Cambodia on Tuesday raised the minimum monthly wage for workers in its key textiles and footwear industry by $2 to $194, effective January next year, shy of a $12 rise sought by major unions.
Factory wages have long been a tricky balancing act for Cambodia's government, to keep costs competitive for investors and brands while satisfying influential unions representing 700,000 workers, which have held strikes in previous years.
Worth $7 billion a year before the pandemic, the garment industry is Cambodia's largest employer and provides vital income for rural families, in making apparel for brands that include H&M, Adidas, Nike and Gap .
The new wage announced by the labor ministry would be a struggle to live on, said Pav Sina, president of the Collective Union Movement of Workers.
"I request all relevant stakeholders, the employers and the government, to consider the possibilities of adding more to the workers' wage," Pav Sina told reporters.
However, Kaing Monika, Deputy Secretary-General at the Garment Manufacturers Association of Cambodia (GMAC), said the raise could be problematic with operating costs also expected to rise.
"Even a $2 increase would have a negative impact," Kaing Monika told Reuters.
Kaing Monika said employers would spend more on pension and healthcare contributions and workplace measures to counter COVID-19, including up to $4 monthly per head on tests.
As of April, garments and textiles were no longer Cambodia's dominant export product, with agricultural goods and other new products on the rise, such as luggage, which is free of duties in the United States, according to the World Bank.
Cambodia's exports of travel goods to the U.S. market were worth $3.5 billion in 2020, up 3.6% from 2019.
That compared to $2.6 billion to the European Union, a 35% contraction, in part due to a partial withdrawal of preferential EU tariffs over human rights and political concerns.