ($10.34) an hour, in keeping with the higher cost of living, and the London rate jumps 3.7% to 9.75 pounds ($11.93) per hour.

This living wage is a voluntary one—companies aren’t required to pay it. And though it’s quite a bit higher than the government-mandated 7.20 pounds ($8.81) per hour for workers over age 25, many companies are opting to pay it.

Cambodia

Continuing the upward labor cost trajectory, Cambodia is set to raise its minimum wage for garment workers again.

Cambodia’s Ministry of Labor and Vocational Training said in a September statement that it would raise the minimum wage for clothing and footwear workers in the country to $153 a month starting at the beginning of next year, the Associated Press reported.

The 9.2% increase follows last year’s 9.4% jump that saw wages go from $128 to the current $140, though it falls short of the $171 workers were looking for in 2017.

Vietnam

Vietnamese workers will see a 7.3% increase to the minimum wage starting in 2017, Thanhnien News reported.

The increase amounts to 180,000-250,000 Vietnamese dong ($8-$11) more a month depending on the region. The current average monthly wage ranges from 2.4 million to 3.5 million dong ($108-$157), which, according to local labor unions, still only covers 80 percent of workers’ basic needs.

India – Tamil Nadu

Thousands of garment workers in Tamil Nadu got some good news in July.

The Madras High Court, which is the highest court in the Indian state of Tamil Nadu, ordered that garment worker monthly wages be raised from $67 to $97. The 30 percent increase, with immediate effect, is the first minimum wage hike in more than 12 years.

“It is a huge victory in a long drawn (out) battle to get workers their due,” Sujata Mody of Penn Thozhilalargal Sangam, a women’s workers’ union, said. “Workers have been living in impoverished conditions with inflation and prices on the up.”

South Africa

South African cotton textile workers have scored another pay raise victory.

As many as 4,630 workers from 70 woven cotton textile factories across the country saw their pay increase 8.25% backdated to July 1, 2016, a rate that’s higher than the current rate of inflation (which hovered around 6 percent this year).

Negotiations were fairly quiet and quick to be resolved in contrast to last year when members of the Southern African Clothing and Textile Workers’ Union (SACTWU) went on strike for three weeks demanding better pay. The strike helped secure workers an 8.5% pay increase in 2015.


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