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Commentary: Eroding wages in Myanmar add to debate about whether garment brands should 'stay or go'

The low wages in Myanmar’s troubled garment sector are just one indicator of how badly the political upheaval and violence have affected people’s lives, says ISEAS - Yusof Ishak Institute's Jared Bissinger.

Commentary: Eroding wages in Myanmar add to debate about whether garment brands should 'stay or go'

File photo. Since the 2021 coup, working conditions and labour rights protections in Myanmar’s garment sector have eroded significantly. (Photo: AFP/Ye Aung Thu)

SINGAPORE: Since the 2021 coup, working conditions and labour rights protections in Myanmar’s garment sector have eroded significantly, with some calling for multinational companies to divest. The garment industry has resisted these demands, claiming that it provides needed employment.

The European Union - the biggest market for Myanmar garments - argues that supporting livelihoods and decent work in Myanmar is essential. However, with the minimum wage down at least 43 per cent in real terms since 2018, there are growing doubts about whether garment work in Myanmar is still “decent”. This erosion is not only hurting workers, but undermining the industry and raising questions about brands’ purchasing practices.

During the 2010s, Myanmar’s garment sector experienced major growth, bolstered by hundreds of new investments, improved labour rights, and a revitalised trade union movement. Hundreds of thousands of people - mostly women - moved from rural Myanmar to Yangon for garment jobs because of better pay and longer, more consistent employment terms.

Before the COVID-19 pandemic, wages were around 200,000 kyat a month (about US$151 at the time), not including variable pay. While not high, these wages provided decent incomes, allowing about 60 per cent of workers to send money to their families.

Since the coup, however, labour rights violations have increased and wages and working conditions have worsened. Many trade union leaders were forced to flee the country. The International Labour Organization (ILO) found that Myanmar’s far-reaching restrictions on unions were a fundamental violation of its international obligations.

INFLATION CUTS INTO WAGES

The legal minimum wage, as of August 2024, is effectively 6,800 kyat per day. This includes a daily base wage (last updated in 2018) of 4,800 kyat, plus two additional 1,000 kyat daily allowances, announced in 2023 and 2024. If the minimum wage had kept up with inflation since its last adjustment in 2018, it would now be about 12,000 kyat a day.

Real wages have also fallen dramatically. Data from H&M - one of the few brands providing transparent data – shows that wages (including guaranteed pay but excluding variable items like overtime and bonuses) increased from 199,000 kyat a month in 2020 to 248,000 kyat a month at end-2023, an increase of 25 per cent.

Over this same period, the CPI increased an estimated 88 per cent and the cost of a common diet, according to the International Food Policy Research Institute, increased 160 per cent.

The result is that an H&M salary, which in 2020 was more than enough to feed an average family, could no longer do so by end-2023. While some factories increased wages by 20-30 per cent in 2024 in response to post-conscription worker shortages, this has not offset years of declining real wages.

There are several reasons behind the decline in wages. The main culprit is high inflation, driven by the military regime’s money printing and popular distrust of the kyat.

Factories also face an increasingly inefficient and challenging business environment. Electricity supply has deteriorated: Yangon’s industrial zones now average 20 hours of blackouts per day. Almost all factories own a generator, from which they get about 62 per cent of their power - at significant additional cost.

Logistics is more complicated and expensive, with land routes to China and Thailand heavily disrupted due to fighting. Workers have also been leaving more frequently since the conscription law was announced in February 2024.

The depreciation of the kyat has partly offset growing challenges, as factories sell in foreign currency but have the most costs in kyat. Even with a complex forex regime manipulated by the military regime, factories still get more than twice as many kyats per dollar as they did pre-coup.

If factories took the same number of US dollars they paid for wages in 2020 - about US$140 a month, according to H&M, and gave workers the kyat received from exchanging that today, they would get over 400,000 kyat a month. Instead, H&M’s data shows that in US dollar terms, wages were down from US$140 in 2020 to just US$94 a month in 2023.

ILLS OF MYANMAR'S GARMENT SECTOR

Changing purchasing practices from brands also play a role in declining wages. As the operational and reputational risks of sourcing from Myanmar have grown, price has become a more important driver of sourcing decisions. The decline of long-term sourcing relationships has affected factories, forcing them to be more price competitive. Some brands are spending more on in-country compliance teams, further reducing Myanmar’s competitiveness.

Lagging wages bolster unions’ arguments about the ills of Myanmar’s garment sector. Unions have been vital in highlighting deteriorating wages, working conditions and labour rights. However, some of their other arguments, including that the sector is a lifeline for the regime, are more suspect.

A greater share of forex coming into Myanmar for garments ends up going towards workers’ wages than for almost any other export, and the way the regime benefits - through forced conversion - is not the fault of the industry or the workers, both of which suffer from it. Nonetheless, unions shape perceptions about buying garments that are made in Myanmar, raising risks for those brands still sourcing from Myanmar.

Eroding wages add to the debate about whether garment brands in Myanmar should “stay or go”. Numerous brands, such as Inditex, have announced a “responsible exit” from Myanmar. However, it is not clear how such an exit is responsible if everyone leaves. It is also not clear that Myanmar’s workers support this. A survey by Labor Solutions of over 100,000 workers found that their key concerns were job security and the ability to continue supporting their families.

In short, workers want brands to “stay and pay”. The onus is on Myanmar’s garment industry, especially the brands, to work together to ensure workers are paid more. If this does not happen, it not only hurts workers but also undermines the industry’s future and makes brands’ claims about responsible sourcing look empty.

Jared Bissinger is the Research Lead at Catalyst Economics and a Visiting Fellow with the Myanmar Studies Programme at ISEAS – Yusof Ishak Institute. This commentary first appeared on the Institute's blog, Fulcrum.

Source: Others/aj

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