Sourcing costs climb due to minimum wage upsurge

Many sourcing countries will see minimum wage hikes in 2019. The wage hikes will affect the costs of apparel sourcing. Already apparel manufacturers have started to negotiate for increased price from buyers as wage upsurge has made their production costs higher.

Here’s a look at wage rates that have risen this year or are on track to increase when 2019 hits. 

Table: The chart is showing the minimum monthly wages of workers in different countries. 

Countries

Wage rates to be implemented from 2019 (in US$ )

 

China

200

Vietnam

180

Mexico

211

Honduras

446

Bangladesh

95

Cambodia

182

Myanmar

73

Tunisia

102-120

Lesotho

138

South Africa

271

China

Average minimum wage in China is over US$ 200 a month now. Basic wages in several regions of the country are expected to rise during 2019. 

Vietnam

Vietnam’s National Wage Council has proposed to increase the minimum wage by 5.3 percent in 2019. The proposed hike, which is the lowest compared to previous years, will increase the minimum wage in the four regions by US$7-9 per month. In 2018, the increase was 6.5 percent, while in 2017 the minimum wage was hiked by 7.3 percent.

From this January, monthly minimum wages will increase in Vietnam—depending on the cost of living in each region—between 2.92 million Vietnamese dongs ($125) to 4.18 million dongs ($180). 

Mexico

Sourcing in Mexico will be more costly in 2019. The country’s wage commission recently said that it will raise the minimum wage in Mexico by 16 percent to roughly $5 a day—and the hikes will continue in line with inflation.

It’s a 71 cents per day increase and the largest percentage pay raise Mexico has seen since 1996. The new rate will be 102.68 pesos ($5.12) a day, which works out to roughly $122 a month based on a six-day work week. In regions closest to the United States, the daily rate will be 176.72 pesos ($8.81), which works out to roughly $211 a month.

Honduras

By 2023, the minimum wage in Honduras will have increased by 38.5 percent.

The Honduran Maquila Association (AHM), which represents apparel manufacturers in the country, recently said the minimum wage will increase by 8 percent this year, 7.5 percent for each of the following three years through 2022, and in 2023 the wage will go up by another 8 percent.

According to AHM, the current monthly minimum wage for garment workers in Honduras is $446. 

Bangladesh

Since 2013, the monthly minimum wage rate in Bangladesh has been 5,300 taka ($63), but as per an agreement made in September 2018, the rate was rised to 8,000 taka ($95) in December, 2018.

According to Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the current monthly minimum wage for garment workers in Bangladesh is $95 which is increased by 51 percent. 

Cambodia

Cambodia recently raised the minimum monthly wage for workers in its crucial textiles and footwear industry to $182, an increase of seven percent, with effect from January, 2019.

Cambodia hiked the monthly minimum wage for garment workers by $12 from the current $170. 

Myanmar

As of April 2018, the minimum wage in Myanmar went up 33 percent to 4,800 kyat ($3) a day. The previous minimum wage of K3600 was set in September 2015.

The workers, on the other hand, said that K4800 would not be enough to sustain families amid steadily rising prices for basic commodities. They want the minimum wage to be at least K5600.

With the already-in-place increase, workers in Myanmar are earning roughly $73 a month. 

Tunisia

In October, the Tunisian Federation of Textiles and Clothing (FTTH) and the Tunisian General Labor Union (UGTT), reached an agreement to raise the minimum wages 6.5 percent in 2019. In 2020, the wage rate will go up by another 6.5 percent.

The most recent reports on the country’s monthly minimum wage, the rate ranging 340 Tunisian dinars ($120) per month for a 48-hour workweek and 290 dinars ($102) per month for a 40‑hour workweek. 

Lesotho

In August 2018, the monthly minimum wage in the southern African country increased 62 percent to $138 a month from $85 before the hike. The increased amount came as the result of pushback from workers and unions after the country’s Ministry of Labor had earlier suggested just a 7 percent increase, which unions deemed insufficient to accommodate inflation. 

South Africa

In the same region, wages in South Africa will rise again in 2019.

August saw the Southern African Clothing and Textile Workers’ Union (SACTWU) settle its wage negotiations for the year, agreeing on a 7.75 percent increase that was retroactive to July 1, 2018. In 2019, the rate will increase another 7.5 percent to 20 South African rand ($1.39) an hour, which amounts to a monthly wage rate of 3,900 ($271) based on a 9-hour work day.

 

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