The Financial Times on Asia's Wage/Price Spiral

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From the Financial Times:

Bangladeshi garment workers, who make clothes for western brands such as H&M, Gap and Marks & Spencer, greeted a recent 80 per cent pay rise by rampaging angrily through the capital Dhaka burning cars and looting shops.
For the world’s lowest- paid garment workers, the increase in the minimum wage, effective from November, takes their pay from $23 to $43 (€33, £27.50) a month. It was their first pay rise for four years, a period of soaring food and fuel prices. However, the workers were enraged that Dhaka had not agreed to the $75 a month they had demanded.

“This is not enough for the survival of workers and their families,” said Amirul Haque Amin, president of Bangladesh’s National Garment Workers’ Federation, which has about 23,000 members. “Living costs – including food, clothes, shelter and medical care – are going higher and higher.”
Bangladeshi authorities have since arrested three prominent labour rights activists and charged them with inciting unrest, which they deny.

Bangladesh lifts pay for garment workers – Jul-29Riot police end Bangladesh labour strife – Jun-23But the anger among the country’s workers is a wake-up call for global retailers expecting to escape rising labour costs and strikes in China by shifting more production to other Asian manufacturing centres.
While starting from a cheaper base than China, Asian industrial hubs such as Bangladesh, Vietnam, Cambodia and Indonesia are also facing mounting labour unrest and intense upward pressure on wages as prices for food and other essentials rise.
“I don’t see very many low-cost countries in the region where there is not pressure for higher wages,” says Ifty Islam, managing partner of Bangladesh-based Asian Tiger Capital Partners. “The ability of employers to pay very low wages is diminishing.”
Demands for better pay across Asia reflect improving job opportunities in economies that are growing faster than their western markets.
“A lot of growth and dynamism is happening in Asia and that is putting upward pressure on wages,” says Mr Islam.
In Cambodia, Phnom Penh recently raised the minimum wage by 21 per cent – from $50 a month to $61. That was below what the more activist of Cambodia’s 273 unions demanded, although a three-day, industry-wide strike did not materialise.

Vietnam recorded 200 strikes last year by workers hit by inflation of 9 per cent. In April, for example, nearly 10,000 workers walked out of a Taiwan-owned shoe factory, demanding better pay.
In Indonesia – where powerful trade unions with millions of members play a crucial role in negotiating with employers – minimum wages, set by regional authorities, have been increasing.
In 2008, Jakarta raised the local minimum wage by 10 per cent to nearly $100 a month, although wages in the country’s remoter regions are half that.
Yet Indonesia has also recorded a spate of strikes at textile factories, including a one-day stoppage last month in Bandung, where 40,000 workers from various companies walked out in protest against rising electricity prices.
“Prices are skyrocketing, and many of our members are breadwinners and have kids to be sent to school,” says Mochammad Papon, head of the union representing garment workers, mostly women, from 14 textile factories in West Java, which is planning to strike for higher wages next week.
In India, too, Nokia, the Finnish mobile phone maker, Bosch, the German car parts manufacturer, South Korea’s Hyundai, Volvo and countless local companies have all faced rising industrial unrest .
But nowhere is workers’ rage as palpable as in Bangladesh, where even Sheikh Hasina Wajed, the prime minister, called the current minimum wage “not only insufficient, but inhuman”.

Local food prices have risen about 31 per cent since the last minimum wage increase in 2006 – before which workers went for 12 years without any adjustment at all. Nazma Akter, president of the Sommilito Garment Workers’ Association, says workers are “earning money to try to survive. But they hardly survive. Their daily needs  . . . are very expensive.”
Factory owners call the new minimum wage generous in the current global market, but Korshed Alam, a Dhaka-based labour rights activist, says workers’ purchasing power has eroded sharply since the 1990s. “Their anger is quite justified,” he says.

However, Dhaka is sensitive to the interests of garment factory owners, of whom 29 sit in the 300-seat parliament, while many other lawmakers have stakes in garment factories. Critics say those interests leave Dhaka unwilling genuinely to engage with labour groups.

“There are no industrial relations,” says Mr Alam. “The whole attitude is arrogant and feudal. Owners and government think they are helping the workers. The workers are not treated like workers – they are treated like beggars.”

Read the original story at Israel’s Financial Expert