Garment Factories Downsize in Response to Minimum Wage

By Thu Zar 5 September 2015

RANGOON — At least one factory has shut down, and several others have reduced their workforces and cut allowances, following the government’s adoption of a minimum wage.

Ahead of the introduction of a 3,600 kyats (US$2.80) minimum wage, which took effect on Sept. 1, the Sabel Pwint Garment Factory in Rangoon’s Hlaing Tharyar Industrial Zone closed its doors. It is believed the company provided termination payments to all of its 237 employees.

They submitted an application for closure on Aug. 26,” said an official from the Ministry of Labor, Employment and Social Security, who requested anonymity. “It said it would cease operations on Aug. 31 and compensate all employees according to the law. Employees have so far not filed complaints.”

Before the minimum wage was finalized, following two years of discussions, some garment factories based in Hlaing Tharyar cut their workforces in anticipation of the changes. At least 97 employees of the Shwe Hsan Yi canvas bag factory were made redundant in July, while the Asia Rose garment factory laid off 190 workers.

Garment factory owners lobbied against the 3,600 kyats minimum wage, set by the government after tripartite negotiations with labor unions and employer representatives, but there have been differing views of its potential impact on businesses.

“A 3,600 kyats minimum wage might impact upon outsourcers in the future, but it is unlikely to directly affect garment factories which operate independently and receive orders from buyersdirectly,” said Myat San Win, owner of the UMH garment factory.

Factory owners said they were also dealing with a range of additional costs that were eating into profit margins, including the tripling of electricity bills as a result of generator use during power cuts, higher rents, inadequate port and transport facilities, a short supply of skilled laborers and low workforce retention.

The current Minimum Wage Law also has its critics among labor activists. Aung Lin, chairman of the Burma Trade Union Federation, said that a provision allowing employers to hire employees on a three-month internship and a further three-month probationary period allowed firms to hire and fire as they pleased

“They may take advantage of this provision to sack employees who engage in labor rights activities,” he said. “[But] we’ll monitor the actions of employers and help employees in line with the law.”

Employees have expressed concern that companies will cut other allowances as a consequence of the new minimum wage.

“Some garment factories in the Mingaladon Industrial Zone have stopped providing meal,” said Phyo Zin Kyaw, a garment factory worker. “Some no longer provide ferry services. Some have increased their workload. And some workers have quit of their own volition because of these changes.”

The minimum wage will be applied across all industries in Burma, with exemptions for small and family-owned businesses employing less than 15 people. Overtime is paid at double rates.