Bangladesh’s textile and apparel industry has been playing an instrumental role in the development of the country’s socio-economic aspect. The labor-intensive sector has been thriving in the country’s demographic dividend facility. Having said that, setting the minimum wage for apparel workers has always been a sensitive issue.
The minimum wage in the RMG sector in Bangladesh was established in 1984. So far, the minimum wage of the workers in this sector has been revised 6 times. And in 2018, the minimum wage was revised to Tk 8,000, which is effective from 2019. We observed labor unrest, pressure from trade unions and brands & buyers led the government to announce the revised pay structure for the garment sector, with a slight increase in both basic and gross wages in six of the seven grades.
Under the Labor Act of 2006, the Government of Bangladesh must review workers’ wages every five years; which is due this year.
As a response to that recently the government constituted a Wage Board to enhance and implement the new wage structure by consulting with employers, labor unions, and other stakeholders.
Garment owners said they could raise wages by 30% to 40%. On the other hand, Shramik Oikya Parishad – an organization of garment workers – has demanded that the minimum wage should be set around Tk 22,000. While other organizations have recommended raising the monthly minimum wage above Tk 17,000.
How much is affordable for the factories?
Due to the recent global turmoil, fuel costs, production costs, and daily expenses have increased drastically which has also pushed up the business cost. In this situation, RMG owners have expressed apprehension that production costs have increased manifold and product prices are not rising accordingly. On the other hand, consumers in the main export markets are buying less.
Shovon Islam, Managing Director of Sparrow Group said, “There is a renewed slowdown in our key export markets. Product prices are not increasing according to the cost of production. Orders are already on the decline from November last year.”
Also, the cost of living has almost doubled due to recent inflation. Workers find that a major portion of their income is spent on meeting the cost of cooking oil and other daily commodities. Which has made their standard of living very poor.
One of the reasons for the development of the RMG industry in Bangladesh is the cheap labor market. And this is why global fashion brands consider Bangladesh as a reliable sourcing hub.
On the other hand, fashion brands in this country have been given many conditions including various compliance, and certification issues since the beginning. Which is increasing the cost of production of clothes manifold. But, the buyers are reducing the price of clothes on the contrary. In such a situation, garment owners say, most of the factories are not able to make a minimum profit.
On top of that, there are doubts about whether the garment industry will be able to take the pressure of new wage increases. Owners also fear that many factories may close as a result. And if the industry does not survive, there will be uncertainty about the livelihood of many workers in this labor-intensive industry.
BKMEA Executive President Mohammad Hatem said, “Many factories are being forced to stop operations, and some are shifting factories outside the country under the pressure of repaying bank loans. Unethical buying behavior of brands is playing a major role in these difficulties.”
Therefore, every five years, the pros and cons of the process of fixing the minimum wages of workers need to be carefully considered.
Minimum wages should be increased naturally
Minimum wages of garments workers as well as any other workers should be increased naturally evaluating a worker’s competency. As there are so many competitive labor in the industry, if factory owners do not pay them according to their competency and competitiveness, there can be a negative impact on them. So we need to set the right wage.
In this case, a factory owner has a great responsibility to enhance its workers’ skill and efficiency through training. Efficient Employee can performs their job with higher productivity. An efficient employee is productive, and they know how to organize their time and effort in order to complete daily tasks. They don’t overuse resources or waste valuable time.
If a worker can provide more value, more efficient deliverables and his/her efficiency improves from 50 percent to 90-100 percent, a factory owner must increase his/her wage as per their competency.
Engr. Abdus Sobhan, CIP, Managing Director, Auko-Tex Group, recently said, “The recent wage hike talk is going on and buyers, NGO’s, worker unions, trade bodies are urging for a wage hike. Yes, workers need a livable wage. But instead if we train our workers to upskill their efficiency then automatically they will get better payment. This will also make the worker valuable for the industry.”
“In addition, there is a gap of standard skilled operators and other category workers in the textile and apparel industry. So, when one of my skilled worker switch job – then it greatly hampers my factories production quality and efficiency. Yes, the wage hike discussion and process will be there – but the sustainable way is to upskill the workers – so they give better return in the long run,” he said.
“I have literally found out that instead of investing millions of dollars on machinery, land infrastructure and lines – if I invest on my people, then it will provide me better return. In addition, upskilling is more cost effective. For example, capacity expansion need a massive investment at once. While in upskilling people, you will need a fractional gradual expense. But output is more and sustainable,” he concluded.
Mohammad Hatem, Executive-President of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) said that we pay our workers as per their efficiency, but it is not practiced in the whole industry. As per the labour law of the country the wage of the garment workers is reviewed after every five years and this time too it is reviewing after five year.
So, no one needs to put pressure on the owners to increase the salary of the workers as it is written on the law how and when the wage board for the garment workers will be formed and how the salary will be fixed for the workers, Hatem said.
However, every year 5 percent increment is added with the salary at the end of every year, he said adding since the five percent increment is added every year the accumulative hike of the salary of the workers is 25 percent over the last five year.
The five percent salary is hiked every year because of inflation adjustment, said Hatem, however, also said every time the salary is hiked ahead of the national election.
He suggested for hiking the salary of the workers either one year after or one year before the national election.
If necessary, the salary can be reviewed after four year, still not before the election, he said. Many factories will face challenges in payment of salary to the workers as they are facing difficulties in paying the salary even under the existing wage structure.
Because, the inflow of volume of work orders from the international retailers and brands has been falling from the volatile economic condition of the world.
Md. Shahidullah Azim, Vice-President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) also said after five years the salary of the workers will be adjusted with formation of a separate wage board as it is written on the labour law of the country.
He also said the five percent adjust will happen with the existing salary of the workers every year. The salary is not automatically adjusted, but the salary is fixed after the review by an independent board, he said.
“If a salary structure is imposed from outside, many factories may eventually shut down and go out of business. That would be a huge loss for the industry. We have to keep the industry alive. If the RMG industry thrives, the workers will get better salaries automatically. And, for that, the buyers, the owners and the workers all have to sit together and decide how to do this,” Md. Shahidullah Azim added.
Buyers’ responsibility
Leaders of garment organizations said that buyers must take responsibility in this situation. Ethical pricing of clothing should be ensured. When a product is sold who gets the large amount of profit- miller or buyer (retailer)? Definitely, it is buyer and their profit margin is very high comparatively than manufacturers. In the issue of increasing worker’s wage, buyers should take part.
Textile Today talked with several garments manufacturers who demanded buyers help in this regard. They opined that they could continue their business smoothly if the buyers consider the issue according to the retail price and cut their profit a bit or put the consumers in a bit pressure for the betterment of the poor garment workers.
Md. Shahidullah Azim said, “The buyers will play the most crucial role here since the owners’ profit and the workers’ wages depend on the products’ price. They have to increase the product prices. Otherwise, the industry cannot develop a sustainable solution to this issue.”
Government responsibility
At this juncture, the government should take initiatives to reduce the cost of doing business and accelerate exports. Which will make the situation tolerable to some extent.
At the same time, it is the government’s responsibility to support the backward workers with low incomes. To improve their quality of life, food supply, medical services and other social services should be ensured at subsidized prices. This responsibility cannot be taken by the factory owners alone.
On the other hand, Bangladesh government has a dream to turn the country into developed nation by 2041. To make the dream successful, contribution of the apparel industry is must. But if the small factories and some mid-range factories cannot run their business to cope with the increased wage, it will impact the whole industry a lot. Which will be spread throughout the country. So, it should be taken into consideration. Bangladesh’s economy, which is one of the fast growing economies in the world, will fall in an embarrassing situation and the dream to be a developed nation may not come as reality. On the other hand, workers, who get a minimum wage of 8000 Tk now, they also fall in more crisis they ever seen.
In this context, government help is inevitable to sustain the industry. Industry owners are very much worried about their future and they opined that without government help the apparel industry, which sometimes called the golden goose of the country, cannot survive.
