Female Wages in the Apparel Industry Post-MFA: The Cases of Cambodia and Sri Lanka

Abstract

The end of the Multi-fiber Arrangement/Agreement on Textiles and Clothing in 2005 was a major policy change that affected the allocation of global apparel productions well as the lives of workers involved in this sector. Since the apparel industry is often the major female employer in developing countries, this policy change was expected to have major implications for women. This paper analyzes the wages and working conditions of women in the apparel sector in Cambodia and Sri Lanka following the phase-out the Multi-fibre Arrangement. In both countries, apparel is a major source of exports, and women constitute 70 to 80 percent of the workers employed in the apparel industry. The paper finds that after the removal of the Multi-fibre Arrangement, apparel prices declined as a result of the increased competition. The theoretical model suggests that a decrease in prices would lead to a decrease in apparel wage premiums relative to other industries in the short run and the widening of the male-female wage gap in the long run. The empirical findings support these theoretical predictions. Wage premiums in the apparel sector relative to other industries went down post-Multi-fibre Arrangement in Cambodia and Sri Lanka and the male-female wage gap increased. The paper finds mixed results in terms of working conditions in Cambodia and Sri Lanka.

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