Minimum wage for RMG workers

Mamun Rashid Bangladesh country manager of a global apparel sourcing company wanted to know my reaction over the proposal to fix the minimum wage for the workers in Ready-made Garment (RMG) industries at Tk 8000 per month. Though I knew, the minimum wage is being reviewed by a recently formed wage board for the RMG workers and the workers, media and civil society were asking for a massive hike in the minimum wage in view of large rise in the 'cost of living', I was not quite sure at what level it was being fixed. I rather sought opinion of the gentleman on the issue. He thought without fixing issues like infrastructure, energy supply, building safety, workers' safety and, more importantly, labour productivity, this might be a counter-productive exercise for the Bangladesh RMG industry. The wage board for the RMG workers did fix Taka 930 as the minimum wage in 1994, after 14 years it was fixed at Taka 1662 in 2006. It was again raised to Taka 3000 in 2010. Recent discussions revealed that the workers' associations and leaders wanted this to go up to Taka 8114 (equivalent of USD 106). On the contrary the owners thought that they could consider a hike up to 50 per cent including the fixation of minimum wage at Taka 4500. It is most likely that government servants, politicians and other stakeholders would try to ensure a balance between all the demands and fix the minimum wage at the middle point. Optimum pricing in the marketing or management world has always been a challenge. While 'low pricing' may affect the productivity and overall image or acceptability of the product, out of the market pricing or non-sustainable pricing may seriously impact the core competitiveness of the product or the industry segment as a whole. While our workers in the RMG industry do deserve a respectable minimum wage, preliminary studies suggest that present condition of the industries may not be supportive of a minimum wage hike at more than USD 100 per month. With less than 2700 units out of around 5500 woven and knitting factories doing direct contracts, it may have devastating impact on the factories doing sub-contracts for little known or not known apparel brands or retailers including 'mom and pop shops'. Tazreen Fashion and most importantly Rana Plaza episodes have no doubt given a 'wake up call' to all the stakeholders in the apparel sector including the development partners and global citizenry. Things obviously can't go the way it has been going. We are seeing agreements and accords are being signed by the global retailers and apparel buyers at the initiation of international development organizations or even the political leadership in the developed world. This is a very good sign and should have happened much earlier to avoid tragic incidents in Bangladesh manufacturing hubs or clusters. However, one should keep in mind that none of the Tazreen or Rana Plaza victims or survivors did point fingers at minimum wage issue. Rather it was all about non-compliance of building safety, workers safety and workplace safety issues and failure in particular to ensure a minimum governance standard. Yes we need to review the minimum wage in view of the price hike of essentials but at the same time we need to make sure that the roof of building where the workers toil day and night would not collapse because of the use of low quality construction materials, workers are not burnt alive in the absence proper fire safety measures or supervisors or floor managers caution the workers in time. Newspaper reports did mention around 2000 factories might not pass the 'safety audit' in Bangladesh RMG sector. We need to fix those. The factory inspectors need to make sure there is minimum factory standards followed in our manufacturing plants. Our fire brigade needs more fire fighting equipment, manufacturing clusters need more integrated development approach and the workers need to demonstrate minimum productivity bias. The minimum wage in China is more than USD 200. A Bangladeshi RMG worker would require almost the same amount of money as his/her wage to produce quantity of goods that a Chinese worker produces. But a Bangladeshi RMG worker gets a monthly minimum compensation less than USD 40. Productivity has always been an issue in our manufacturing world. While Bangladesh minimum wage in the apparel industries is USD 40, it is USD 113 in India, USD 118 in Pakistan, USD 120 in Vietnam and USD 204 in China. With an aim to make best use of the workers integrity and proven entrepreneurship, Bangladesh has a cushion to go up further. But where Bangladesh should position itself in the 'wage curve', is a tough question to answer and warrants due scrutiny in consideration of cost associated with fixing other pertinent issues like building safety, workers safety, power and energy investments, compliance with factory standards and productivity development needs. The issue what America or Europe or Japan has taught us is that it is not only salary but also overall safety, recognition and empowerment to keep the workers going. Our apparel sector has grown much over the time showing a lot of future potentials. It is 'too large to ignore' now. This is in fact the 'main stay' of our economy, if we consider the earnings, employment and more importantly 'women engagement' side of it. The sector requires more 'pre-planned efforts', thoughtful endeavours and handholding than what we have seen before. We need to look beyond. There is no 'quick fixing' or 'overnight solution'. Rather a dynamic review process and regulatory platform should be put in place considering the industry to reach USD 50 billion export mark within next decade or so. (Mamun Rashid is a banker and economic analyst. E-mail: [email protected])