The ready-made garment (RMG) industry in Bangladesh stands as a cornerstone of the nation's economy, accounting for over 80 per cent of total exports and providing employment to more than four million people. However, on the other side of the industry's remarkable growth, there are persisting issues of poor working condition and low wage. Recent reports indicate that the government of Bangladesh established a wage board in April 10, 2023 to reevaluate the minimum wage structure for the garment industry.
At present, the minimum wage for garment workers in Bangladesh stands at TK 8,000 per month, just slightly above the national poverty line, roughly estimated at TK 7,100. In response, the Bangladesh Garments Workers Unity Council (BGWUC) has strongly advocated for a minimum monthly wage of Tk 23,000 for workers in this sector. Similarly, considering the cost of living for a family of four, the Centre for Policy Dialogue (CPD), the lead think tank, has proposed TK 17,568 as the minimum wage for RMG workers. The CPD's estimation is based on a survey investigating the experiences and living conditions of 228 RMG workers employed in 76 factories in Dhaka, Narayanganj, Gazipur, and Chattogram. GWD, a non-profit organisation based in the U.S. that regularly communicates with a nationally representative sample of women garment workers in Bangladesh, estimated a living wage for the sector in 2023 to be between Tk. 21,900 and Tk. 26,300.
Nonetheless, industry leaders have voiced concerns regarding the potential consequences of any arbitrary wage hike, emphasising the importance of a rational wage adjustment that doesn't jeopardise the sector's overall competitiveness. Striking a balance between fair compensation for workers and the industry's global positioning is paramount, acknowledging the industry's role as a major driver of the country's economic development. In the light of the nuanced and sensitive nature of this issue, it is essential to delve deeper into determining the appropriate minimum wage for the RMG sector.
The journey of the RMG sector in Bangladesh commenced in the 1980s, with the first minimum wage being established in 1994 at TK 930. Subsequent revisions occurred in 2006, setting the minimum wage at TK 1,662.5 in 2010, increasing it to TK 3,000, and the latest adjustment in 2018, elevating the minimum wage to TK 8,000. Unfortunately, these revisions faced widespread criticism, primarily due to their perceived inadequacy.
Accounting for inflation is imperative to maintain the same real value and purchasing power of the minimum wage over time. Moreover, factoring in the growth of real GDP is crucial to ensure that the minimum wage keeps pace with the overall economic advancement of the country. Thus, establishing an equitable and realistic minimum wage for RMG workers in Bangladesh is a multifaceted challenge that necessitates careful consideration of various economic, social, and labour market factors.
Considering the benchmark minimum wage of TK 930 established in 1994, it is essential to calculate an adjusted wage that maintains constant purchasing power while accounting for the impact of inflation and the relative income levels influenced by the growth rates in real GDP. This adjustment requires a detailed examination of inflation and economic growth rates. Figure 1 offers a visual representation of two distinct series of simulated minimum wage schedules: one set based solely on inflation rate adjustments and another taking into account both inflation and growth rates. It also includes the actual minimum wage figures for the same period.
Upon careful observation, it becomes evident that the simulated minimum wage series, which considers only the effects of inflation rates, closely aligns with the actual historical minimum wage data. However, the plot takes a remarkable turn when the actual minimum wage figures are juxtaposed with the simulated minimum wage series that factors in both inflation and economic growth rates. In this scenario, the simulated minimum wage significantly surpasses the actual minimum wage, reaching approximately three times the wage received by RMG workers in 2022.
In light of these findings, the demand for a minimum wage of TK 23,000 put forth by workers' unions emerges as a reasonable and well-justified proposition. This adjustment is imperative to uphold a relative income level that maintains the same purchasing power as the minimum wage established in 1994. It reflects the evolving economic landscape and the growing expectations of RMG workers, many of whom have long aspired for a wage that better aligns with the ever-changing economic realities and the rising cost of living.
Expanding on this notion, it's worth noting that the demand for TK 23,000 minimum wage is not an arbitrary or extravagant proposition; rather it is rooted in the desire to establish a fair and equitable standard of living for the RMG workers. This wage adjustment would not only uplift the living standards of these workers but also contribute to reducing income inequality and enhancing their overall quality of life. It is, therefore, an essential step towards ensuring that the RMG sector continues to thrive while safeguarding the well-being and dignity of its valuable workforce.
Since there are concerns from RMG industry leaders regarding the proposed minimum wage increase and its potential impact on the sector's competitiveness in the global market, it is imperative to conduct a comparative analysis of minimum wages of RMG workers in the competitor countries. The minimum wage for RMG workers in India currently stands at Rs 14,244, which is approximately equivalent to 18,800 in Bangladeshi currency. Similarly, in Vietnam, RMG workers receive a minimum wage of about VND 4.68 million, which translates to approximately Tk 21,000 in Bangladeshi currency.
Thus, the recommended minimum wage of approximately TK 23,000 for RMG workers in Bangladesh aligns closely with what RMG workers receive in Bangladesh's major competitor countries. This indicates that the demand for a minimum wage of TK 23,000 is not only reasonable but also competitive on the international stage. It reflects the need to ensure that RMG workers in Bangladesh are fairly compensated for their valuable contributions to the sector.
Additionally, given the infrequency of adjustments to the minimum wage in the past, the call for a minimum wage of TK 23,000 is rooted in sound economic reasoning. It is a step towards providing RMG workers with a wage that keeps pace with the cost of living and inflation. This adjustment is not just a matter of workers' rights but is also essential for the long-term prosperity of the RMG sector and the overall economic development of Bangladesh.
Dr. Md. Deen Islam is Associate Professor of Economics, University of Dhaka and Research Director, Research and Policy Integration for Development (RAPID).