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According to a U.S.-based association that represents more than 1,000 brands, international fashion retailers like H&M (HMb.ST) and Gap (GPS.N) are dedicated to increasing purchasing prices for apparel made in Bangladesh to help manufacturers there offset higher worker pay, as reported by Reuters.
After China, Bangladesh is the world's largest exporter of clothing. The government ordered this week, following fatal protests between police and factory workers, an almost 60% hike in the minimum monthly pay to 12,500 taka ($113) starting in December—the first increase in five years.
Ahead of a general election in January, factory owners had warned that the wage increase would reduce their profit margins by five to six percent. Based on industry estimates, labor expenditures make up 10–13% of total production expenses.
Stephen Lamar, CEO of the American Apparel & Footwear Association (AAFA), told Reuters that they would "absolutely" hike purchase prices by the 5-6% that costs are expected to climb.
"As we and our members have reiterated several times now, we are committed to responsible purchasing practices to support the wage increases," Lamar wrote in a message to members.
"We also renew our pleas for the adoption of an annual minimum wage review mechanism so that Bangladeshi workers are not disadvantaged by changing macroeconomic conditions."
Bangladesh's garment industry, which employs roughly 4 million people, has grown thanks in part to low pay. With about 16% of GDP going toward them, ready-made clothing is a vital component of the economy.
According to data from the International Labour Organization, Bangladesh still lags behind other regional centers of garment manufacturing, like Vietnam, where the average monthly wage is $275 ($1 = 110.0000 taka), and Cambodia, where it is $250, even after the increase in the minimum wage, which some workers felt was too little.
AFA members Abercrombie & Fitch (ANF.N) and Lululemon (LULU.O) informed Bangladeshi Prime Minister Sheikh Hasina last month that companies requested salary increases that took into consideration the country's 9% inflation rate. In July, Lamar also wrote to Hasina.
The primary consumers of clothing created in Bangladesh are retailers located in the United States and Europe. Fashion brands, like the majority of merchants of consumer goods, are facing challenges from large inventories and a weakening global economy, which is causing consumers in important areas to cut back on their purchases.
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