In early 2020, the Covid-19 pandemic threw the global fashion industry into turmoil, as supply chain disruptions, store closures and lockdowns brought production to a standstill. With their profits under threat, fashion brands took swift action to cut costs. For garment workers across Cambodia, the consequences were catastrophic as mass suspensions and layoffs pushed workers further into financial precarity. But this was only the beginning of the story.
More than three years on, with the fashion industry well on its way to recovery, the situation for Cambodian garment workers remains dire. Through interviews with 308 garment workers employed at factories producing for brands such as Nike, Adidas, New Balance, Gap, Levi Strauss, and Puma, this study provides evidence of the daily reality for workers across Cambodia’s garment industry in today’s ‘post-pandemic’ Climate.
What emerges is an alarming indictment of a global fashion industry that puts profit above the rights of garment workers in factories across Cambodia. While most of the brands covered by this research have returned to profitability, workers’ financial precarity is worse than ever. At least a quarter of surveyed workers reported a decrease in monthly pay since 2020, even before accounting for drastic cuts in overtime work. Simultaneously, the cost of living has soared across Cambodia, trapping workers in a vicious cycle of poverty, insecurity and debt that spirals further with every paycheque that fails to cover their basic needs.
Despite decades of promises to pay garment workers a living wage and uphold human rights across global supply chains, this research shows the impacts of brands using the same old tricks to cut costs and protect profits. More than three years after the pandemic emerged, brands continue to cite volatile economic conditions when pulling orders, fuelling competition at the bottom of global supply chains, with workers’ wages impacted the most.[i] In turn, factory owners are increasingly cutting costs wherever possible by limiting the overtime that workers rely on, increasing production targets, and continuing mass layoffs and suspensions when all else fails.
In the immediate aftermath of Covid-19, there was momentum towards rebuilding more equitably. This research shows that instead of recovering from the crisis together, the global fashion industry has once again pushed the costs onto the garment workers who make their clothes. With the situation for Cambodian garment workers going from bad to worse, their calls for reform of the global fashion industry could not be more urgent.
Key research findings
- Decreased monthly wages: At least 25 percent of surveyed workers report a decrease in monthly take-home pay since 2020, excluding overtime. Despite a legal minimum wage increase of US$10 between 2020 and 2023, the majority of surveyed workers are earning less now than they were in 2020, before the Covid-19 crisis hit.
- Systemic dependence on overtime pay: Overtime pay decreased by more than 60 percent for surveyed workers from 2020 to 2023. Workers have gone from earning, on average, an additional US$36 before the pandemic hit, to an average US$12 per month in 2023. In a country where garment workers were already overly reliant on overtime to supplement their minimum wage, they have had to cope by cutting back on daily food intake and educational expenses for their children.
- Soaring Debt: 91 percent of surveyed workers report to holding at least one current loan, with 70 percent pointing to the pandemic as a direct link to increased debt. Amidst the growing cost of living crisis, workers are increasingly turning to informal loans that carry interest rates as high as 20 percent, with some workers reporting alarming new trends such as borrowing from factory supervisors directly.
Key recommendations to apparel and footwear brands:
- Publish and maintain a complete list of supplier factories they source from across all tiers of their supply chain, including subcontracted suppliers
- Immediately resolve wage theft and severance disputes in supply chains so tha garment workers receive full wages, severance payments and other legal entitlements as a matter of urgency.
- Publicly commit to developing policies and procedures to pay all workers in their supply chains a living wage, and release a detailed plan outlining the timeframe and steps that will be taken to ensure all the factories they work with are paying workers a living wage.
- Publish and enforce a responsible purchasing practices policy that is aligned with brands obligations under the UN Guiding Principles on Business and Human Rights and the OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector.
- Brands’ purchasing practices should provide factory suppliers with order stability and adequate time for planning and implementation of orders. Payments should be timely, and the costing model used by companies should enable the payment of living wages and benefits, the provision of social protection and the implementation of worker safety protections.
Key recommendations to the Royal Government of Cambodia:
- Increase the minimum wage to ensure that base salaries across the garment industry are sufficient to cover basic needs such as food, housing and utilities.
- Consider developing guidelines under the Labour Law that address factory practices of reducing working hours below the 48 hour standard working week.
- The Ministry of Labour and Vocational Training reinforce their implementation mechanisms, such as workplace inspections, to ensure factories are not using production targets to pay workers below the minimum wage.
- The National Bank of Cambodia should consider reviewing and regulating interest rates for micro-finance institutions, banks, and informal lenders to align with international standards.
- Consider implementing a policy of rent controlled housing for garment workers to address price gouging practices.
Key recommendations to governments in Australia, the European Union and the United States
- The EU and its Member States should finalise and implement ambitious legislation on corporate sustainability due diligence. Such legislation should include requirements that, in the context of their due diligence duty, companies shall adapt their business and purchasing practices and ensure workers in their value chains are paid a living wage.
- The EU should work on dedicated legislation to ban the use of Unfair Trading Practices in the textile and clothing sector. Practices such as prices below the cost of production, late payment or late order cancellation should be outlawed.
- The EU and US should maintain the lapse in preferential trade agreements with Cambodia, until concrete and sustainable improvements to human rights and labour rights in the country are made.
- Australia and the US should consider looking to the EU for guidance in creating their own legislation to ensure supply chain oversight. Both countries should adopt legislation that mandates that companies operating overseas undertake gender-responsive human rights due diligence. This legislation should establish an accessible redress mechanism that is independent, well-resourced, accountable, and transparent, which has powers to investigate, and provides effective, enforceable remedies.
- Australia should align its trade agreements with international human rights and gender equality obligations. Binding labour rights provisions should be included in all agreements, and provisions that undermine workers’ rights, directly or indirectly in Australia or in partner countries, should be excluded. Trade agreements should include redress mechanisms that enable workers to access compensation in response to cases of human rights violations.
Video: Women garment workers in Cambodia speak out about their reality, calling for urgent industry reform. CENTRAL, together with CATU, C.CAWDU and CATU have documented their stories and working conditions in a new report to provide evidence of international brands’ such as Adidas, Nike, Levi’s and Puma’s wage theft and to amplify workers’ calls for decent pay.