The contentious issue of minimum wage that refuses to die

by Apparel Resources

04-June-2019  |  7 mins read

minimum wage

It seems the issue of minimum wage would never end for Bangladesh! After a long wait, it was in December last year that the country’s wage board decided to hike the minimum wage to Taka 8,000 (US $ 96) from what was Taka 5,300 (US $ 69) per month in 2013, the year the garment workers last witnessed an increase in their monthly wages.

As per the boards’ proposal, Taka 8,000 (as minimum wage) was decided for the workers of grade VII, which included basic pay of Taka 4,100, 50 per cent of basic pay as house rent, Taka 600 as medical allowance, Taka 350 as travel allowance and Taka 900 as food allowance. For grade VI, the wage board proposed Taka 8,399 as gross monthly pay with Taka 4,366 as basic pay; for grade V, Taka 8,855 as gross pay with Taka 4,670 as basic; for grade IV, Taka 9,245 as gross pay with basic at Taka 4,930; for grade III, Taka 9,578 as gross pay with basic at Taka 5,152; for grade II, Taka 14,621 as gross pay with basic pay at Taka 8,514 and Taka 17,504 as gross pay with Taka 10,436 as basic pay for grade I.

The moment, the board’s decision came to light, the country erupted into mindless violence with garment workers taking to the streets, vandalising properties, stalling production work in factories and holding the industry to ransom, to protest what they termed ‘discrepancy’ in the wage structure! The more than a week long mayhem that followed forced the Government to relook into workers’ grievances and make the necessary changes. This somewhat subdued the workers’ rage, who slowly but steadily returned to their respective workplaces and the industry got going.

Despite counting major loss due to stalling of work, factory owners heaved a sigh of relief and so did the country, for which the garment sector is its economic backbone. But as the anniversary of the infamous Rana Plaza disaster neared, it was now turn of the anti-graft watchdog Transparency International Bangladesh (TIB) to rake up the issue of minimum wage once again!

As per a TIB report unveiled just before commemoration of the Rana Plaza disaster, it alleged that in actual terms, wages of apparel workers in Bangladesh decreased by 26 per cent even as the factory owners claimed that they had raised the wage by 23 per cent in the new wage structure keeping with the Government’s declaration in January this year.

As per TIB researcher Nazmul Huda Mina, the claim of 23 per cent wage increase is not reality. Mina explained that in 2013, the minimum wage for grade VII workers was Taka 3,000. As per the law, the wage would have reached Taka 3,829 by the end of 2018 after adding five per cent increment yearly. Now, the wage for the grade should be Taka 5,207 if the wage increased really by 36 per cent as the owners claim. But the workers’ basic wage is Taka 4,100, which is Taka 1,107 less than the real wage.

What’s more, as per TIB’s research carried out on 80 factories (situated at Savar, Dhaka, Gazipur and Narayanganj) in the period between May 2018 and April 2019, after the hike, production target has allegedly been increased by 30 to 36 per cent in different factories.

As would have been, the apex garment manufacturers’ body BGMEA came down heavily on the TIB as to the correctness of the report, sampling procedure and above all the timing to unveil its findings.

In a statement, BGMEA said that TIB’s claim of not adjusting 5 per cent annual automatic increment with the basics of the new wage structure was not true;it also underlined that accumulated impact of 5 per cent automatic annual increments would yield an aggregated 27.63 per cent increment to the basics in all grades over 5 years, whereas the actual increase by the Minimum Wage Board was made at rates ranging from 28.7 per cent to 36.7 per cent.

BGMEA also reportedly sought clarification from TIB about the methodology of its calculation while adding that production efficiency was a continuous process, and as per its knowledge, the Minimum Wage Board did not consider the correlation of the increase in minimum wage and efficiency.

BGMEA thought wages should always be linked to skills and it would strongly recommend wage-skill matrix so that the workers got paid according to their skills, the statement underlined.

It may be mentioned here that the new BGMEA President Dr. Rubana Huq in her first interview with Apparel Resources strongly advocated wages based on skill-set.

“Wage has to be set based on skills… And if we are to do that, we would also have to train our workers to think differently. The wage-skill grid must be practised to assess the basic efficiency of the workers, which would translate into a win-win scenario for all,” explained Rubana to Apparel Resources.

The BGMEA’s stand on the issue holds water considering the fact that Bangladesh’s worker efficiency is only 40 per cent to 45 per cent, whereas the worker efficiency in China, Vietnam and Turkey are 65 per cent, 55 per cent and 70 per cent, respectively.

Taking into account that the industry is already facing challenges on multiple fronts, be it from the competitors, increasing overheads and falling margins, the issue of minimum wage should take a back seat now if the industry has to maintain its competitive edge and move ahead. A hike of more than 50 per cent in wage is quite substantial by any standard after all.

Share This Article