The answers are not simple
In Bangladesh, the last revision of the minimum wage (from Tk3,000 in 2010 to Tk5,300, or almost $65 -- came into effect from January 1, 2014) was associated with a 37% increase. In 2018, how much should the workers expect?
On the other hand, the minimum wage board is working on a new minimum pay structure for garment workers.
RMG workers’ associations are demanding Tk16,000 as the minimum wage, citing rise in costs of living. Many industry insiders have opined that with this increase in wage, Bangladesh will no longer remain cost effective.
Owners of RMG factories took up the matter of fixing minimum wages for their workers, but how ready are they to raise the minimum wage to anything substantial?
There is another reality which needs to be taken in consideration. We already know that hundreds of factories have been closed for several reasons, like Accord and Alliance inspections, production cost increases, high compliance costs, and low prices of products.
Recently, the representative body of the garment factories owners proposed raising the minimum wage by 20% to Tk6,360. But between 2013 and 2018, the prices of essentials (food, housing, health care, education, and recreation) have gone up, which has reduced the purchasing power of workers in the RMG sector.
Even if the country’s inflation rate has yet to come down to the targeted rate for the current fiscal as the average inflation rate was 5.81% during the period from June 2017 to May 2018, economists are of the opinion that a revised minimum wage rate will not only compensate for the inflation but also raise workers’ purchasing power.
Another convenient principle in setting the minimum wage rate could be to increase the rate by the same percentage as the increase in national income. The per capita real GDP and the per capita real GNP increased by 31% and 27% respectively from 2013 to 2018, as our country is on its way to reaching middle-income status by 2021.
It is true that the RMG industry in Bangladesh is going through a transition phase after the Rana Plaza tragedy, and the costs of compliance has been high. An increase in the minimum wage could indeed put extra pressure on owners and the businesses.
Therefore, the minimum wage board should consider all these possibilities before finalizing the figure. Around 4.4 million workers, mostly women, are involved in more than $30.16 billion industry in Bangladesh.
The minimum salary for a government employee is Tk15,250 -- how can a garment worker make do with one-third of that amount, when both purchase their essentials from the same markets to survive?
Accord and Alliance have played a pivotal role in raising the safety standards in our RMG factories. Now they have to equally stand by the workers. All RMG-related communities should come forward to mitigate this problem.
According to a statement by RMG entrepreneurs, buyers purchase goods at different prices from different countries. In Bangladesh, they buy goods with lower prices than the other countries. Our low price is one of the biggest reasons behind increasing our workers’ wages.
When a product is sold, who gets the large amount of profit -- the owners or the buyers? Definitely the buyers, and their profit margin remains much higher than that of the manufacturers.
The profits they make on the differences between the sales in their respective markets and purchases from Bangladesh, are unusually high. So, a moral obligation might even come to play here.
Regarding the issue of increasing workers’ wages, buyers should take part by a cent’s increase. At the same time, the government can negotiate and lobby with the EU, US, and any related trade bodies.
Md Harunur Rashid is Deputy Secretary and Data Investigator of AFD (French Development Agency) project based at BKMEA.