By Chea Sophal*
15 August 2011
Photo: Sophal/2011
Figure 1: Garment workers are having lunch at a factory eating area.
They spend 1,000 to 2,000 Riels each for buying their lunch and they share with a few of their friends.
Cambodia garment industry has evolved from nowhere in the mid 1990s to become the country’s most important manufacturing sector. The growth of this sector has been driven by more settled political and social conditions in Cambodian society and the 1999 Cambodia-US trade agreement on the quota regime which expired at the end of 2004. Exports grew from nothing in 1994 to almost 3 billion in 2007. Roughly two-thirds of sales are to the United States, and most of the remainder to the European Union.[1]
There are nearly 300 garment factories and the industry employs more than 300,000 employees directly (MoC, 2009). Thousands more jobs have been created on the sidelines of the industry such as in food sales and other services to the factory workers, and in sub-contracted piece work and supply of packaging materials. Nearly all-85 to 90 per cent – of garment factory workers are young women aged 18 to 25 years old.[2]
Figure 2: Garments and Textile products exported (in million dollars)
Source: Ministry of Commerce, 2010
Cambodian Labour Law, which was promulgated in March 1997, allowed Ministry in charge of Labour to set the minimum wage by a Prakas (ministerial order) upon the recommendations provided by the Labour Advisory Committee (LAC)[3]. The minimum wage is subjected to be adjusted from time to time in accordance with the evolution of economic conditions and the cost of living (Labour Law, Art.107). The adopted Labour Law does not set the minimum wage; it only states that the wage must be at least equal to the guaranteed minimum wage; that is, it must ensure every worker of a decent standard of living compatible with human dignity. The term “minimum wage” refers to the wage level that employers may not undercut, which is guaranteed by law. The term “minimum income” and “living wage” are used interchangeably with minimum wage, however, these concepts are quite different. Minimum income is the income level that a citizen and their family need to live and participate in a society, regardless of their employment. Living wage is a wage that covers the basic needs of workers and their family, plus allowing for saving for future purposes (Kang & Liv, 2009, p. 5). The government has not so far set minimum wage for any other sectors rather than the garment, textile, and footwear industry.
28 days before promulgating the Cambodian Labour Law, on March 3, 1997, the Ministry of Social Action and Veteran Affairs[4] issued Notice No.06/97 providing the minimum wage framework. Apprentices are entitled to $30 U.S. dollars per month, while workers during probationary period are provided with $40 USD. The Notice stated that workers who completed the probation shall become a sewer and are eligible to the minimum wage of 40 dollars per month.[5] It seems that this regulation does not encourage workers to continue to stay to work since the same amount of money for both probationary workers and those who are promoted as a sewer. The set-up of minimum wage for the garment and shoe work is way higher than the government civil servants. The average wage of a civil servant is equivalent of $28 USD per month.[6]
Over three years and three months later, new notice was issued. The 22-June-2000 Notice No.15/00 indicated that MoSALVY informed all Federations of Trade Unions, Associations of Employers and Employers of all garment textile and shoe factories in Cambodia that LAC held a discussion meeting on minimum wage for garment and shoe workers. Both employers and trade unions could not reach the agreement in the meeting since each party has its own convincing arguments. In order to solve the difficulties at that time, the Association of Employers proposed solutions as follows:
· Keep the minimum wage of $40 USD per month for some further times;
· Give a bonus of at least $5 USD per month to workers who come to work regularly[7];
· Increase wage of 5% of based salary for workers whose seniority is 2 years, of 6% of based salary for workers whose seniority is more than 4 years, of 7% of based salary for workers whose seniority is more than 6 years etc.
The proposed solutions were not accepted by all union representatives who are the members of the LAC. The President of the Free Trade Union of Workers of the Kingdom of Cambodia (FTUWKC), Mr. Chea Vichea, did not agree with the above offer from the employers and he demanded the increase of workers’ salary $60 per month. The other union federations who were also the members of LAC did not agree on their friends’ demand. The LAC then decided to delay the wage negotiations in the LAC forum until all trade unions’ representatives agreed among themselves and ready for the another wage discussion again (Notice No.15/00, 2000).
26 days later, on 18 July 2000, LAC convinced the follow-up meeting with the stakeholders to determine the minimum wage for garment and shoe workers. Both employers’ associations and trade union organizations came to an agreement on the wage of $40 for probationary workers, $45 for regular workers, $5 for attendance bonus, 1,000 Riels for voluntary overtime work or a free meal allowance, and a seniority bonus (of $2 for first year, $3 for second year, $4 for third year, and $5 for the fifth year).
The industrial peace took place for almost 6 years and a half from 18 July 2000 to 23 October 2006 when the stakeholders opened the new debate on the minimum wage negotiations. The general trend was that the 1999 Cambodia-US Trade Agreement, which helped prosper the Cambodian Garment Industry, ended by the end of 2004 and the public was so worried about the possible collapse of this vital industry. However, with the confidence and trust building between the international buyers and Cambodian garment suppliers, the industry continued to survive as of today with fierce competition from China, Vietnam, India, and Bangladesh. The new wage negotiation among the stakeholders was held on 19 October 2006 under the supervision of LAC. The results from the discussion includes as follows:
- The minimum wage for garment, textile workers and shoe making workers is set at US$45.00 per month for probationary period of 01 month to 03 months. At the end of probationary period, a full-right worker receives the minimum wage of US$ 50 per month;
- Those whose wage based on piece of product produced (pieceworkers) shall receive wages based on the actual result of work performed. If the output of work allows the worker to receive more than the amount mentioned in (1) above, the worker shall receive that amount. However, if the amount is less, the employer shall provide an additional amount to reach US$45.00 per month for probationary workers and USD 50 for regular workers; and
- Benefits workers used to receive from Notification No. 017/00 dated 18 July 2000 on points 3, 4, 5 an 6 shall be retained.
This settlement did not last long like the previous one due to the high inflation rate[8], new demand came in. By May 2008, it was only one year and half from 23 October 2008, MoLVT issued Notice 032/08 requiring employers to pay a $6 per month cost of living allowance to workers in the textile, garment and footwear industries. This is the allowance for workers to cope with the increase of food prices and inflation. Inflation of the consumers’ price for twelve months went up to the highest rate at 25.7% in May 2008, an increase to the double compared to late 2008, before it declined to 18.1% in October 2008 (Mirror, 2008). Article 107 of Labour Code points a few elements to be taken into consideration for determining the minimum wage such as the needs of workers and their families in relations to the general level of salary in the country, the cost of living, social security allowances, and the comparative standard of living of other social groups; and economic factors, including the requirements of economic development, productivity, and the advantages of achieving and maintaining a high level of employment. The industrial relations faced very tough situation seeing 105 strikes in 2008 with the 304,396 days lost.
Figure 3: Number of Days Lost Due to Strikes
Source: GMAC
The 2011 Employment Terms and Conditions Report-Asia Pacific indicated the regional comparisons of minimum wage. See the table below. By comparison, Cambodia is still competitive in labour cost to Vietnam, Indonesia, Thailand and Vietnam while minimum in Bangladesh and India is still lower at $43 and $56 respectively.
Country | USD per month[9] (equivalent) | Provisions in Law |
Bangladesh | 43-132 | Minimum wage has not been stipulated except for garment workers and industries located in Export Processing Zones |
Cambodia | 61 | USD61 per month but minimum wage which may vary by region based on economic conditions. USD56 for probationary employees. |
India | 56 | Minimum wages for certain scheduled occupations are set by state governments and vary according to the nature of work. |
Indonesia | 145 | Minimum wages are set by Ministry of Manpower according to the nature and location of business. USD145 is the minimum wage in Jakarta. |
Lao PDR | 71 | Companies to pay a monthly salary of hot less than LAK569,000 per month. |
Thailand | 177 | THB215 per day depending on the area. THB 215 per day is the minimum wage in Bangkak. |
Vietnam | 74 | Minimum wage for unskilled labour employed in foreign-invested enterprises in Hanoi and Ho Chi Minh City. VND 1,550,000 per month. |
8 July 2010 was the latest series of wage negotiation between the employers’ association and trade union organizations under the LAC meeting. The trade union federations displayed different demands at the table for the pay increase from $70 to $93 reasoning of high food price and the wage is not enough for a living. The employer’s association agreed to offer $4 increase to the existing minimum wage and later supported the government suggestion to a $5 raise. Mr. Ath Thorn, President of Coalition of Cambodian Apparel Workers Democratic Union and Ms. Morm Nhim, President of National Independent Federation Textile Union of Cambodia, disagreed with the suggested increase of $5 while five other trade union organizations rallied behind the government proposal (ILO BFC, 2010). In its concluding remarks of its meeting, LAC decided to bundle the previously separated and universally paid $6 monthly cost of living allowance into the definition of minimum wage. Now the minimum wage is of $61 per month for regular workers, $56 per month for probationary workers.
On the average, the historical debate about minimum wage took place every two years and a half from 1997 to 2010, the shortest period between the negotiations lasted 26 days from just on 22 June 2000 to 18 July 2000. All minimum wage debates in the industrial practices were held in the form of discussion between stakeholders, Government representatives, employers’ associations and trade union organizations under the supervision of LAC. Below table is the summary table of minimum wage resulted from the discussion. It is widely noticed over a decade there has not been any change for the apprentice’s minimum wage. This may show that this category of workers is not crucially important with the view that under an apprenticeship, an employer gives professional training to apprentices who are newly recruited and unskilled. Prakas 004/00 provides that apprentices work no more than 6 hours per day and 5 days per week while the normal regular workers work 8 hours per days and 6 days per week.
Type of Employee | Notice No.06/97 Monthly Minimum Wage (in USD) | Notice No.017/00 Monthly Minimum Wage (in USD) | Notice No.745/06 Monthly Minimum Wage(in USD) | LAC Statement (8 July 2010) Monthly Minimum Wage (in USD) |
Apprentices | $30 | $30 | $30 | $30 |
During probation | $40 | $40 | $45 | $56 |
Regular employees | $45 | $45 | $50 | $61 |
With this consolidated table, it is obviously that the evolution of minimum wage debate for the wage increase changed a lot but the wage increase for the past 13 years from 1997 to 2010 is just $1.23 USD on the per year average starting from $40 in 1997 to $56 in 2010 for probationary workers and the same increase for regular workers from $45 to $61. The increase for both types of workers consists of only $16 USD for the past 13 years. According to CIDS survey and calculations, the living wage of garment workers should range from at least US$90 per month to US$ 120 per month (CIDS, 2009). The study reasoned that the current effective wage in the garment industry of $79USD per month, which includes overtime and other allowances, is not a living wage. If the overtime is excluded, the average effective wage is $67USD per month. The overtime has played a very important role in enabling workers to cover their basic expenses and maintain a minimum living standard.
It is very hard for the Government especially the MoLVT to carefully balance the interests of garment , textile, and footwear investment and at the same time to satisfy workers’ demand for pay rise. It is also involving in maintaining and creating job/employment for Cambodians. That is why the trends of minimum wage increase through the historical reflection from 1997 shows very little increase of just $1.23USD per year over the course of 13 years from 1997 to 2010.
* Chea Sophal is taking the Doctoral Degree of Law (LLD) at Pannasastra University of Cambodia in Phnom Penh. He can be reached at: sophallex@gmail.com
References
MoSALVA (1997): Notice No.06/97, Ministry of Social Affairs, Labour Vocational Training and Veteran’s Affairs, Phnom Penh. Cambodia.
MoSALVY (2000): Notice No.015/00, Ministry of Social Affairs, Labour Vocational Training, and Youth Rehabilitation. Phnom Penh. Cambodia.
MoSALVY (2000): Notice No.017/00, Ministry of Social Affairs, Labour Vocational Training, and Youth Rehabilitation. Phnom Penh. Cambodia.
MoLVT (2006): Notice No.745/06, Ministry of Labour and Vocational Training. Phnom Penh. Cambodia
MoLVT (2008): Notice 032/08, Ministry of Labour and Vocational Training. Phnom Penh. Cambodia
ILO BFC (2010): Media Update, Wage Increase. Phnom Penh. Better Factories Cambodia.
Kang, C. & Liv, D. (2009). Study on Minimum Wage for Cambodia’s Garment Industry. Phnom Penh: Cambodia Institute for Development Study
IMF ( ): IMF Country Report, No. 03/59, International Monetary Fund, Washington.D.C.
ILO (2008): Guide to the Cambodian Labour Law for Garment Industry. ILO Better Factories Cambodia. Phnom Penh. Cambodia.
CIDS (2009): Living Wage Survey for Cambodia’s Garment Industry. The Cambodia Institute for Development Study. Phnom Penh. Cambodia
The Phnom Penh Post Article (2008): Officials are keeping mum about the real inflation rate, but market surveys show rice prices have doubled and fuel, other costs are biting into earning. Written by HOR HAB AND CHOW KA YIU Wednesday, 13 August 2008. Phnom Penh. Cambodia. <http://www.phnompenhpost.com/index.php/2008081321178/Business/Consumer-pricesrising-by-30pc-or-more-experts.html >
The Mirror (2008): The Mirror of the Cambodian Economy in 2009. Vol. 12, No. 591. Phnom Penh. Cambodia <http://cambodiamirror.wordpress.com/2008/12/18/the‐mirror‐of‐thecambodian‐
economy‐in‐2009‐tuesday‐16‐december‐2008/>
[1] Asian Development Bank, Cambodia’s Garment Industry: Meeting the challenges of the post-quota environment, October 2004, p. iv
[2] Ibid, p. iii
[3] The Committee consists of Government officials (Ministry in charge of Labour), representatives from other relevant ministries, trade unions’ representatives and the employers’ association representatives. Its mission aims at studying problems related to labour, the employment of workers, wages, vocational training, the mobility of labour force in the country, migrations, the improvement of the material and moral conditions of workers and the matter of labour health and safety. The other duties include formulating recommendations on the guaranteed minimum age, rendering advices on regulations concerning the conditions of employment.
[4] The Ministry later became Ministry of Social Affairs, Labour, Vocational Training, and Youth Rehabilitation and in 2005 the Ministry wad divided into two 1).Ministries namely Ministry of Social Affairs, Veteran and Youth Rehabilitation (MoSALVY) and 2). Ministry of Labour and Vocational Training.
[5] The Notice was made as a result of Ministerial discussion with the garment producer association on January 17, 1997 to determine the working conditions of workers of the garment factories in Phnom Penh City. There is no minimum wage set specifically for apprentices in the garment industry outside Phnom Penh.
[6] IMF Country Report No. 03/59, op. cit., p. 27.
[7] This bonus of $5 is currently classified as ‘attendance bonus’ for regular attendance at work. There are many implications behind the application of this such as the deduction of it when the worker falls sick or come later or even the worker is on annual leave or special leave. The Arbitration Council (Awards 04/03, 26/03, 03/04, 62/04, and 63/04) found that when employees take sick leave approved by an authorised and legally recognized medical practitioner, the attendance bonus must be paid in proportion to the days worker.
[8] Inflation has been especially harmful to wage earners in the garment industry, which employs more than 300,000 workers. Prices have generally risen faster for goods priced in riel than for goods priced in dollars. Petrol prices were up 42.5 percent; fish 48 percent; beef 41 percent; pork 40.6 percent and chicken 57 percent in July 2008 compared to the same time last year, according to the EIC data (Phnom Penh Post, 2008)
[9] Minimum wage per month in USD is assumed at 8 hours per day, 25 days per month and 4.2 weeks per month, it is served as an indicative number.
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