H&M and Gap, along with other global fashion retailers, have pledged to increase the prices they pay for clothing manufactured in Bangladesh. This commitment aims to assist factories in balancing the impact of higher wages for workers, as stated by a U.S.-based association representing over 1,000 brands.
Bangladesh, the second-largest global exporter of garments following China, witnessed deadly clashes between police and factory workers this week. In response, the government has mandated a nearly 60% increase in the minimum monthly wage, raising it to 12,500 taka ($113) starting in December. This marks the first wage hike in five years.
The recent wage hike in Bangladesh has been met with concerns from factory owners, who argue that it will impact their profit margins by raising costs by 5-6%. Industry estimates indicate that labor typically constitutes 10-13% of the total manufacturing costs. This development comes ahead of a January general election, adding a political dimension to the economic considerations at play.
Bangladesh’s garment industry, supported by low wages, has become a cornerstone of the economy, employing approximately 4 million people. Ready-made garments contribute significantly to the GDP, making up almost 16% of the total.
Despite the recent minimum wage increase—deemed insufficient by some workers—Bangladesh still trails behind other garment manufacturing hubs in the region. According to data from the International Labour Organization, the average monthly wage in Vietnam is $275, while in Cambodia, it stands at $250.
Stephen Lamar, the chief executive of the American Apparel & Footwear Association (AAFA), affirmed that when it comes to the 5-6% increase in costs, there will be a rise in purchase prices accordingly. In response to whether purchase prices would reflect the rise in costs, Lamar stated, “Absolutely” as reported by Reuters.