Ethiopia Pays Too Little to Clothing-Factory Workers

(Bloomberg) -- Ethiopia should gradually increase base wages for workers in its nascent clothing-making industry and address ethnic unrest in a region housing its flagship industrial park, according to a study by New York University.

The entry-level pay for those producing for retailers including Hennes & Mauritz AB and PVH Corp. at Hawassa Industrial Park is 750 Ethiopian birr ($26) a month, according to the report by the Stern School of Business’ Center for Business and Human Rights. The annual wages are 40 percent below the average Ethiopian per capita income of $783, according to the study.

Monthly rent for a single room within a few kilometers of the park has jumped to as much as 1,500 birr from 500 birr, the study said.

“The main error the government made was to assure Asian suppliers and Western buyers that Ethiopian sewing-machine operators would contentedly accept extremely low base pay,” according to the study released Tuesday.

Ethiopia may not be able to sustain those assurances of a compliant, cheap workforce. Factory owners have been struggling to train sewing-machine operators to work efficiently and employees unhappy with their compensation and living conditions are increasingly willing to protest by stopping work or even quitting, the study found.

Made in Ethiopia

Unrest in Hawassa, which is the capital of Ethiopia’s SNNP Region, has spiraled since Prime Minister Abiy Ahmed assumed office over a year ago. The clashes between ethnic Sidama and Wolayta that began in June “could result in manufacturers rethinking their commitment to the Ethiopia experiment,” according to the study.

Ethiopia forecasts the industrial park will employ tens of thousands of workers in the sector it expects will one day have billions of dollars in sales, according to the report. The park is one of five the government has inaugurated since 2014 and has about 25,000 employees.

In its first year of operation, worker attrition at the park was about 100 percent, which meant that factories on average replaced their entire staff every 12 months.

The retailers and the prime minister’s office didn’t immediately respond to emails seeking comment.

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