Cheap Asian labour: The end?

Cheap labour in factories producing clothes, shoes, toys & food helped Asia grow quickly for decades, but wages are rising so time for next step?

A ceramics factory in Lampang appears nearly empty after its workforce was cut by more than half, from 100 to 45, after the 300-baht daily minimum wage took effect. The factory also claimed that the rising price of LPG put it under financial strain. (Photo: Aswin Wongnorkaew)

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LABOUR

End in sight for 'cheap' Asia labour

29 Apr 2013
DPA

China's affluent cities of Guangzhou and Shenzhen will raise their minimum wages by 19% in the manufacturing heartland of Guangdong province on Wednesday, to coincide with international Labour Day.

Similar hikes in the minimum wage have been seen this year in Southeast Asia, one of China's main rivals in labour-intensive industries such as garments, shoes, toys and processed foods.

Thailand in January introduced a nationwide minimum wage of 300 baht (about 10.30 US dollars) a day, an increase of 65%. Malaysia announced its first-ever mandatory minimum wage of 300 dollars a month, up 50% from previous guidelines.

In the Indonesian capital Jakarta, the minimum wage rose 40% to 226 dollars.

The wage spikes top a decade of gradual pay increases for workers in the region.

According to the International Labour Organisation (ILO), ...monthly average wages adjusted for inflation nearly doubled in Asia during the previous decade.

The ILO calculated that a Filipino factory worker takes home 1.40 dollars an hour, compared to the 23.30 dollars earned by workers in the United States.

"This is certainly not the end of cheap labour, but it might be the end of ridiculously cheap labour," said Malte Luebker, senior regional wage specialist at the ILO's Bangkok office.

China accounts for the lion's share of Asian wage increases. It has been deliberately following a policy to bolster incomes and domestic consumption, while shifting investments from the coastal provinces to the Chinese hinterland.

Foxconn Technology, the main manufacturer of Apple gadgets, was criticised by the Western press in 2010 for alleged labour abuses at its Shenzhen factories. It is now attempting to lower production costs through automation. It has also moved production to cheaper provinces, opening huge new plants in several inland cities in the last three years.

With wages rising even in rural provinces, other labour intensive industries have been shifting production in recent years from China to countries like Bangladesh, Cambodia, Indonesia and Vietnam.

For manufacturers in those countries, rising wages have begun to take a toll on profit margins, especially as European and US importers are driving hard bargains because of recession and high unemployment in their home markets.

"Buyers refuse to pay even a cent more," said Purnomo Narmiadi, head of the Indonesian Employers' Association in the industrial town of Bekasi, a hub for garment and shoe factories where the minimum wage was raised 40% in January.

They say that they can always switch to contract factories in Vietnam.

But if buyers shift to Vietnam, at least this year, they should not expect great bargains.

"All importers have to accept higher prices if they still want to import from us," said Nguyen Quang Vinh, director of the Hanoi College of the Garment Industry.

"Our margin is shrinking because 65% of our profit now goes to pay wages, compared with 50% five years ago," he said.

Whether labour intensive industries such as garments can shift to even cheaper countries is questionable.

"I have heard about the possibility of some companies shifting production to countries that have lower salaries like Laos or Myanmar, but Laos is a small country without enough labour while Myanmar has poor infrastructure," said Pham Thuy Lieu, director of Hanoi Msa-Hapro Co Ltd, a South Korean garment manufacturer in Hanoi.

Bangladesh, still ranked among the cheapest labour markets, is gaining a bad reputation after a series of deadly fires and other accidents at garment factories.

Rising wages are also forcing Asian manufacturers to become more productive to survive.

"Having the minimum wage at 300 baht (10 dollars) a day has helped us maintain our workforce because there is less turnover, so the efficiency of the factory improves," said Ghabyapad Tantipipatpong, spokeswoman of the Thai Food Processors' Association. 

Rising productivity tends offset the costs of higher wages and helps to increase domestic consumption, which is the long-term goal of many Asian governments.

"Wages used to be looked at from the perspective of where can I make things cheapest, but now foreign investors are looking at where do the people have the purchasing power to buy what I want to sell them," said the ILO's Luebker.

(Source: Bangkok Post, LABOUR, End in sight for 'cheap' Asia labour, 29 Apr 2013, DPA, link


Cheap Asian Labour Vocabulary
 
Labour Day - a holiday on May 1st observed around the world, also called "International Worker's Day" or "may Day" (See Wikipedia)

International Labour Organization (ILO) - the United Nations organization that deals with labour issues around the world (See Wikipedia)

end in sight - the end is near
end in sight for cheap Asia labour

affluent - rich, wealthy, has lots of money มั่งคั่ง
affluent cities

wage - an amount of money that you earn for working, usually according to how many hours or days you work each week or month ค่าจ้าง
minimum wage - the lowest legal wage (lowest amount of money that can legally be paid to a worker for their work) 
raise minimum wage

heartland -
manufacturing heartland 
the manufacturing heartland of Guangdong province

coincide with - happen at the same time as
the raising of the minimum wage will coincide with international Labour Day.

China's affluent cities of Guangzhou and Shenzhen will raise their minimum wages by 19% in the manufacturing heartland of Guangdong province on Wednesday, to coincide with international Labour Day.

rivals - competing for or trying to get the same thing; competitors, other companies or countries competing for the same customers and purchases คู่แข่ง opponents; people you are fighting or competing against คู่อริ

China's rival
one of China's main rivals in labour-intensive industries

intensive - involving a lot of effort, energy, or attention
labour-intensive
labour-intensive industries 

garments - clothing
labour-intensive industries such as garments

processed - treated in some way, e.g., treated with chemicals, cut, etc.
processed foods

Similar hikes in the minimum wage have been seen this year in Southeast Asia, one of China's main rivals in labour-intensive industries such as garments, shoes, toys and processed foods.

nationwide - throughout a whole country ทั่วทั้งประเทศ ทั่วประเทศ
a nationwide minimum wage of 300 baht

mandatory - required, must do (not optional) เป็นข้อบังคับ
a mandatory minimum wage
Malaysia announced its first-ever mandatory minimum wage

guidelines - directions and instructions on how to do something;  rules to help guide action แนวทาง นโยบาย
minimum wage guidelines - not required a suggested minimum wage, but not a

Thailand in January introduced a nationwide minimum wage of 300 baht (about 10.30 US dollars) a day, an increase of 65%. Malaysia announced its first-ever mandatory minimum wage of 300 dollars a month, up 50% from previous guidelines.

capital - the city that is the center of government for a country  เมืองหลวง

the Indonesian capital Jakarta
the Thai capital Bangkok
the Philippine capital Manila

In the Indonesian capital Jakarta, the minimum wage rose 40% to 226 dollars

spike - a sudden large increase
wage spikes


gradual - moving slowly
gradual pay increases for workers

decade - a period of ten years ทศวรรษ, ระยะเวลา 10 ปี
a decade of gradual pay increases

The wage spikes top a decade of gradual pay increases for workers in the region.

inflation - the level of prices rising in the economy as a whole ภาวะเงินเฟ้อ
adjusted for inflation
average monthly wages adjusted for inflation

According to the International Labour Organisation (ILO), average monthly wages adjusted for inflation nearly doubled in Asia during the previous decade.

takes home - earns (takes home money that employer pays him or her)
a Filipino factory worker takes home 1.40 dollars an hour

The ILO calculated that a Filipino factory worker takes home 1.40 dollars an hour, compared to the 23.30 dollars earned by workers in the United States.

ridiculous
(adjective) - when something is so impossible or not what you expect that you must laugh, laughable, absurd น่าขัน,  น่าหัวเราะ
ridiculously (adverb)

ridiculously cheap

ridiculously cheap labour

"This is certainly not the end of cheap labour, but it might be the end of ridiculously cheap labour," said Malte Luebker, senior regional wage specialist at the ILO's Bangkok office.

accounts for ... - has ...
the lion's
share of ... - most of ...
China accounts for the lion's share of Asian wage increases.

domestic - within the country ภายในประเทศ
consumption - money spent by households and families on goods and services (See Wikipedia) การบริโภค
domestic consumption

bolster - increase; to make something stronger or more effective ทำให้เข้มแข็ง
bolster incomes and domestic consumption

policy
- a plan of action to guide decisions and achieve outcomes นโยบาย (See Wikipedia)
a policy to bolster incomes and domestic consumption

deliberately - done intentionally; done on purpose จงใจ ตั้งใจ
deliberately following a policy of ... 

coast (noun) - an area near the sea
coastal (adjective)
coastal provinces

hinterland - an area that is far away from the most busy or important areas (important economically with lots of business and wealth)
the Chinese hinterland
shifting investments from the coastal provinces to the Chinese hinterland.

China accounts for the lion's share of Asian wage increases. It has been deliberately following a policy to bolster incomes and domestic consumption, while shifting investments from the coastal provinces to the Chinese hinterland.

Foxconn Technology - the company that Apple hired to make iPhones in China, criticized for harsh labour practices (See Wikipedia)

press - newspapers and magazines, and those parts of television and radio which broadcast news, or reporters and photographers who work for them สื่อมวลชน
the Western press - newspapers and TV from US and Europe

criticise - find things or point out things that are wrong, find fault with
criticised by the Western press

labour abuses - things that a company does to its workers that are not good (bad work conditions, dangers, low pay, long hours, lack of job security, etc) 

alleged - claimed to be true although not yet proven ที่ถูกกล่าวหา
alleged labour abuses at factories

automation - machines and robots doing the work of humans
It is now attempting to lower production costs through automation.

plants - factories

inland - located inside the country (not by the sea, not in the richer coastal areas)
inland cities
It has also moved production to cheaper provinces, opening huge new plants in several inland cities in the last three years.

Foxconn Technology, the main manufacturer of Apple gadgets, was criticised by the Western press in 2010 for alleged labour abuses at its Shenzhen factories. It is now attempting to lower production costs through automation. It has also moved production to cheaper provinces, opening huge new plants in several inland cities in the last three years.

rural - in the countryside (farms, forests), not the city ชนบท
rural provinces

With wages rising even in rural provinces, other labour intensive industries have been shifting production in recent years from China to countries like Bangladesh, Cambodia, Indonesia and Vietnam.

profit - money that you make from selling goods and services after all your costs have been paid กำไร
profit margin - a percentage showing the relationship between the profit a company makes and the money that it obtains from sales, a sign of how efficient the company is; the difference between the cost of buying or producing something and the price that it is sold for, calculated as a percentage of the selling price

toll - normally the number of people killed or injured in an accident or disaster (but in this case, it refers to a business losing money)
take a toll on 
take a toll on profit margins

manufacturers - companies that produce goods in factories
rising wages have begun to take a toll on profit margins
European and US importers are driving hard bargains

recession - a period of reduced economic activity and growth, starts with at least two quarters of negative GDP growth; a period when trade and industry are not successful and there is a lot of unemployment ภาวะเศรษฐกิจถดถอย (See Wikipedia and list of recessions in US)

unemployment - the number of people in a region or country who are available for work and currently seeking work (workforce) but are without work การว่างงาน การตกงาน (See Wikipedia)
high unemployment

For manufacturers in those countries, rising wages have begun to take a toll on profit margins, especially as European and US importers are driving hard bargains because of recession and high unemployment in their home markets.

refuse - to say "no," you won't do something people ask you to do
refuse to pay more

a cent - a penny (100 cents = 1 US dollar)
refuse to pay even a cent more - meaning: will not accept any price increase

garment
- clothes
garment factories

hub - the central or main part of something where there is most activity จุดศูนย์กลาง
a hub for garment and shoe factories

"Buyers refuse to pay even a cent more," said Purnomo Narmiadi, head of the Indonesian Employers' Association in the industrial town of Bekasi, a hub for garment and shoe factories where the minimum wage was raised 40% in January.

contract - a written (or oral) agreement that is legally binding สัญญา
contract factories - factories that are producing goods for another company under a contract (an OEM arrangement)

switch - to change to something new เปลี่ยน
They say that they can always switch to contract factories in Vietnam.

bargains - when you pay a low price for something, cheap things you buy

But if buyers shift to Vietnam, at least this year, they should not expect great bargains.

import - to buy or bring in products from another country นำเข้า

All importers have to accept higher prices if they still want to import from us

shrinking - decreasing, getting smaller over time
our margin is shrinking - our profits are shrinking, our profit margins are shrinking
Our margin is shrinking because 65% of our profit now goes to pay wages, compared with 50% five years ago.

questionable - involving doubts about whether something has been done properly ที่น่าสงสัย

Whether labour intensive industries such as garments can shift to even cheaper countries is questionable.

infrastructure - the high-cost facilities that everyone in the economy shares (water, roads, electricity, trains) สาธารณูปโภค
poor infrastructure
Myanmar has poor infrastructure

series - many things (happening one after another in time)
a series of deadly fires

reputation - to be know or remembered for something good or bad; the opinion people have about how good or bad someone or something is ชื่อเสียง; ความนับหน้าถือตา; ที่มีชื่อเสียง ที่เป็นที่รู้จัก

good reputation
bad reputation 

gain a bad
reputation 
gain a bad reputation after a series of deadly fires

Bangladesh, still ranked among the cheapest labour markets, is gaining a bad reputation after a series of deadly fires and other accidents at garment factories.

productive - produces a lot without spending a lot of resources; doing a lot with little resources (accomplishing much in a little time)
survive - to continue to exist or live รอดพ้น อยู่รอด สืบต่อไปได้  มีชีวิตรอด

Rising wages are also forcing Asian manufacturers to become more productive to survive.

maintain - keep in good condition รักษา
workforce - all the workers in an economy or a company  แรงงาน

the minimum wage at 300 baht helps us maintain our workforce

turnover - the rate at which employees leave a company and are replaced by other people
there is less worker turnover  

efficiency - waste little time, energy and resources in doing a task (minimize time, energy and resources in performing a task) (See glossary) การทำงานอย่างมีประสิทธิภาพ คุ้มค่าเวลาและใช้พลังงานหรือต้นทุนในการผลิตน้อย เพื่อให้ได้ผลผลิตมาก
the efficiency of the factory improves

"Having the minimum wage at 300 baht (10 dollars) a day has helped us maintain our workforce because there is less turnover, so the efficiency of the factory improves," said Ghabyapad Tantipipatpong, spokeswoman of the Thai Food Processors' Association. 

productivity - producing more with the same amount of inputs (labour, energy, etc) การผลิตสินค้า
rising productivity

offset - reduce by moving in the opposite direction
Rising productivity tends offset the costs of higher wages

Rising productivity tends offset the costs of higher wages and helps to increase domestic consumption, which is the long-term goal of many Asian governments.

perspective - a particular way of considering something ทัศนคติ opinion, view on an issue มุมมอง ทัศนะ a way of thinking things (influenced by experience and beliefs)

purchasing power - the ability of a group of people to buy things (determined by income and value of country's exchange rate)

"Wages used to be looked at from the perspective of where can I make things cheapest, but now foreign investors are looking at where do the people have the purchasing power to buy what I want to sell them," said the ILO's Luebker.

About the author

columnist
Writer: Jon Fernquest
Position: Online Writer