William E. Todd is U.S. Ambassador to the Kingdom of Cambodia
In this column and in my blog, I have written often about the strong economic development that Cambodia has already witnessed, as well as Cambodia’s vast potential. As Cambodia’s economy continues to grow and develop, the country will face challenges, including disputes between workers and business owners. Media coverage of several recent labor actions prompted a young Cambodian named Sereyvath to ask, “How can these disputes be resolved?”
Of course, we had some good news this week regarding the labor sector, with the announcement that the minimum wage for garment workers will increase from $66 per month (including a $5 per month health benefit) to $80 per month. The agreement was a compromise, with the unions initially asking for $120 per month and the factory owners offering $71 per month. It took weeks of negotiations to get to the final result, and the increase is a positive development for the nearly 400,000 workers in the garment sector, most of whom are young women. Like most compromises, however, the agreement has detractors on both sides, with some indicating that the new wage does not do enough for workers and some factory owners fearing the increase will make their products uncompetitive.
The key to resolving labor disputes effectively is finding a balance between protecting workers’ rights and safety, while at the same time fostering an environment that encourages economic growth and development. Finding an equilibrium between business development and workers’ welfare requires an understanding of the common interests between workers and business owners – as workers thrive, so do businesses, and vice versa.
Understanding that a healthy, skilled, and efficient workforce is critical to a strong economy, the U.S. government strongly supports workers’ rights and improved work conditions in Cambodia. The labor movement in America exemplifies how the protection of workers can lead to a better economy, which in turn benefits society at large. The American labor movement produced higher wages, aid for disabled workers, and safer working conditions. All of these factors resulted in an expansion of the middle class, which is the best engine for developing an economy and reducing poverty. The growth of the American middle class allowed the United States to transition from an agriculture-based economy to an industrial one, and then later become the service-oriented economy it is today. Cambodia can experience similar economic success if it balances pro-business economic policies with policies aimed at assisting workers and allowing them to reach their full God-given potential.
The Cambodian government has been successful in creating a pro-business environment, which includes 100 percent foreign ownership of businesses, exemptions from export taxes, duty free imports of capital goods, and favorable corporate tax policies. These policies are important to economic growth, but it is just as important to have policies that protect labor. When this balance is found, there will be fewer labor disputes, and Cambodia will experience even greater economic growth than before.
The U.S. government took such an approach to improving working conditions and promoting economic development in Cambodia when it helped to create the “Better Factories” project. In the 1990s, the United States and Cambodia entered into a trade agreement that gave Cambodian-produced garments preferential tax treatment in the American market (pro-business) in exchange for improved conditions for garment factory workers (pro-labor). The trade agreement resulted in a large expansion of Cambodia’s garment sector, while ensuring that Cambodian factories provide safe working conditions and comply with local labor laws, which benefits workers and makes Cambodia’s goods more attractive to international markets.
Similarly, setting a Cambodian minimum wage needs to both make business sense and protect and strengthen the workforce. This week’s agreement is a positive development, but a longer-term approach to setting the minimum wage should use scientific principles based on sound economics to answer such fundamental questions as “What wage can the economy sustain?” “What amount of money do workers need to afford food, housing, transportation, and healthcare?” and “What minimum wage will maintain Cambodia’s attractiveness to foreign investment in the region?”
A scientific, quantitative system for determining the minimum wage would help workers by setting a wage based on what it truly costs to live. For example, a minimum wage increase of 30 percent doesn’t go far if there is a 50 percent increase in the cost of living. That is why it is also important that governments protect workers from unfair price gouging for rent or food, especially for workers who migrate to cities from the provinces. Such protections make city jobs more attractive and help ease labor shortages factories often face. The scientific model would also prevent an undue financial burden on employers by assessing what the economy could actually bear. Perhaps most importantly, this approach would provide a fair minimum wage that results in fewer labor disputes, strikes, and work stoppages, which would actually increase corporate revenues.
Although the garment industry garners most of the attention in Cambodia’s labor market, workers’ rights are crucial in all sectors, including the civil sector. In order to have an effective government, teachers, police, and other government employees must receive a fair minimum wage. It is no secret that many civil servants charge “facilitation fees” to provide services required by their jobs. This practice fosters a culture of corruption, hinders transparency in the business world, and hurts the wallets of ordinary citizens. By providing government employees with a fair wage – determined by a scientific, data-based system – they would have enough money to feed their families, and in turn, less motivation to seek “facilitation fees.”
Providing a livable wage is an investment not only in workers’ well being, but also in developing a better educated middle class. As the labor pool becomes more skilled and better educated, the economy is able to attract even higher-paying jobs that further drive economic development. Examples of this can be seen throughout the region, such as in Thailand, Nepal, and Malaysia, which all have higher wages than Cambodia. This wage differential encourages Cambodian workers to migrate to other countries, often resorting to means that leave them open to becoming victims of human trafficking. Therefore, it is in Cambodia’s interest to invest in a livable wage that incentivizes Cambodian workers to stay in Cambodia, but does not “price out” Cambodian products in the region. Ultimately, using a scientific approach to setting a fair minimum wage for all would benefit the entire country and support a growing economy and expanding middle class.
Thank you very much for reading this week’s column. I am very curious to read what you think about my answer to this question, and I look forward to receiving other comments and questions. Please write to me in English or Khmer at AskAMBToddPP@state.gov.
In this column and in my blog, I have written often about the strong economic development that Cambodia has already witnessed, as well as Cambodia’s vast potential. As Cambodia’s economy continues to grow and develop, the country will face challenges, including disputes between workers and business owners. Media coverage of several recent labor actions prompted a young Cambodian named Sereyvath to ask, “How can these disputes be resolved?”
Of course, we had some good news this week regarding the labor sector, with the announcement that the minimum wage for garment workers will increase from $66 per month (including a $5 per month health benefit) to $80 per month. The agreement was a compromise, with the unions initially asking for $120 per month and the factory owners offering $71 per month. It took weeks of negotiations to get to the final result, and the increase is a positive development for the nearly 400,000 workers in the garment sector, most of whom are young women. Like most compromises, however, the agreement has detractors on both sides, with some indicating that the new wage does not do enough for workers and some factory owners fearing the increase will make their products uncompetitive.
The key to resolving labor disputes effectively is finding a balance between protecting workers’ rights and safety, while at the same time fostering an environment that encourages economic growth and development. Finding an equilibrium between business development and workers’ welfare requires an understanding of the common interests between workers and business owners – as workers thrive, so do businesses, and vice versa.
Understanding that a healthy, skilled, and efficient workforce is critical to a strong economy, the U.S. government strongly supports workers’ rights and improved work conditions in Cambodia. The labor movement in America exemplifies how the protection of workers can lead to a better economy, which in turn benefits society at large. The American labor movement produced higher wages, aid for disabled workers, and safer working conditions. All of these factors resulted in an expansion of the middle class, which is the best engine for developing an economy and reducing poverty. The growth of the American middle class allowed the United States to transition from an agriculture-based economy to an industrial one, and then later become the service-oriented economy it is today. Cambodia can experience similar economic success if it balances pro-business economic policies with policies aimed at assisting workers and allowing them to reach their full God-given potential.
The Cambodian government has been successful in creating a pro-business environment, which includes 100 percent foreign ownership of businesses, exemptions from export taxes, duty free imports of capital goods, and favorable corporate tax policies. These policies are important to economic growth, but it is just as important to have policies that protect labor. When this balance is found, there will be fewer labor disputes, and Cambodia will experience even greater economic growth than before.
The U.S. government took such an approach to improving working conditions and promoting economic development in Cambodia when it helped to create the “Better Factories” project. In the 1990s, the United States and Cambodia entered into a trade agreement that gave Cambodian-produced garments preferential tax treatment in the American market (pro-business) in exchange for improved conditions for garment factory workers (pro-labor). The trade agreement resulted in a large expansion of Cambodia’s garment sector, while ensuring that Cambodian factories provide safe working conditions and comply with local labor laws, which benefits workers and makes Cambodia’s goods more attractive to international markets.
Similarly, setting a Cambodian minimum wage needs to both make business sense and protect and strengthen the workforce. This week’s agreement is a positive development, but a longer-term approach to setting the minimum wage should use scientific principles based on sound economics to answer such fundamental questions as “What wage can the economy sustain?” “What amount of money do workers need to afford food, housing, transportation, and healthcare?” and “What minimum wage will maintain Cambodia’s attractiveness to foreign investment in the region?”
A scientific, quantitative system for determining the minimum wage would help workers by setting a wage based on what it truly costs to live. For example, a minimum wage increase of 30 percent doesn’t go far if there is a 50 percent increase in the cost of living. That is why it is also important that governments protect workers from unfair price gouging for rent or food, especially for workers who migrate to cities from the provinces. Such protections make city jobs more attractive and help ease labor shortages factories often face. The scientific model would also prevent an undue financial burden on employers by assessing what the economy could actually bear. Perhaps most importantly, this approach would provide a fair minimum wage that results in fewer labor disputes, strikes, and work stoppages, which would actually increase corporate revenues.
Although the garment industry garners most of the attention in Cambodia’s labor market, workers’ rights are crucial in all sectors, including the civil sector. In order to have an effective government, teachers, police, and other government employees must receive a fair minimum wage. It is no secret that many civil servants charge “facilitation fees” to provide services required by their jobs. This practice fosters a culture of corruption, hinders transparency in the business world, and hurts the wallets of ordinary citizens. By providing government employees with a fair wage – determined by a scientific, data-based system – they would have enough money to feed their families, and in turn, less motivation to seek “facilitation fees.”
Providing a livable wage is an investment not only in workers’ well being, but also in developing a better educated middle class. As the labor pool becomes more skilled and better educated, the economy is able to attract even higher-paying jobs that further drive economic development. Examples of this can be seen throughout the region, such as in Thailand, Nepal, and Malaysia, which all have higher wages than Cambodia. This wage differential encourages Cambodian workers to migrate to other countries, often resorting to means that leave them open to becoming victims of human trafficking. Therefore, it is in Cambodia’s interest to invest in a livable wage that incentivizes Cambodian workers to stay in Cambodia, but does not “price out” Cambodian products in the region. Ultimately, using a scientific approach to setting a fair minimum wage for all would benefit the entire country and support a growing economy and expanding middle class.
Thank you very much for reading this week’s column. I am very curious to read what you think about my answer to this question, and I look forward to receiving other comments and questions. Please write to me in English or Khmer at AskAMBToddPP@state.gov.
2 comments:
Mr Todd hit the Cambodian Government on the right spot :
" facilitation fee " or corruption has prevented labor force from getting a reasonable minimum wage .
A garment factory of 400 workers has to spend the average facilitation fee ( under the table ) about a million dollars a year.
Can Hun Sen raise the minimum wage to as much $150 for blue-collar & $250 for white-collar labors, as his opponents
said they do if they win the election ?
Why don't Khmer workers vote Hun Sen out , for themselves ?
Sok An said in a statement to the public that in 5 years Cambodia wages has increased by 500% percent.
Meaning that Sok An wants us to believe that today wages is $70 per month, but 5 years ago the wages was $7 a month.
As far as CPP can lies and thinks that people are dumb, they will keep lying.
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