Wages of sin
Raising minimum wages is necessary, but not sufficient, for Bangladeshi garments sector
Bangladeshi garments workers have been agitating for a rise in the minimum wage, which was last adjusted in 2018. Before the pandemic, workers usually had reasonable overtime opportunities. But these have become less fruquent, while the country has been experiencing double-digit food price inflation for nearly two years now. The workers’ demand of a three-fold rise in the minimum wage may well have been an ambit claim. Many owners could well argue that they would not be able to afford such a payrise. The role of the government here is to work with all stakeholders to resolve the issue.
Instead, Bangladesh government has chosen the path of repression. Yesterday, police open fired and killed a worker named Anjuara Khatun.
This is, of course, characteristic of a regime that is now in full on repression mode. The Hasina regime is not tolerating even a non-violent civic activism by expatriate Bangladeshis. For example, it has blocked a petition supporting the workers’ demand.
The full petition, which I fully support, is appended at the end of this piece. But a higher minimum wage, on its own, is not going to do much, and a fundamental political change is needed.
Wages, of course, cannot be analysed separately from productivity. And a common argument against the workers’ demand is that productivity level in Bangladesh is much lower than elsewhere, and therefore a wage rise cannot be afforded.
Well, according to the World Bank World Development Indicator, value added per worker in the industry sector excluding construction were broadly similar in Banglades, India and Vietnam in 2019 (the latest year for which there is data).
And this excellent infographic by Finpresso shows how Bangladeshi workers are underpaid compared with their peers in the region.
That is, it is not self evident that Bangladeshi owners cannot afford a payrise for their workers.
From the workers’ side, of course, the issue is the cost of living.
I happened to be in Dhaka when the minimum wages were being debated in 2010. That’s when I first came up with the idea of the Khichuri Indicator. That analysis was published in the now defunct Forum.
Well, let’s update the analysis. Minimum wage in the sector was 1662.50 taka in 2006, rising to 3,000 taka in 2010, 5,000 taka in 2013, and 8,000 taka in 2018. Suppose each worker on a minimum wage was consuming a plate of khichuri and dim bhaji — a very basic Bengali staple, how many plates could they afford each month?
The chart below shows that with each minimum wage rise, workers could afford more plates. This is consistent with a rising living standard. The chart also shows that at current prices, a worker on minimum wage is back at the 2013 level of possible consumption according to this simple metric.
We can do some back of the envelop calculations.
A worker on minimum wage could afford 117 plates a month with 8,000 taka in 2018. At current prices, they can afford only 73 plates. This compares with 70 plates they could afford in 2013 with 5,000 taka. So, if the worker were to be simply compensated for the recent cost of living pressure, to afford the 117 plates, the minimum wage would need to rise to 12,805 taka.
Of course, a minimum wage of 12,805 taka would mean they would be consuming no more than the 2018 level. What if they were expecting a similar increase in the five years since as they had experienced in the previous five years?
If the same pace of increase in consumption were to be maintained between 2018-23 as was the case in 2013-18, the worker would require a minimum wage sufficient to cover 193 plates. The required wage turns out to be 21,200 taka.
The point of this calculation is not to justify a particular level of wage. Rather, the point is to illustrate how the inflation is hitting the urban working classes. For many of them, living standards may well have been set back by a decade.
While the minimum wage needs to rise, it is crucial to understand that a wage increase by itself will not help, and could in fact hurt the workers! This is because, as things stand, any wage rise could easily be eroded by continued inflation.
According to the Hasina regime apologists, the workers’ plight reflects global inflation. This is half right, and therefore all wrong. Yes, global inflation has affected Bangladesh. But the policy responses — refusal to allow the exchange rate to depreciate and interest rates to rise in face of an external shock — have made things worse. And things may get much, much worse before they get better. Taka would likely depreciate even more, raising inflation temporarily before prices stabilise. Rising interest rates are also likely to affect many factory owners’ balance sheets.
In this environment, obviously the minimum wage cannot keep rising.
The cost of living pressure faced by the workers is Made In Bangladesh! Any worker messing up their tasks the way the government has mishandled the economy in the past 18 months would never work again.
The same standard should hold for the prime minister and her cronies.
This piece has benefitted from discussions at several online threads. I am particularly grateful to Zia Hassan, Taukir Aziz, Fahim Mashroor, Ehteshamul Haque, Shafiqul Alam, Shafiqur Rahman, and Faham Abdus Salam.
Data sources: CEIC Asia database, Prothom Alo and Manabzamin, World Bank.
The petition
Bangladesh’s 4 million garment workers earn just $74 per month. This paltry wage is a fraction of what similar workers earn in China ($304), India ($171), and other Asian nations. It's only 33% of Bangladesh's own GDP per capita, but they helped Bangladesh earn $43 billion dollars in export earnings last year.
These low wages have sparked massive protests by garment workers in Dhaka. Their demands are simple - fairer wages and improved working conditions. But the government has responded with intimidation and violence, killing workers and arresting strike leaders.
With parliamentary elections approaching in January 2024, the crisis has escalated. The powerful garment industry leaders who control the major factories have cozy relationships with Prime Minister Sheikh Hasina's government. They contribute heavily to the ruling party. In return, the government tips the scales against workers in wage negotiations and suppresses their protests. This perpetuates an exploitative system that serves the industry over its workers.
This petition calls on the Bangladesh government to:
Enter good-faith wage negotiations with workers
Stop violently suppressing protests and strikes
Protect workers' rights to organize and bargain collectively
Please sign this petition in solidarity with Bangladesh's garment workers.
Further reading
Bangladesh apparel less competitive than Vietnam’s
Reyad Hossain, 22 Jan 2023
উন্নয়নের মডেল মিরাকল থেকে মরীচিকায় পরিণত হয়েছে
রাশেদ আল মাহমুদ তিতুমীর interviewed by ফারুক ওয়াসিফ, 12 Jun 2023
Bangladesh’s Democracy Under Siege
Zarif Faiaz, 1 Jul 2023
Is Bangladesh at a triple crossroad?
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All that went wrong for Bangladesh’s economy
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Why Bangladesh's Democracy Is on Life Support
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‘উন্নয়ন–বিস্ময়’ কি ‘উন্নয়ন–বিপর্যয়ের’ দিকে যাচ্ছে
রাশেদ আল মাহমুদ তিতুমীর interviewed by এ কে এম জাকারিয়া, 1 Oct 2023
নিষেধাজ্ঞার গুঞ্জন, আতঙ্কে তৈরি পোশাক ব্যবসায়ীরা
সাজ্জাদ হোসেন, 8 Oct 2023
IMF to suggest new exchange rate system
Rejaul Karim Byron , Asifur Rahman, 18 Oct 2023
How Bangladesh Bank's measures to check the dollar crisis backfired
Jebun Nesa Alo, 22 Oct 2023
Bangladesh Government Doubles Down on Pressure Campaign Against Opposition
Mubashar Hasan, 30 Oct 2023
BB chief moves to IMF, bilateral sources to rebuild reserves
Jebun Nesa Alo, 2 Nov 2023