In the past two months, factories have been ransacked and clashes have erupted sporadically on the streets of Dhaka, the Bangladeshi capital, as tens of thousands of restive garment workers expressed anger over wages they complain are too meagre to ensure even basic survival.
Clashes spread more virulently even as a government oversight board announced late last month a rise in wages from about 1,660 taka (Dh85.95) for the lowest-paid to 3,000 taka a month, a decision that will be enforced from November. The proposed increase fell well short of the workers' demand of 5,000 taka a month. Workers had initially demanded 6,200 taka. Bangladesh's garment industry is the country's biggest employer after agriculture. According to the International Trade Union Confederation, Bangladesh's 3.5 million garment workers, most of them women, are the "world's most poorly paid workers".
Many work 12 to 14 hour shifts, six days a week, often in hazardous conditions. The 5,000 taka they are demanding is less than half the monthly wage of workers in China, the world's largest producer of garments. In recent years, Bangladesh has emerged as an attractive manufacturing centre for top multinational clothing retailers such as Tesco, Gap, H&M, Walmart and Marks & Spencer because of its low-cost labour, believed to be the world's cheapest, against more expensive manufacturing centres such as China and India.
Garment exports from Bangladesh - mainly to the US and EU nations - surged to US$12 billion (Dh44.07bn) last year from $5bn eight years earlier, accounting for 80 per cent of the country's total exports, according to the government's export promotions bureau. But observers complain of unfair trade policies as international fashion buyers mint profits by selling cheap products from developing countries at superior prices in western high streets, in the process exploiting the workers who make the garments.
"The problem Bangladesh faces is that giant multinational retailers will not pay for a wage increase," said Khondker Mosharraf Hossain, the country's minister of labour. "Every year the multinationals slash the prices they are willing to pay per unit, which drives down wages." And Sheikh Hasina Wajed, Bangladesh's prime minister, recently told the parliament: "It is not possible for the workers to live on the wages they get now." Compensation in the garment industry was "not only insufficient but also inhuman", she said.
Bangladesh is not the only developing country in which workers are complaining. Late last month, 3,000 female Cambodian factory workers took to the streets of Phnom Penh to protest against their wages of $1.60 per day. In a report released last month, the UK charity ActionAid accuses Asda, a British supermarket chain, of paying Bangladeshi workers only a quarter of the amount they need to afford a decent living.
According to ActionAid's calculations, if Asda pays workers only an additional 2 pence on every £4 (Dh22.90) T-shirt it buys from developing countries such as Bangladesh, it will in effect double workers' wages and pull them out of poverty. Responding to the charge, Asda says it is "really disappointed" by the report as it "doesn't do justice to all the hard work we've been doing behind the scenes. We're a little surprised to say the least that they've chosen to single us out for criticism".
The American Federation of Labour and Congress of Industrial Organisations also weighed in. "Bangladesh's garment workers are among the hardest working women in the world, and the most exploited," the union said this month. "The garment workers and their families are crowded into primitive one-room hovels, forced to live from hand to mouth, barely subsisting on rice and lentils. Dozens of families share one primitive hand water pump where they queue up to bathe, scrub their clothes and wash their dishes. "
Living wages in Bangladesh have not been raised since 2006, even though annual inflation rates have soared to between 6.5 and 10 per cent. "Do you see how much rent is? How much food costs? How can ? workers live on this tiny amount?" said Mosherafa Mishu, the head of the Garment Workers Unity Forum. If their demands were not met, "we will create a militant movement, we will be on the streets again", he warned.
Faruque Hassan, the acting president of the Bangladesh Garment Manufacturers and Export Association, said: "Our competitors, for example Cambodia, Vietnam, they are paying very similar wages to us, very similar amounts per hour." But Bangladesh's factory owners staunchly oppose the demand to raise the wage to 5,000 taka per month, arguing that low labour costs are offset by other expenses such as the rising cost of raw materials and power.
"Isn't it unconscionable that CEOs are able to take home millions while workers in underdeveloped countries earn mere cents per hour?" wrote Art Carden, an assistant professor of economics and business at Tennessee's Rhodes College, in a research paper in 2008. "Is it sad? Yes. Is it unconscionable? No. ? Firms that sacrifice profits in order to pay higher wages will reduce their ability to earn profits, attract capital, and expand in the future. In the short run, we can improve standards of living for some people. In the long run, this illusory prosperity comes at the cost of increasing future poverty."
But many observers contend that the extra wages can be borne by international buyers without significantly harming profitability. "The extent of the impact [of a wage hike] on the owners would depend on how much more companies like Walmart and H&M are willing to pay to offset the rise in cost of production," Zahid Hussain, a senior economist at the World Bank's south Asia finance and poverty group, wrote in a World Bank blog this month.
Labour costs typically make up between only 1 and 3 per cent of the total cost of producing garments in the developing world, Mr Hussain wrote. A large increase in wages, therefore, should not require correspondingly large increases in retail prices."For example, for a typical sportswear garment, doubling wages would increase retail price by roughly 1 to 3 per cent; tripling wages would result in price increases of 2 to 6 per cent," he wrote.
But some observers argue that factories in Bangladesh - which relies heavily on international orders - will have to keep costs lower than in rival Asian manufacturing centres. Foreign companies are slowly moving away from China for precisely the same reason, observers say. Wages in China increased by 17 per cent in the first half of this year, according to a survey released last month by the Hong Kong Trade Development Council. Credit Suisse says these higher wages will cost companies about $15 trillion by 2015. Some companies are expected to offset higher labour costs by using fewer workers.
"We are trying to increase automation and ensure our processes will rely on fewer workers," Shereen Tong, the chief financial officer of Hong Kong's VTech Holdings, a maker of cordless phones, told Bloomberg. "For products that need to be manufactured in high volumes, automation will help improve efficiency." @Email:business@thenational.ae
