Analysis: Ethiopia’s industrialization comes at a cost as workers left struggling with alarmingly low wages

By Zelalem Takele @ZelalemTak11163

Addis Abeba – In the last two decades, Ethiopia has undergone a remarkable economic transformation, with a focus on industrialization to drive growth. Through strategic plans and policies, the country has made significant progress in its manufacturing sector, boosting its economy. However, amidst this impressive journey, Ethiopia now faces a pressing question: has this transformative growth and industrialization left behind the very workers who have fueled it?

This concern came to the forefront when the Ethiopian Confederation of Trade Unions (CETU) recently attempted to organize a May Day rally, only for the government to cancel it. Yet this cancellation only scratches the surface of a deeper economic conundrum that Ethiopia grapples with.

The country’s industrial parks, such as Hawassa, Adama, and Bole-Lemi, have been hailed as catalysts for economic transformation and job creation. The 12 industrial parks have successfully attracted both domestic and foreign investments, promising employment opportunities and economic growth. However, beneath the façade of progress lies an unsettling reality faced by workers within these industrial parks: alarmingly low wages that perpetuate poverty and social inequalities.

The story of Tadele Birru (name changed upon request) serves as a testament to this fact. Despite holding a degree in industrial engineering and three years of experience, Tadele earns a monthly gross salary of 3,000 birr at Century Garments PLC, one of the textile companies in Hawassa Industrial Park. Even with his wife’s additional income of 2,000 birr per month, their combined earnings fall short of meeting their family’s needs. With two children, including one already attending school, their monthly expenses, which include rent and education costs, leave little room for groceries, transportation, and medical bills.

“We often find our expenses surpassing our income,” Tadele laments.

One of the shining examples of Ethiopia’s industrialization success lies in the textile and garment industry, where thousands of workers like Tadele are employed. The government’s efforts in establishing industrial parks, such as the Hawassa Industrial Park, have propelled Ethiopia to become one of Africa’s largest textile and garment exporters. A recent report by the National Bank of Ethiopia (NBE) indicates that the sector generated exports worth $175.6 million in 2022 alone, providing a significant boost to the country’s foreign exchange earnings. But workers like Tadele are not the major beneficiaries of this success.

Just like Tadele, another worker interviewed by Addis Standard from Transsion Manufacturing PLC, a company operating at Addis Ababa ICT Park, not only highlights the inadequate wages but also the physical toll taken by the work. “The job requires prolonged periods of standing, resulting in back pain that many cannot bear. Combined with the low salaries, this has led to a high attrition rate,” he revealed.

The worker also sheds light on the wage system at his workplace, explaining its division into a ‘basic salary’ and a ‘performance salary’. He reveals that his base wage is a mere 2,040 birr, while the performance-based portion is left to the discretion of supervisors. “If they have no output to show, our earnings are essentially compromised. Even during periods of high production, the compensation is minimal, forcing us to toil relentlessly for the performance salary,” he lamented.

Despite the optimistic narrative surrounding Ethiopia’s industrial parks, the experiences of workers like Tadele tell a different story. Workers toil for long hours under strenuous conditions, often facing inadequate safety measures and limited room for growth. But the most serious challenge for industrial workers is the woefully low wages, which are barely enough to provide workers with a dignified standard of living, let alone support their families. According to the latest report by the Ethiopian Statistical Service, over half a million people are employed as plant and machine operators and assemblers.

Kasahun Follo, President of the Ethiopian Confederation of Trade Unions (CETU), has profound concern about the rising cost of living and its impact on Ethiopian workers. “We have witnessed the economy soar, but wages for workers have remained stagnant, leaving them to grapple with escalating living costs. The COVID-19 crisis has only worsened these existing hardships,” he stated.

Due to high inflation and the rising cost of living, many workers rely on overtime work just to make ends meet, stretching their already exhausting working hours. Consequently, they sacrifice their health, time with their families, and personal well-being to break free from the shackles of poverty. These workers find themselves trapped in a never-ending cycle of low pay and unfulfilled aspirations, facing limited opportunities to improve their economic conditions.

Kasahun insists that although remuneration for our workers has always been insufficient to maintain a basic standard of living, the issues extend beyond economics and delve into the realm of worker organization. The President highlighted the repercussions faced by those who attempt to unite workers, describing the series of obstacles they encounter. “Leaders of such groups often face dismissal or, failing that, may be banned from their roles, denied benefits, or reassigned to other positions,” he shared. Currently, the Ethiopian Confederation of Trade Unions (CETU) has 751,887 workers as members.

Khalid Getye, an in-house lawyer at the Ethiopian Labour Rights Watch, an NGO established three years ago, shares Kasahun’s sentiments regarding the challenges faced by labor officers in accessing industries for assessments and assisting workers in organizing themselves.

Advocates such as Kasahun and Khalid recognize and appreciate the government’s dedication to attracting foreign direct investments (FDIs) and promoting domestic industries, which has resulted in numerous employment opportunities. The growth of the manufacturing sector has led to job creation for millions of Ethiopians, particularly in urban areas, effectively diversifying the country’s economy and reducing reliance on traditional sectors like agriculture. Recent statistics demonstrate a significant increase in economic diversification, with the industry sector contributing around 28% to GDP currently, up from less than 10% in 2002.

However, workers’ advocates argue that concerted efforts from the government and private enterprises are necessary to address the challenges faced by industrial workers. They state it is crucial for companies operating within industrial parks to recognize their ethical responsibility in providing fair wages that ensure a decent livelihood for workers. Stricter regulations and oversight must also be implemented to guarantee worker protection and decent working conditions. As Kasahun highlights, “government intervention is crucial in this regard.”

While some progress has been made in terms of legal provisions such as paternal leave and efforts to limit workforce reduction, Khalid criticizes the government’s tendency to favor private investors. He emphasizes that the allure of cheap labor to attract foreign investment should not compromise the rights of Ethiopian workers. Khalid suggests policy reforms oriented towards introducing a minimum wage and a fairer minimum wage rate to address this systemic issue. “CETU has been calling for the introduction of a minimum wage and a reduction in income tax,” Kasahun said.

As the manufacturing sector takes on a more pivotal role in the economies of developing countries like Ethiopia, the discussion surrounding the implementation of a minimum wage to safeguard worker interests has gained prominence. Proponents of a minimum wage argue that it serves as a protection against worker exploitation and ensures fair pay. This, in turn, improves living standards, reduces poverty rates, and narrows wealth disparities. With a minimum wage in place, workers can receive compensation that reflects their efforts, ultimately enhancing their motivation and overall job satisfaction.

Although the revised labor proclamation of 2019 called for the establishment of a board responsible for determining and revising the minimum wage, Kasahun notes that it has been four years without any significant changes.

The government has been reluctant to introduce a minimum wage rate, fearing unintended consequences such as discouraging investors and business owners, particularly in sectors with lower profit margins. These consequences could potentially include layoffs, reduced work hours, or even business closures, resulting in increased unemployment and hindering economic growth. The government also expresses concerns that implementing a minimum wage may deter foreign investors seeking lower production costs, leading to job relocation and reduced domestic employment opportunities.

Even in the mildest of conflicts and instability, Ethiopia continues to attract foreign investors thanks to its cheap labor. According to the Ethiopian Investment Commission, Ethiopia attracted close to $3 billion in Foreign Direct Investment (FDI) last year. During a parliamentary session held 06 July, 2023, Prime Minister Abiy Ahmed (PhD) disclosed that the FDI flows showed a 10.4% increment compared with the previous year.

Despite these challenges, Khalid maintains some optimism, acknowledging signs of the government’s willingness to address worker issues. The Ministry of Labor and Skills recently announced the launch of a national assessment to determine the feasibility of implementing a national minimum wage. The assessment process is expected to take three to four months to complete. AS