Labour Costs To Rise In 2018

Economy

Labour Costs To Rise In 2018

The textile and clothing manufacturing industry and buyers will have to grapple with higher costs of production in 2018. The most hated cost in the industry - labour costs are set to rise this year, in almost all the textile and apparel manufacturing countries, as governments and unions agree on higher minimum wages. Of course, these are still way lower than the living wages. Freight and logistics costs are expected to rise too, as important ports are working at overcapacity, bottlenecks are leading to delays and thus higher charges, warehouses in Europe and USA are short of capacity.

Minimum wages rising in 2018

Various provinces in China, a few months ago, announced higher minimum wages. Average minimum wage in China is over US$ 200 a month now. Basic wages in several Southeast Asian countries are expected to rise during 2018.

In Vietnam's case, the increases would vary according to four major areas, with 6.13% as the minimum figure, valid for major cities like Hanoi and Ho Chi Minh City, and 6.97% the maximum. An average increase of 6.5% in the minimum monthly wage is to be rolled out across Vietnam as of January 1, 2018. With wage bands tiered across the country, this will see employees' monthly pay affected on a sliding scale.

In Region One, which include Hanoi, Ho Chi Minh City and the urban districts of leading cities in Vietnam, workers will get an increase of VND 230,000 (US$10), with the minimum wage raised to VND 3.98 million. Workers in Region Four (the country's least developed areas) will benefit from a VND 180,000 (US$7.9) increase, taking their monthly wage to VND 2.76 million.

In the case of skilled workers, monthly salaries are at least 7% higher than the stipulated minimum wage in the respective regions. The latest increase is the lowest in the last 10 years with 2017 seeing a 7.3% hike in the monthly minimum wage.

In neighboring Cambodia, the minimum monthly wage would rise from US$ 153 (NT$ 4,578) by 11.11% to US$ 170 (NT$ 5,087).

In the Indonesian area of Serang in Western Java, the increase in the local wage would amount to 8.71%.

Myanmar officials announced this month that the daily minimum wage would rise to between 4,000 and 4,800 kyat ($2.92-$3.51) based on region, which would mean a 10-30% increase from the previous 3,600 kyat ($2.63) wage, depending on where workers live.

In a bid for garment worker votes in next year's election, Cambodian Prime Minister Hun Sen announced an 11% increase in minimum wage for garment and footwear workers, stating the government would gift them $5 a month beyond the required minimum salary of $165.

The monthly minimum wage in Laos is set to increase from Kip 900,000 (US$107) to Kip 1,200,000 (US$142).

The announcement was made following a recent meeting between representatives of the country's Ministry of Labour and Social Welfare, the Lao National Chamber of Commerce and Industry, and the Lao Federation of Trade Unions. The proposed increase comes amid concerns of rising living cost in Laos, where the average wage for manufacturing workers is among the lowest in the ASEAN bloc.

In Thailand, salaries are set to rise 5-6% annually in short term, according to Willis Towers Watson, a global advisory firm. The survey projects overall salaries in Thailand to increase by 5.5% in 2018, slightly higher than the actual salary hike of 5.2% in 2017. The survey had more than 4000 respondents in Asia Pacific with 132 firms participating in the Thai market.

The salary rise in Thailand ranks in the middle of the pack regionally. India was the regional leader for 2018 pay rises with a 10% increase, while Sri Lanka was at 8.6% and Indonesia at 8.5%. Pichpajee Saichuae, managing director of Wilis Towers Watson's local unit, said salaries in Thailand reflect the overall economic sentiment, which is now stable, with inflation staying at 1.1%.

In Bangladesh, minimum wages had increased modestly from US$ 65 a month to US$ 70 a month, after retailers and buyers had to face international pressure following the death of thousands of workers in the Rana Plaza factory fire.

Africa, the emerging textile and apparel manufacturing and sourcing hub, is also facing some rise in labour costs. With increasing industrialization, African countries are streamlining their labour policies to some extent. In South Africa, workers' unions are demanding a minimum wage of Rand 10000 a month.

In Egypt, while minimum wages of US$ 100-113 a month may not increase, the government is trying to reduce unionism to some extent. Minimum wages in Ethiopia, Uganda, Kenya remain as low as US$ 60 a month.

Greece, after the economic crisis of 2013, is plagued with the highest unemployment rate of 21% in the eurozone. And the government's aim is to increase the minimum wage to at least Euro 750 a month, as it was before the crisis. Experts agree that this is still a very low wage level.

In Europe, Spain's government has agreed to a 4% salary rise for the country's lowest earners in 2018 and a further increase up to 850 euros a month by 2020, if specific economic growth and employment targets are met. Spanish Prime Minister Mariano Rajoy reached an agreement with trade unions and company representatives last week which will see the country's lowest paid workers receive 28.4 euros more a month in 2018.

By 2019, Spain's minimum wage will theoretically be raised to 773 euros, a 5% increase, and in 2020 it will go up to 850 euros a month, which equates to a 10% rise.

The wage agreement's actual implementation is subject to two conditions. Spain's GDP growth must be of more than 2.5% in the previous year and the average number of people affiliated to the social security system has to increase by 450,000 for minimum wage to be bumped up. Current trends indicate that these targets are realistic.

The Spanish government's end-of-year growth forecast for 2017 is 3.1% and the county's unemployment rate dropped to its lowest level in almost nine years in the third quarter.

But even with an increase in salaries Spain remains in Group 2 of Eurostats's minimum wage pyramid, alongside other countries such as Portugal, Greece, Malta and Slovenia where the lowest legal wages are between 500 and 1000 euros.

Group 3, encompassing countries with the highest minimum wages in EU Member States, include France, Germany, the Netherlands, Belgium, Ireland and Luxembourg, where lowest monthly income is above 1000 euros.

The minimum wage in Portugal is to go up in 2018 to €580 per month, without an across-the-board agreement among all parties involved in negotiations and without compensation for companies. It is the first time this will happen since 2006. The minimum monthly wage is to rise from €557 to €580, and with the government's backing. Workers' unions wanted the minimum wage pushed up to €600 a month.

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%-was effective December 1, 2017.

The Mexican Employers Federation, or Coparmex, had been calling for a higher 95.24 pesos per day to reach what it considers a level of well-being, but fears of stimulating inflation may have tempered the increase.

The federation said the new rate covers just 92.76% of what's needed to meet the welfare line.

And in April 2018, Mexico's wage commission will once again increase wages to at least reach 100% of what's necessary to meet the welfare line. Five years ago, the minimum wage was 60 pesos per day.

According to a study by the Centre for Environment And Sustainability (CES) at the University of Surrey, in terms of the living labour compensation, garment workers on average need to be paid an additional 35% over the living wage to offset the financial demands of income tax and social security.

The study considers not only factory workers, but also everyone else involved in the garment industry supply chain, including agricultural farmers.

And it found that agricultural workers are actually the lowest paid in the garment supply chain. While garment factory workers are paid around half the living wage, agricultural workers get paid even less in almost all the countries.

As per the Asia Floor Wage Alliance (AFWA) - an alliance of trade unions and labour rights activists demanding that garment workers be paid a living wage - the figure for 2015 in terms of Purchasing Power Parity (PPP) is US$ 1021.

In India, this means a monthly minimum living wage of Rs 18,727 - without overtime payment and benefits. The minimum wages differ across the states of India, but all of them remain less than this amount.

Referring to the AFWA living wage, Anannya Bhattacharjee, president of the Garment and Allied Workers Union, said, "On average, in Asia, garment workers get about one-third of the Asia Floor Wage regional figure for the minimum living wage."