Myanmar labour issues from perspective of enterprise

Myanmar labour issues from the perspective of enterprises: Findings from a survey of food processing and garment manufacturing  enterprises.

Over the past decade, Myanmar’s economy expanded rapidly and there is widespread agreement that the country has a huge potential for continued rapid development in the future. At the same time, a key challenge is to ensure that economic growth is inclusive, generating economic opportunities for all segments of the population. One important element of inclusive growth is the creation of decent jobs. To this end, Myanmar’s Government embarked on an ambitious agenda to reform and update the country’s labour-related legislation. These legislative changes and new labour market dynamics may require companies in the private sector to adapt industrial relations systems, labour practices and management, as well as enterprise models in general.

Currently, knowledge on Myanmar’s labour market is quite limited. It is in this context that the Myanmar Center for Economic and Social Development (CESD), with funding from the International Development Research Centre (IDRC), initiated a labour market reform research programme to provide policy-makers and other relevant stakeholders with research-based evidence that can inform the development of policies and measures for a more efficient and equitable labour market, which is conducive to inclusive economic growth. One focal area of this research programme is to look at Myanmar labour issues from the perspective of employers. For this purpose, CESD conducted a survey among a sample of Myanmar private enterprises in the food processing and garment manufacturing sectors to collect quantitative and qualitative information on key labour issues. The two selected sectors not only play dominant roles in Myanmar’s economic and employment structure, but these sectors have also proven important for job creation in other developing countries.

The purpose of this report is to present and discuss the findings from the enterprise survey. The data provide insights into the current human resource management practices and the views and perceptions of employers on issues including labour relations and labour market dynamics. When interpreting the key findings summarized in this report, it is important to keep in mind that they are based on a sample of food processing and garment enterprises and may not necessarily apply equally to other sectors of

Myanmar’s economy.

Employment dynamics, labour turnover and workforce composition

Labour turnover rates in Myanmar are very high. The enterprise survey results indicate that the average labour turnover rate is 57 per cent for garment producers and 39 per cent for food processors. This means that an average factory saw around half of its workforce leave in 2014. This analysis suggests that labour turnover is often worker-initiated. However, the survey does not contain specific data on the causes of the high turnover rate. It may reflect job dissatisfaction, for example due to low wages, poor working conditions, long working hours or other factors. It may also reflect the abundance of job opportunities in other factories. Another possible driver of labour turnover could be the absence of well-functioning grievance mechanisms, underdeveloped industrial relations, or the perceived challenges with resolving disputes jointly between employers and employees. Such high turnover rates create problems for enterprises and disrupt the production process, thereby impacting productivity and reducing incentives to invest in human resource development.

Looking at the gender composition shows that the large majority of workers in garment factories are female, reflecting the importance of the clothing sector in providing formal employment opportunities to Myanmar women. By contrast, most workers in the food processing industry are male. Part-time jobs are not very common. On average, less than 5 per cent of a company’s workforce consists of part-time workers. Foreign employees are rare (1.2 per cent in garment enterprises and 0.2 per cent in food companies).

Education, skills, training and foreign labour

Managers and professionals account for small shares of companies’ total workforces. Managers make up around 2.5 per cent of a typical company’s total workforce while professionals account for about 6 per cent. Looking at the educational achievements of companies’ workforces, the findings indicate that around 60 per cent of employees in both industries have completed secondary or high school. Overall, compared to Myanmar’s population as a whole, the workforces of the enterprises that participated in the enterprise survey appear to be quite well educated. However, when asked to assess the composition of their workforces in terms of skilled versus low skilled production workers, survey participants reported around 60 per cent of their production workers are low skilled. Moreover, they ranked the inadequately educated labour force as the most severe impediment to their operations.

Offering training and skill development programmes is an important means for companies to enhance skill levels, productivity and professionalism of staff. The enterprise survey results indicate that a minority of enterprises reported spending money on employee training (22 per cent of garment producers and 14 per cent of food manufacturers). These percentages appear to be lower than for other countries in the region, such as the Lao People’s Democratic Republic, Viet Nam or China. Moreover, among the small proportion of enterprises that reported investments in workforce training, the average expenditure was very low (at about US$700 per enterprise in 2014). Accordingly, the number of employees who benefit from paid external training is very small (on average only around 3.5 per cent of enterprises’ workforces). Other no-cost training mechanisms, such as job orientation programmes, mentoring and on-the-job training, were not necessarily captured by the data noted above. Yet, more than three quarters of all surveyed enterprises indicated engaging in at least some kind of training for their workers (even if it is not paid). The most common form is in-house training, which almost half of the sample enterprises provide, followed by training offered by government agencies.

Another way that enterprises can try to improve their productivity is to hire foreign experts, thereby sourcing skills that are not available domestically and transferring knowledge and know-how to the local workforce. Overall, 36 per cent of the enterprises in the sample indicated that they have at least one foreign employee. The occupational group most commonly filled with foreign staff is managers and professionals; 24 per cent of enterprises report having at least one foreign manager or professional. Similarly, 23 per cent employ foreign engineers and technicians. The share of garment producers that employs foreign staff is much higher than the share of food manufacturers.

Labour rights and labour relations

Awareness of and compliance with labour rights is far from complete in Myanmar. The fragmented

legal framework, its often poor and arbitrary implementation, and the country’s authoritarian political

history have impacted labour relations, specifically the models and forms of interaction between employers and employees that are practiced in enterprises. Workers’ representation, for example, is still a sensitive issue. Labour unions were long forbidden under law and only recently were allowed. At the same time, labour associations are important for social dialogue. Of surveyed enterprises in the food processing sector, 29 per cent have a workers’ association, compared to 56 per cent of enterprises in the garment sector.

The topic of wages paid to workers has been a notable area of debate in Myanmar in recent years. Demands for wage increases were particularly common in the garment sector where 44 per cent of respondents indicated that their workers asked for higher remuneration during the last three years. By contrast, demands for wage increases affected only 3 per cent of the food processing companies in the sample. Moreover, the frequency of demands for wage increases has been much higher in the garment sector, with some companies reporting three or four requests for higher wages during the last three years. Meanwhile, food processing enterprises have at most been faced with two such demands. The private sector enterprises interviewed have also experienced industrial relations challenges during the last three years, particularly in the garment sector. More than a third of the garment enterprises in the sample have seen their workers going on at least one strike during the last three years, compared with only 2 per cent of the surveyed food manufacturers.

Another important issue is the use of employment contracts and pay slips by enterprises. Both are documents that ensure transparency and accountability in industrial relations. Since September 2015, the Ministry of Labour has required enterprises to use official employment contracts containing

information on wage rates, working hours, days off, benefits and a termination date. However, the use of employment contracts is not yet universal. Among the garment companies participating in the survey, almost all have employment contracts with their workers, while less than half of the food processing enterprises in the sample do. Meanwhile, pay slips are issued by 99 per cent of garment companies but only half of food processing enterprises. Some labour activists have pointed out that pay slips are not always provided in Myanmar language but either partially or entirely in a foreign language that only few, if any, workers can understand. However, the extent to which foreign-language pay slips are used is disputed.

Wages and productivity

Wage levels have been an important labour-relations issue in Myanmar in recent years and the cause of many strikes. Partly in response to these labour disputes, the Government of Myanmar passed the Minimum Wages Act in 2013. A minimum wage rate of 3,600 kyats (MMK) per day came into force on 1 September 2015 (corresponding to a monthly minimum wage of approximately US$91). Many companies, especially in the garment sector which is both labour-intensive and particularly exposed to international competition, protested against this minimum wage rate, claiming it was too high and would harm their competitiveness. Myanmar’s minimum wage rate ranks among the lowest in Asia, as does the country’s GDP per capita.

The survey was conducted before the minimum wage rate was established, meaning that it is not possible to determine the percentage of enterprises compliant with the new Minimum Wages Act. However, the survey results show that 58 per cent of enterprises reported that the average wage they were paying to machine operators and plant workers would have been below the new minimum wage rate, while this share is even higher at 64 per cent for service and sales workers. The percentages are somewhat higher in the food processing sector than in the garment sector. One important caveat is that the average wages refer to take-home wages for workers (including overtime pay and different bonuses and benefits) while the minimum wage refers to the basic wage rate. The data show that low worker remuneration was common before the new minimum wage rate was established, and evidences the magnitude of the change and possibly the difficulties of integrating the new minimum wage rate into companies’ payment systems.

The paper also analyses the typical composition of wages. Interestingly, some companies in the sample do not pay a basic wage; in fact, 16 per cent of them do not (all of them are micro or small food processing enterprises). Apart from that, the majority of enterprises set wages to reflect overtime pay; attendance, skills, seniority and production bonuses; and housing and transportation allowances. On average, the basic wage rate makes up only 52 per cent of a worker’s wage, with the remainder being derived from additional payment items. This structure could imply a certain degree of income insecurity for workers. Overtime payments account for 16 per cent of an average worker’s total wage while attendance bonuses and productivity bonuses account for around 10 per cent and 8 per cent, respectively. Wage structures that rely more heavily on non-wage remuneration are much more prevalent in the apparel sector than in the food processing sector.

Labour productivity is a major factor in determining whether an enterprise is competitive and profitable, and in setting workers’ wages. Calculating labour productivity by dividing a company’s sales value by its number of workers yields an average monthly productivity per employee of MMK547,000 in the food processing industry and MMK155,000 in garment factories. However, these figures are not directly comparable as food processing enterprises provided their sales data based on market prices charged to customers whereas most garment enterprises provided their sales data based on the Cut-Make-Pack (CMP) (or processing) fees that they receive. Thus, while sales figures for food manufacturers also reflect the cost of inputs such as raw materials and intermediate goods, the same is not true for garment enterprises producing under the CMP model where most or even all inputs are typically provided by the buyer.

It is interesting to compare these figures with workers’ remuneration. On average, the garment

enterprises in the sample pay monthly wages of MMK127,720 to their workers while food processors pay MMK103,926. This means that in the garment sector there is only a narrow gap between the measure for monthly labour productivity and monthly average wages. This reflects that most of the sales figures of CMP enterprises actually represent labour costs related to labour-intensive assembly work, but it also suggests that garment enterprises operate on a rather slim profit margin (at least per employee) with possible implications on their room to manoeuver for wage increases (at current productivity levels). Finally, survey findings show that average labour productivity in enterprises with a labour turnover rate below 30 per cent was almost twice as high as in companies with a labour turnover rate above 30 per cent, indicating a correlation between lower labour turnover rates and higher labour productivity.

Working time

Working time is an important element of working conditions, in addition to the treatment by supervisors, non-discrimination, access to facilities (e.g. toilets, drinking water), and workplace safety. In most enterprises (82 per cent), employees work six days a week. Meanwhile, 3 per cent of respondents indicated that in their factories the average working week is five days or less. At the same time, while no garment enterprise reported a seven-day work week, 6.8 per cent of food producers did.

On average, labourers working in the enterprises in the sample get 53 minutes of break time per day. The average working time in the surveyed enterprises is 46 regular hours per week; however, workers in garment companies, on average, work 1.5 hours more a week than their counterparts in food processing enterprises (46.7 versus 45.2 hours). Moreover, workers in garment enterprises, on average, work almost three times more overtime than in food processing enterprises (14.3 versus 5.5 hours a week).

Social security system

Myanmar’s Social Security Board (SSB) under the Ministry of Labour has a long history of providing social services, employment sickness benefits and other compensations related to work injuries. However, over the last three decades the SSB did not perform well in terms of the quality and cost of its health care services. In 2012, the Government initiated a reform of the SSB, expanding its portfolio to include employment benefits and programmes for pension and housing. This reform seems to have taken effect also in the enterprises surveyed, 92 per cent of which indicated that they are registered at the SSB, although the average share of full-time workers who have a social security card is somewhat lower at 78 per cent.

On average, contributions to the SSB made up less than 1 per cent of companies’ total sales value in 2014, yet the contributions are often viewed as burdensome, with 56 per cent of the garment companies and 21 per cent of food manufacturers in the sample indicating that SSB contributions are a burden for them. At the same time, less than half of the survey respondents indicated that the SSB provides full service and benefits to their employees. On the positive, however, 72 per cent of garment enterprises and 53 per cent of food processing companies feel that the quality of SSB services has improved in the past few years.

Suggestions for future policy directions

The results of the analyses point to various areas where further reform seems desirable so that the following suggestions for future policy directions to support increased employment opportunities, improved working conditions, and inclusive economic growth can be derived:

  1. Streamlining and implementation of labour laws. During the last couple of years, a plethora of laws were repealed, amended or newly passed, but less attention has been given to the actual implementation of these laws, rules and regulations. There is a need to reinforce efforts to streamline labour legislation, remove contradictions, improve transparency and clarity, and dedicate sufficient resources to the proper implementation of existing laws, rules and regulation.
  2. Promoting and facilitating or, if necessary, enforcing the use of Reducing labour turnover rates. employment contracts could make employment relations more stable. Policy initiatives could also aim to encourage or support the establishment of grievance systems within enterprises. Any measure that helps to strengthen factory-level dialogue, improve working conditions, or otherwise address concerns of workers and management may also help to reduce labour turnover rates.
  3. Labour productivity in Myanmar is low and enterprises Supporting human capital development. indicate that the scarcity of skilled labour is a big obstacle to success. At the same time, enterprises themselves invest little in human resource development. In this context, government policy can aim at expanding the supply of government-provided training and at supporting private sector initiatives

(e.g. private training centres). The Government should consider offering incentives to companies to increase their demand for skill development programmes and to provide training to their employees.

  1. providing the right Promoting social dialogue and improving industrial relations. This implies legal and institutional framework. Myanmar currently does not have specialized labour courts, for example. Apart from that, the Government can also act as convening authority and provide platforms for dialogue and exchange between employers and workers.
  2. Ensuring compliance with the Minimum Wages Act and other labour laws. The Government has a central role to play in terms of improving compliance with the entire labour law framework which would help to ensure decent working conditions for workers while providing employers with a more predictable operating environment. An important example is promoting compliance with the minimum wage law and, if necessary, enforcing it, not only to ensure that workers earn the minimum income to which they are legally entitled and that allows them certain living standards, but also to maintain conditions of fair competition among market participants.
  3. Promoting the universal implementation of the social security scheme. This will help to increase the number of beneficiaries and ensure no enterprise can gain a competitive advantage from reduced labour costs derived from the non-payment of social security contributions.
  4. currently working abroad. Promoting return migration of (semi-)skilled Myanmar nationals Some of them have developed skills as a result of their work experience in foreign countries that are not available but needed in the local labour market. This is particularly true for technical and managerial skills as well as skills for international transactions (e.g. language and communication).
  5. could embark on an international publicity On a broader level, the Government of Myanmar campaign to associate “Made in Myanmar” products with decent work. The Government should also work to ensure that these claims are factually accurate by promoting safe and decent working conditions in factories.

Copyright © International Labour Organization, Myanmar Center for Economic and Social Development, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, International Development Research Center 2017. First published 2017


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