Comment: Caught in the cost of labour trap
In the ongoing debate running on just-style about labour costs in Bangladesh, David Birnbaum asks why wages in the country remain so low?
I have read with interest Professor Doug Miller's critique of my article 'It's not about the cost of labour', which was published on just-style earlier this month.
Let me say at once that I am in total agreement with Professor Miller's conclusions. I too am appalled by wages in cheap labour countries such as Bangladesh. The data I presented is in fact very conservative. I can assure you, the reality is far worse.
In all fairness, some transnational factory groups with branches in Bangladesh pay wages well above average. In some cases 50% higher. Unfortunately, this only makes average wages of the remaining factories even lower.
The real question facing both Professor Miller and me is this: why do wages in Bangladesh remain so low? It is not an ethical issue. It is a business question. Factories do not pay their workers below-subsistence wages because their owners are mean and nasty, just as transnational branch factories do not pay higher wages because they are virtuous and kindly.
Wages are directly related to skills and the value companies place on those skills.
Some years ago, I worked with a factory that imported guest workers from Bangladesh. Their wages were eight times that of the in-country Bangladesh worker. That factory was considerably more profitable than anything going on in Bangladesh.
Factories in Honduras and El Salvador offer basic commodity garments at some of the most competitive prices in the world. Wages in Honduras and El Salvador are four times higher than those paid in Bangladesh. Those factories seem to do well.
The root of the problem is the relationship between Bangladesh garment factory owners and their workers.
With the exception of a small but important minority, factories value their workers at the same level they value bobbins or needles, what we in the industry term DISPOSABLE STORES. If the needle breaks or the bobbin is lost, the factory replaces the item. In the same respect, if the worker leaves, the factory replaces the worker. There is no shortage of needles, bobbins, or Bangladeshi women living in poverty who can be trained to sew a straight line in a matter of a few weeks.
Most Bangladesh factories produce basic commodity garments. They cannot offer speed to market, high value-added products or special services. They can offer their customers nothing but cheap labour.
If all you can offer your customer is cheap labour, you should not be surprised when your customer negotiates for the cheapest labour price. After all, Bangladesh does not have a monopoly on 0-service factories. In fact, the world is overflowing with 0-service factories who will work just to cover overhead.
You would think that factory owners caught in the commodity garment trap would make an effort to escape.
Herein lies the real problem. To move up, the factory must train its workers.
But where a commodity T-shirt factory can train a worker in 2-3 weeks, a factory providing speed to market or higher value-added goods must invest over a year in worker training. To make this investment, management must raise their perceived level of the worker from that of a needle or a bobbin, to that of at least a buttonhole machine.
I am not suggesting that Bangladeshi managers think of their workers as human beings, but to move up out of the trap they must re-categorise their people from DISPOSABLE STORES to CAPITAL EQUIPMENT.
Please understand I am not being ironic, much less facetious. This is the real garment world.
Countries such as Bangladesh where most factories treat their workers as DISPOSABLE STORES, suffer from a problem known as NOMADIC WORKER SYNDROME.
Since the factory has no commitment to the worker, the worker has no loyalty to the factory. As a result, sewers will work in factory A for six months, then move on to factory B for six months, then to factory C... The result is that most factory owners believe that worker training will benefit only their competitors because the worker will leave the moment training ends.
On the other hand, the transnational factories, particularly those producing higher value-added goods, have a simple solution. They pay their people a premium and treat them with a modicum of courtesy. The premium costs little and the courtesy costs nothing at all.
Bangladesh is home to two separate industries. One pragmatic and rational and contemporary, the other-off-the-wall belonging to the 12th century.
Two see the first two articles in this debate, follow the headline links below:
- 2014: Year in review - Sourcing winners and losers
- COMMENT: The decline of the buying office
- 2014: Year in review - Brand winners and losers
- 2014: Year in review - Retail winners and losers
- Bangladesh: The business benefits of compliance
- Report urges overhaul of Cambodia factory safety
- North Face debuts locally-grown "backyard" hoodie
- Apparel manufacturing leads US reshoring trend
- Triumph recalls 22,000 bras for underwire fault
- Investigation uncovers China's dog leather trade