Workers in Ethiopia’s clothes factories earn $26 a month, the worst paid in the world. That is according to a recent report by New York University Stern Centre for Business and Human Rights. The report is based on the Hawassa Industrial Park, Ethiopia’s flagship industrial park supported by the government.
WHY ARE ETHIOPIAN FACTORY WORKERS THE WORST PAID?
The main reason for the low wages is the government’s focus on developing the country into a leading manufacturing hub in Africa. It plans to boost its clothing exports to a total of $ 30 billion a year from its current $ 145 million.
The Ethiopian economy faces a growing trade deficit. This means that the value of Ethiopia’s imports is higher than that of its exports. In the fourth quarter of 2018, it recorded a trade deficit of $3.85 billion. Thus, it is important to increase the country’s export income by developing the manufacturing sector (i.e. the manufacturing sector takes raw materials and converts them into finished products).
IS CHEAP LABOUR ACTUALLY HELPFUL?
Cheap labour is a key selling point of Ethiopia. In Kenya, clothes factory workers earn $ 207 a month – almost eight times more than their Ethiopian counterparts. With workers’ willingness to toil for longer hours but lesser pay, Ethiopian factories are able to secure an edge over its competitors from Asia and Africa.
So far, low labour costs haves aided the country in becoming one of the world’s top exporters of garments. It has attracted a slew of international fashion brands to set up factories in Ethiopia’s industrial parks. These include H&M, Tommy Hilfiger and Levi’s.
Whilst cheap labour has proven to be central to the competitiveness of Ethiopia’s manufacturing sector, it may not be sustainable in the long run. A monthly wage of $26 is far from enough to cover a worker’s basic needs like housing, shelter and food. This may dampen workers’ motivations to work productively. The low wage has also discouraged fashion workers from treating their jobs as their long-term careers. According to the Report, the annual attrition rate stands at 100%. This means that no worker stays longer than a year.
A CAUTIONARY TALE FROM BANGLADESH
The story in Bangladesh is a cautionary tale for Ethiopia. With a greater awareness of their rights, Bangladeshi workers have become increasingly assertive in demanding higher pay and better working conditions through protests and strikes.
At the moment, the Ethiopian government does not have to worry about forceful reactions from discontented clothes factory workers. According to the Journal of Labour and Society, trade union movements in Ethiopia are weak in advocating for workers’ well-being. Yet, it is not unlikely that continued neglect of workers’ right may prompt discontented workers to take the same course as their Bangleshi counterparts.
MINIMUM WAGE: A FEASIBLE FIX?
To encourage improvement in workers’ pay, the report proposed implementing an official minimum wage in the private sector (i.e. industries not under direct government control). Yet, the biggest worry is that increases in labour costs may turn away foreign investors. Another potential downside is a rise in the unemployment rate as factory owners may not afford to hire more workers at the minimum wage.
Proponents might suggest it still be worth a try. Increased labour costs can be evened off by more favourable, cost-reducing policies from government such as tax relief and lower rents in the industrial parks.