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Delegation Meeting on Minimum Wage Issues in Sri Lanka – January of 2022 A narrative to the Apparel Sector in Sri Lanka

The apparel sector in Sri Lanka contributes 7% to the country’s total GDP. In 2019 it earned a record high of US$ 5.3 billion U.S. from export earnings. The industry represented 46.9% of the country’s total exports (59% of industrial exports) at US$ 9,426 million in 2019. The market constitutes accelerated demands from the EU, US, Canada, The United Arab Emirates, Australia, and Japan. In 2019 exports to the EU grew over 5 percent per year and reached 2.2 billion U.S. dollars while exports to the United States recorded a growth of 3.3 percent year reaching 2.3 billion U.S. dollars. Despite the contractions in global demand for the products and disruptions to the supply chain of raw materials amidst the current COVID – 19 pandemic, the industry continued to yield profits earning US$ 3,434.8 million from exports in January – August 2021 which is a 20.4% increase over that of January

– August 2020, US$ 2,853.1 evidencing the commercial stability and the sustainability of the industry.


With economic liberalization and open markets, Sri Lanka welcomed industrious foreign direct investments since 1977. Immunized by government concessions, incentives, and infrastructure, the apparel sector started to flourish leading up to establishing 14 special zones commonly knowns as Free Trade Zones across the island since its first installation in Katunayake in 1978. Manufactures and exporters can vary from large to small & medium scale depending on the production capacity. Although the majority of the export-oriented clothing factories are SMEs and they are scattered across the country. Within these factories are some of the best-produced garments ranging from sportswear, lingerie, loungewear, bridal wear, workwear, swimwear to children’s wear under world-renowned labels such as Victoria’s Secret, Gap, Liz Claiborne, Next, Jones New York, Nike, Tommy Hilfiger, Pink, Triumph, Ann Taylor, Speedo, Abercrombie & Fitch, Land’s End, Marks & Spencer, etc. The sector provides around 300,000 to 600,000 direct employment in 300 to 360 garment factories around the country. Amongst which 78% is identified as female labor performing routine work such as sewing machine operation. Amidst rural poverty and unemployment, in pursuit of the comfort of their families and children, women living in rural areas migrate to the FTZs catering to the abundance of demand for “light manufacturing labor” in garment factories.

Marching towards a “living wage”

Although the garment industry in Sri Lanka provides an unprecedented number of jobs to women in the rural poverty line of Sri Lanka, contributing to economic growth and positive balance of payments in the country, it has come at a price – and it is the workers who are paying it.

Apparel sector workers in Sri Lanka are paid a basic salary of approximately 120-175US $ (25,000LKR – 35,000LKR) per month including overtime and other incentives which don’t even cover their basic expenses. As sole breadwinners of their families, these workers remit around two-third of their paycheck back to their families in rural villages leaving a bare minimum for their survival in free trade zones, which entails food, accommodation, transportation, and other living costs. Typically, food accounts for over 50% of the monthly income of low- income groups however there is a drastic change in this pattern observed among apparel sector workers due to hidden costs such as boarding and hostel payments, weekly transportation back to their villages, water bills, electricity, and other utility bills, overtime work, deviation from their family and social life.

Currently, the cost of living estimated for a family of four per month in Sri Lanka is around 400US $ (80,000 LKR) which is over twice of apparel sector workers’ monthly income inclusive of incentives and overtime led to finding extra money from illegal trades such as prostitution, working at illegal massage parlors and sending their underage children to work. For some of them obtaining microfinance is the last resort. “Extremely low wages are a cause of forced labor and debt bondage”.The ILO has therefore encouraged national authorities to set minimum wages to prevent the payment of extremely low wages that are insufficient to maintain the workers and their families”(Weissbrodt, David; Anti-Slavery International; 2002). Although the ILO convention has taken such measures to provide minimum wages, currently, the minimum wage of these workers is only 78.58US$ (16,000LKR), which is still not a justifiable, fair wage given that they are working for a multi-billion-dollar industry that directly contributes to a positive trade balance. Further, Sri Lanka’s apparel sector is benefitting from large the European Union’s Generalized System of Preferences (GSP+) concession, However, the benefits are not equitably distributed among these factory level workers who are the backbone of the entire production process, and there are no dialogues identifying constructive mechanisms to ensure the trickle-down of benefits to workers, despite many attempts by Trade Unions and labor NGOs.

According to Asia Floor Wage statistics, “For an average item of clothing only between 0.5-3% of the cost goes to the worker who made it. This means that on an €8 t-shirt, the most a worker will get paid is 24 cents.” Not only does this evidence the exploitation of labor in the sector but also questions whopping profits margins and its equitable distribution. As mentioned above apparel sector in Sri Lanka enjoys a surplus and benefits derived from government subsidies and the European Union’s Generalized System of Preferences (GSP+) scheme hence proportion paid to labor is not only justifiable but also questions many aspects of the industry including corruption inside factories at the expense of labors.

As minimum wages and other statutory measures fail to provide solutions to notoriously low wages in the apparel sector, stakeholders who are concerned about this issue including INGOs, NGOs, and Civil Society Organizations propose a “Living Wage” as a sustainable solution. “A living wage, recognized by the UN as a human right, is a

wage that is sufficient to afford a decent standard of living for a worker and their family. It should be earned in a standard workweek of no more than 48 hours and must include enough to pay for food, water, housing, education, health care, transportation, clothing, and some discretionary earnings, including savings for unexpected events (Labor behind the label). Thus, according to the research conducted by “Labor behind the label” in 2020, the Living wage benchmark (AFW2020 and CCC estimates) vs average minimum wage in Sri Lanka is 13% at a minimum wage of 49.12 US $ (10,000LKR) and calculated “living wage” of 371.32 US $ (75,601LKR).

Impaired wages amidst Covid-19 pandemic.

The Covid-19 pandemic had drastic effects on the apparel sector and its workforce. With the identification of the initial group of patients, the Sri Lanka government instituted a 1-month national lockdown from the end of March to the of end April 2020 to prevent the spread of the virus. Factories were permitted to reopen at the end of April 2020, albeit with limited staff. In October 2020 the second wave of the pandemic emerged from a leading apparel factory in the country causing the virus to spread among more than 15,000 workers across EPZ. Trade unions argued that the emergence of the second wave from the apparel sector was due to poor health practices and the negligence of factory authorities. Along with the spread of the virus in factories lot of workers had to face wage loss in various manners. Many factories have halted paying workers incentives such as overtime and attendance bonus and even the April and December annual bonus. Wages of workers who were under quarantine were also deducted in several factories. Irrespective of the prevailing health situation in the country in 2021, the factories continued their functioning, and workers were compelled to attend to work in some cases without the incentives provided. To maintain the health and safety of the workers, there were guidelines drawn by the health authorities of the government. But some factories neglected in following the provided guidelines. As the Sri Lankan garment industry has been affected by lower orders during the pandemic, in early May 2020, a tripartite task force led by the Ministry of Labour reached an agreement that required employers not to terminate workers’ employment during the pandemic and to pay 50% of workers’ basic wages, or at least LKR 14,500, if workers are furloughed. This agreement was later extended to October 2020 and then factories continued the practice until March 2021. Nevertheless, Sri Lanka’s earnings from textiles and garment exports increased by 28 percent year-on-year to

$2.487 billion during the first six months of 2021, according to the statistics released by the Central Bank of Sri Lanka. This is an indication of workers’ commitment even amidst the pandemic. According to the Clean Cloth Campaign (CCC) ‘Still, underpaid report’ estimated wage gap for Sri Lanka’s garment workers from March 2020 to April 2021 of LKR 61.763 billion (US$313.5 million), which is the combined impact of lost wages during the first lockdown, job losses without due severance, continued furlough arrangements from June to August 2020, and unpaid bonuses in 2020.

Free Trade Zone workers didn’t even receive 24.65 US $ (Rs. 5,000) government Covid subsidy despite meeting the prerequisites, as they were not registered voters in areas of current residence, despite being a resident and working there for a prolonged period.

While economically stable households used this emergency as an opportunity to expand family relationships, working women in free trade zones were in a dilemma. Lower wages in the industry tie workers in a vicious cycle of poverty. In absence of sufficient financial resources to obtain nutritious food, their physical health and quality of life have deteriorated which are directed consequences of low wages.

With oppression at the workplace owing to the fear of losing jobs, pay cuts, huge targets and not having recovery plans to manage their future, family life and personal relationships of the Free Trade Zone workers, who are mostly women, were also negatively affected. With restrained movement and lack of social engagement, intimate partner violence in workers’ households has soared. Many complaints of physical harm and life threats were reported to the local police and hospitals amidst the lockdown flagging a shadow pandemic.

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