September 1 was a dark day for some 200 employees turning up to work at their garment factory in Hlaing Tharyar Industrial Zone. Instead of earning their first day of the newly implemented K3600 minimum wage, they learned their factory had shut and they were all suddenly out of work amidst an industry-wide gutting of staff.
More than 1000 factory workers have lost their job in the wake of the new minimum wage, according to the Ministry of Labour. Just one factory has so far closed however.
U Maung Maung Hlaing, head of the Labour Laws Inspection Department in Hlaing Tharyar township, said the Jasmine Pwint factory shuttered on August 31, the day before the national minimum wage took effect. The factory has not provided an official reason for closing. U Maung Maung Hlaing said repeated requests for information from the factory’s owners have gone unanswered.
A total of K200 million of compensation was divvied between the 237 former workers, but job prospects are in short supply as the garment sector undergoes an industry-wide purge to accommodate the new salary floor.
“We are trying the best we can to quickly create more jobs for those [laid off] workers,” said U Aung Htey Win, deputy director general of the labour ministry.
It’s a stark departure from the burgeoning textile industry’s growth throughout the previous year, when a new factory opened every week according to the Myanmar Garment Manufacturers Association’s count. But the entry-level wages at those factories were on average 4.5 times less than the new minimum, which is still among the lowest daily salaries in the region.
“Some factories paid as little as K450 a day. The payment system relied on overtime and bonuses based on the quantity of garments produced,” said Ko Wai Phyo Maung, leader of the Labour Union Network.
While factories are precipitously shedding their workforce, they claim it’s only tangentially related to the minimum wage implementation. It has to do with a recent decline in orders, the factory bosses claim, or a lack of productivity.
Factory employers ardently resisted the K3600 wage. Discussions concerning a minimum began years ago, and the Minimum Wage Act was approved in 2013. In July, 200 representatives from the 145 garment factories unanimously voted against the minimum. Citing productivity concerns and unusually high national overtime rates, the factory bosses suggested K2500 or even K1500 would make a more reasonable starting point.
But trade groups and big brand-name retailers like GAP and H&M threw their weight behind the minimum wage, and suggested stabilising the strikes and pickets would do more to attract foreign investment than a wage hike could possibly detract from it.
But the largely Chinese and South Korean-owned industry is already making good on threats that thousands of jobs would be at stake if the government arm-twisted them into accepting the K3600 wage.
“We cannot continue operating the garment business with these runaway costs. Therefore, we have had to lay off the workers and give compensation,” said Ma Myat San Win, director of the UMH garment factory at Shwe Pyi Thar Industrial Zone where more than 400 labourers have been dismissed.
She added that the layoffs were attributable to a lack of orders, as Myanmar’s factories must import everything, including the fabric, the designs and any accessories.
“Local factories which cannot become self-sufficient will surely be closed down by the minimum wage,” she said.
U Aung Lin, chair of the Myanmar Trade Unions Federation, said factories were facing difficulties because of their mismanagement, rather than because of a reasonable and rather low daily minimum.
“The garment factory owners do not have good market planning and the government has not limited overcrowding in the industry,” he said. “By comparison, the new minimum wage does not even cover the real living expenses of the workers. Therefore, if the condition was not changed, the labour dispute and unrest would be continuing.”
According to global trade unions, the firings and factory closure in the wake of the minimum wage are less the spectre of coming instability than normal road bumps along a well-travelled route to fairer labour practices.
“This is normal fluctuation,” said Petra Brannmark, a spokesperson for IndustriALL Global Union, adding that the “lack of managerial competence to make garment factories sustainable” is to blame in many cases.
And in neighbouring countries that have experienced the same wage-hike growing pains, the hiccups have hardly crippled the industry.
“In Cambodia, minimum wages were raised in two phases by 60 percent over 13 months to US$128 as of January 1, 2015. Despite these considerable increases, the ILO reports that Cambodian garment exports grew by 9.3 pc in 2014, and expanded further by 10.6 pc in the first quarter of 2015,” she said.
While the forecast may be bright the factories, the workers say they have gone from cramped spaces,10:55:05 and dangerous conditions to now being unemployed and unable to feed their families.
“I can’t afford to complain because most of the laid-off workers did not receive compensation,” said Ko Chit The Aung, a laid-off worker from the Shwe Swan Yee Penan factory in Hlaing Tharyar, referring to the firing of workers with less than six months’ experience who can now be dismissed without compensation.
“But the little money I received as compensation is gone now. My family has eight members and we are facing a crisis because of the minimum wage,” he said.
Additional reporting by Laignee Barron. Translation by Khin San May