Happier workers, higher profits, new study of Vietnam garment sector finds

A new study shows that factories with better working conditions are up to 8 percent more profitable than their counterparts.

Employers who believe they should squeeze their workers to improve the bottom line may need to think again.

A new study has made a compelling case that garment companies can actually reap greater profits by investing more in creating better working conditions.

The multi-year independent review of the Better Work program, which covers a fifth of Vietnam’s garment workforce, proves that productivity and profitability are significantly enhanced when workers are happier and healthier.

It has found that factories with better working conditions are up to 8 percent more profitable than their counterparts. The average firm in the Better Work program, a partnership between the U.N.’s International Labor Organization and the World Bank’s International Finance Corporation, increases its revenue-to-cost ratio by 25 percent after four years of participation.

Workers of garment factories under the program said that their weekly wages have been higher. They have fewer concerns on overtime and low-paid salary and are better able to fund schooling for their daughters. In Vietnam, poor families who can't afford education for all of their children tend to send sons to school first.

The participating factories tend to have less frequent abuse of probationary contracts and the working time has been cut from 59 hours to 55 hours per week.

According to the study, around 15 percent of factories in the program still do not comply with minimum wage regulations, but that is three percentage points lower than the ratio seen five years ago. The gender pay gap has also been narrowed.

Since 2009, Better Work has assessed and advised textile firms in Vietnam on best practices to meet labor standards.

By Dam Tuan  / VnExpress