Struggle for Wages and Working Conditions: A Study on Governance and Social Upgrading in the Cambodian Garment Industry

Nikolaj Garby-Dreyer

Student thesis: Master thesis

Abstract

Since Cambodia re-emerged in the global economy, the garment industry has been a cornerstone ofthe economy and a main driver for GDP growth. When the Multi-Fibre Arrangement (MFA) endedin 2005, Cambodia shamed fears that the country would suffer from global competition, andremains an important global garment exporter today. The Cambodian garment industry haspromoted an image as an ‘ethical sourcing option’, most importantly by the presence of ILO’sBetter Factories Cambodia. However, in December 2013–January 2014 large general strikesfollowing minimum wage negotiations brought the industry to a standstill. The government’sviolent response had fatal consequences, and it was only when international brands intervened onbehalf of the workers that the conflict was resolved, and the minimum wage saw a considerableincrease.The struggle for wages and better working conditions are inherent to the global fast-fashiongarment production, which workers are among the most exploited in the world. In response to this,the fast-fashion brand H&M launched its Roadmap to Fair Living Wage in 2013, with theproclaimed goal to ensure a fair living wage for workers in their global production network.The purpose of this study is to understand the development of working conditions and wages in theCambodian garment industry. The study is threefold: Firstly, it investigates how the industrydeveloped since 2005; secondly, it explains this development; and thirdly, it looks at howstakeholders perceive H&M’s efforts to promote social upgrading. This is done through aqualitative case study in which interviews with stakeholders were conducted in Hong Kong, PhnomPenh, and over Skype, and through a visit to a factory, where H&M is implementing and testingtheir Roadmap. Furthermore, a framework for analysis of the dynamics between actors in exportindustries of developing countries is developed, which allows for vertical and horizontal analyses ofwhich governance forms are prevalent in Cambodian garment industry; what paths for socialupgrading can be identified; and to what extent there exists a social contract between the industry’sactors.The study finds that although the garment industry has grown in both size and scope, no economicupgrading has taken place, and social upgrading has only has happened to a limited extent. Also,several examples of social downgrading were found, especially concerning health and safety issuesand work security. Wages in the period saw a decrease in real terms until the 2014, where theminimum wage was increased considerably. It can be concluded that the Cambodian garment industry is characterised by private governanceled by international brands. The brands govern the Cambodian based garment suppliers throughcaptive value chains, and hold a powerful bargaining position over the Cambodian government.Horizontally, private governance is also prevalent, with the local garment association GMACexercising power over the government and the garment workers. Although some brands areengaged in CSR- and multi-stakeholder initiatives, the path for social upgrading that best describesthe Cambodian garment industry is the market-driven path, in which supply and demand forethically sourced products defines the pace with which developments in working conditions andwages occur.The study furthermore identifies a social contract between the industry’s actors on how theindustry is governed and how social upgrading happen. Conversely, the strikes and demonstrationsthat translated to the considerable increase in the minimum wage in 2014 can be described as abreach with this social contract. This happened by labour unions destabilising the industry, therebyforcing the private and public actors to make real change. But such instability, although the onlypolicy tool left for social actors, creates risk for both international brands and the industry’ssuppliers. This risk also applies for the Cambodian government and the garment workersthemselves. Therefore it seems like a shift toward a social contract on the CSR- or multistakeholderpath for social upgrading is paramount for the industry in the future – and in thecurrent political climate, only the international brands can realistically make this shift possible.Finally, H&M is generally considered to be the most responsible and responsive brand byCambodian stakeholders, but many social actors stress that H&M could and should do more, andwill reap benefits if they do so. The Roadmap, which is relatively unknown, is therefore considereda noble goal, and stakeholders await its further implementation with reserved anticipation.

EducationsMSc in Business, Language and Culture, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2015
Number of pages91
SupervisorsPeter Lund-Thomsen