The Bangladesh garment manufacturing industry, the world’s second largest after China, is facing mounting pressure to significantly increase the minimum wage. The country’s key strength compared to its rivals is its abundant and affordable workforce, coupled with expertise in garment production, suitable location and export-friendly policies.
Stagnant since 2018 at BDT 8,000 (US $ 73), the minimum wage in Bangladesh is lower than that in China, Cambodia, India and Vietnam. Labour unions are vociferously pushing for a raise, demanding an increase to BDT 23,000 (US $ 209) monthly.
However, the readymade garment (RMG) factory owners fear that unreasonable wage hikes could escalate costs, potentially diminishing competitiveness, especially in the face of rising competition from emerging markets in garment production. Additionally, these owners note that global retailers are hesitant about accepting price hikes.
The RMG wage board was formed in 2018, and that same year, the minimum wage was fixed at BDT 8,000, which was BDT 5,300 earlier.
As per the Bangladesh Labour law, the government will form a new wage board every five years and it will set a new wage structure. However, due to the increase in commodity prices, RMG workers could not wait for another five years for a new wage structure and took to the streets demanding a raise on several occasions.
Finally, the new wage board was formed on 9th April, headed by Senior District Judge Liaquat Ali Molla, to recommend a new wage structure for over four million garment workers in Bangladesh.
The three other members of this wage board are: Moksud Belal Siddiqui, representing the Bangladesh Employers’ Federation; Sultan Ahmed from Jatiya Sramik League; and independent member Dhaka University Professor Md Kamal Uddin.
Additionally, two more members were announced by the Ministry: Md Siddiqur Rahman, former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and Sirajul Islam Rony, President of Bangladesh National Garments Workers Employees League, representing the owners and workers respectively.
Liaquat Ali Molla stated in August that new wages for garment workers would be decided by November and will be implemented the following month. However, the third meeting of the minimum wage board for RMG workers concluded recently without any concrete proposals from either party regarding minimum wage adjustments.
Sources indicate that the board is currently seeking a two-three month extension of its tenure to allow for the declaration of minimum wages within this year.
Here’s what the key stakeholders have to say about the unfolding saga.
Workers’ demands extend beyond minimum wage
Sirajul Islam Rony, who represents workers on the wage board, expressed their intention to propose a reasonable wage increase that aligns with the genuine needs of the workers at the upcoming meeting.
“Over the past five years, inflation has risen significantly. Considering inflation, expenses and other factors, we believe that the minimum wage should be in the range of BDT 20,000-22,000, but not less than Taka 18,000,” said Rony.
However, labour organisations in Bangladesh are calling for an increase in the minimum wage of garment workers to BDT 23,000, citing the current market challenges. Some groups are advocating for BDT 24,000. The IndustriALL Bangladesh Council (IBC), representing 16 garment workers’ federations, made this demand during a press conference in July this year.
In addition to the proposed minimum wage adjustments, there are calls for other benefits, such as the introduction of gratuity and provident funds to secure workers’ welfare post-employment.
Taka 17,568 minimum wage: CPD’s proposal for Bangladesh apparel workers
The Centre for Policy Dialogue (CPD) recently put forth a proposal to increase the basic pay of RMG workers by 55 per cent through the minimum wage board.
In light of the escalating cost of living, this think-tank suggested establishing Taka 17,568 as the new minimum wage for RMG workers in the country.
CPD’s recommendation goes beyond just increasing the wage; it also advises the minimum wage board to adopt a percentage-based system to delineate all components of the wage structure, rather than a fixed salary.
CPD’s research further indicated that if garment owners could secure an additional 7.0 cents on average per unit of RMG product, they would be well-equipped to implement the wage structure proposed by CPD.
The CPD also made an appeal to global brands, urging them to consider this matter for the improvement of Bangladesh’s RMG industry.
Industry leaders voice concerns
The RMG sector, the largest foreign currency earner, contributed US $ 47 billion in the last fiscal year (FY ’23), accounting for 84.61 per cent of the total export earnings of US $ 55.55 billion, as per official data. Industry leaders have voiced concerns that an unreasonable hike in wages will erode the competitiveness of the sector, which is already under stress.
In the first eight months of this year, 313 factories, including 80 garment units, have gone bankrupt, according to Industrial Police data. Among them, 60 were under the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), 16 under the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), 9 were textile mills registered with the Bangladesh Textile Mills Association (BTMA) and 5 were under the Bangladesh Export Processing Zones Authority (BEPZA).
In the past year, Bangladesh’s currency has devalued by 16 per cent, causing challenges for the garment sector that heavily relies on imported raw materials. Banks are now cautious about opening new letters of credit (LCs) due to the growing dollar crisis, waiting for previous LC loans to be settled.
Siddiqur Rahman, who represents garment sector owners on the Wage Board, questioned the methods used in CPD’s survey. He warned against raising wages too high, fearing it could force factories to close, especially given the global disruptions caused by the pandemic and the Russia-Ukraine war.
Mohammad Hatem, Executive President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), criticised international brands and buyers for adding extra costs to the Bangladeshi apparel industry in the guise of ethical practices. He highlighted the challenges faced by garment industry entrepreneurs, including heavy bank loans, personal debts, lawsuits, warrants and economic uncertainty.
BGMEA reiterates demand for price hike by buyers
The BGMEA has repeatedly requested an increase in the prices of garment items.
BGMEA President Faruque Hassan conveyed this message in a letter sent to all representatives of brands and buyers, stating, “Firstly, we need our buyers to comprehend and embrace the wage dynamics within our specific contexts and priorities. We seek their support in making reasonable price adjustments.”
Hassan emphasised the importance of taking a long-term perspective into account, recognising that the rising costs and wages are inevitable. He stressed that, regardless of efficiency, it may become challenging to compete in certain product categories if costs continue to rise.
He encouraged local garment suppliers to explore new opportunities and underscored the necessity for ongoing innovation and diversification into items that align with the sector’s cost and competitive trajectory.
Hassan wrote, “There will certainly be price pressure as we operate in global competition, but undercutting the price among ourselves will not secure business in the longer term. Rather we need to get our valued buyers engaged in long-term partnership.”
He further added, “Switching factories and countries for lower prices is not an escape from reality and accepting unsustainable prices is also not a prudent business strategy. This is also true that adding cost without value is not sustainable. The point I am trying to make here is that, first we need our buyers to understand and internalise the wage dynamics from our respective contexts and priorities and support us through rational price adjustment.”
Furthermore, he emphasised the critical need for investments in machinery, technology and skills.
The BGMEA also called upon the Government to implement appropriate measures to control inflation and to extend a special safety net programme, including food rationing, to its workers.
Major US brands urge PM Hasina to review minimum RMG wage
In October recently, 15 major US brands sent a letter to Prime Minister Sheikh Hasina urging a successful conclusion to ongoing negotiations under the minimum wage review mechanism that incorporates the views of all stakeholders and reflects the economic realities of Bangladesh.
“We recognise the value that Bangladesh holds as the third largest supplier of garments as well as a fast-growing supplier of footwear and travel goods to the world. Bangladesh’s commendable sustainability efforts in the garment footwear and travel goods sectors have garnered well-deserved recognition. We value this critical partnership.”
The letter requested the government to focus on the following aspects in minimum wage discussions:
- The consultations should be inclusive and include all relevant stakeholders, including a constructive dialogue with labour groups and trade unions.
- The consultations should seek to raise the minimum wage to a level that corresponds with a wage level and benefits that are sufficient to cover workers’ basic needs and some discretionary income and takes into account inflationary pressures.
The letter further read, “We note that the average monthly net wages for garment workers in Bangladesh has not been adjusted since 2019, while inflation has increased significantly over that time. We continue to recommend that the government of Bangladesh adopt an annual minimum wage review mechanism to keep up with changing macroeconomic factors. The government can play an important role in facilitating new union registration, condemning violence, threats or intimidation against union members and overall fostering an environment that respects workers’ collective bargaining rights and empowers them as essential stakeholders in the nation’s progress.”
The brands urged the government to prevent any form of retaliation against participants throughout and after the minimum wage review.
As the country approaches general elections in January 2024 and the wage board is set to decide the new minimum wage soon, there is significant anticipation regarding the industry’s and the government’s response to the evolving situation.
