Dhaka Courier

For a living wage only

img
Photo: UNB

On January 13, after eight days of labour unrest, the government of Bangladesh announced a revised pay structure for the garment sector, with a slight increase in both basic and gross wages in six of seven grades. The revision was applied to an earlier announced wage structure that went into force in December 2018.

The gross hike in the revision ranges from a token Tk 15 to a modest Tk 747, effective from December last year and to be adjusted from February next .  The annual increment has been fixed at 5 percent.

As per the latest announcement, the basic wage for the workers in Grade I would increase by Tk 498 to Tk 10,938 from Tk 10,440. The gross wage for the grade would increase to Tk 18,257 from Tk 17,510.

The basic wage for Grade II increased by Tk 524 to Tk 9,044 from Tk 8,520 while the gross wage went up to Tk 15,416 from Tk 14,630.

For Grade III, the basic wage increased by Tk 170 to Tk 5,330 from Tk 5,160 and gross pay increased to Tk 9,845 from Tk 9,590.

For Grade IV, the basic wage increased by Tk 68 to Tk 4,998 from Tk 4,930 while the gross pay increased to Tk 9,347 from Tk 9,245.

For Grade V, the basic wage increased by Tk 13 to Tk 4,683 from Tk 4,670 while the gross wage increased to Tk 8,875 from Tk 8,855.

For the grade VI, the basic wage increased by Tk 10 to Tk 4,380 from Tk 4,370 and gross pay increased to Tk 8,420 from Tk 8,405.

The basic and gross wages for the grade VII remained unchanged (Tk 8,000).

Other benefits, including 50 percent of the basic wage as house rent, Tk 600 as medical allowance, Tk 350 as travel allowance and Tk 900 as food allowance, remained unchanged for the workers of all grades.

In their immediate reaction, Bangladesh Garment Workers Trade Union Centre said the government and factory owners failed to play a responsible role in resolving the ongoing labour unrest in the apparel sector. The announcement of wage revision for Grade III, IV, V and VI by Tk 170, Tk 68, Tk 13 and Tk 10 respectively disheartened workers, the labour body said in a release. It would not be possible to solve the labour unrest with just a token increase in workers’ wages, it said.

The workers, protesting since January 6, had been demanding pay raise in three grades in particular -- grade 3, 4 and 5. The decision came following directives from the prime minister after an eventful day.

Even as a tripartite committee held almost a daylong meeting to reach a consensus on the hike, RMG workers continued their protest. On the other hand, factory owners threatened to shut down their units if the protestors did not go back to work.

The meeting of the 20-member committee, which has representation of workers, owners as well as the government, approved wage increase in grades 1-6. The gross pay in grade 7 remains unchanged at Tk 8,000, which was Tk 5,300 in the previous pay structure announced in 2013.

The government would publish a new gazette on the revised wage structure in the following three to four days, said Labour and Employment Secretary Afroza Khan, who heads the tripartite committee. She added that no revision was needed for grade 7 workers. The committee, formed on January 9, had been considering pay hikes in the three “most problematic” grades -- 3, 4 and 5.

But eventually it was decided to revise the entire pay structure, originally announced in September last year, for all grades. The workers will receive the arrear with their pay for February, Commerce Minister Tipu Munshi told reporters after the meeting. “We were mainly concerned about the pay in grade 3, 4 and 5. But we eventually revised the wages in six grades so workers get a little more,” he said, announcing the decision at a press conference at the ministry.

Amirul Haque Amin, president of the National Garment Workers Federation, said, “We welcome the revision and the new wage structure.” He was speaking on behalf of the trade union leaders who are on the tripartite committee. But various workers’ groups have at different times expressed a sharp divergence between their views and those representing them in the committee. Indeed, that now stands out as one of the key problems in these negotiations. And probably why, despite the assurances from Amirul Haque, the unrest could not definitively be said to have died down.

Sure enough, reactions among the workers were mixed. Five garment workers were injured in a clash with police as they staged demonstrations the next day rejecting the revised wage structure. Several thousand workers started demonstration on Dhaka-Tangail highway in Narsinghopur area of Ashulia from 9am and tried to put up a barricade.

Later, a chase and counter-chase took place between the RMG workers and police. Several factories were declared shut for the day following the agitation. Agitating workers said they were continuing their protests as their basic salary was not raised as per their expectation.

Production in as many as 35 garment factories remained suspended a day after the government revised the pay structure. Officials of Industrial Police and Department of Inspection for Factories and Establishments confirmed the number of ready-made garment (RMG) factories that remained closed. Of the closed units, the workers from 10 factories of some leading apparel conglomerates, including Ha-Meem Group, Sharmin Group and Envoy Group, joined the agitation, it was reported.

Meanwhile, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) threatened to keep all the factories shut for an indefinite period if the agitating workers did not return to work by Monday, January 14. Some of them did. And by Tuesday, the picture was looking distinctly better. But to say the troubles were over and the issue settled, would be a stretch to say the least. In fact, what has been achieved is at best a temporary reprieve, as fundamental issues remain unresolved in the sector.

Bristling under the surface

Wages in Bangladesh are comprised of a basic hourly wage which is augmented with a variety of legally-required and optional allowances, bonuses and incremental payments. Overtime wages form another part of most workers’ take-home pay. Wages are calculated according to a seven-step grading system for each job classification, which is based on seniority and experience. Taken together, these factors can make it difficult for workers to know exactly how their wages are calculated.

The reason why the workers’ protests continued after the revision of the wage structure is that it took care of only part of the problem. That was the reduction in basic pay suffered by workers in some grades (name 3-6). However it left unresolved the issue whereby workers outside of grade 7 failed to reap the same hike in wages (Tk 2700) with the minimum wage being raised to Tk 8,000 from Tk 5,300. The wages of older experienced workers of other grades increased by more than Tk 2700 compared to the 2013 Gazette, but did not increase by Tk 2700 compared to their previous month’s wages.

“This is an important reason for labour unrest. The problem was not only with the gradual decline of some of the grades, but also the comparative increase in basic and gross grades compared to grade 7,” explains Kallol Mustafa, a leading advocate of workers’ rights.

“An operator of Grade 4 wage was earning Tk 6,420 in 2013. According to the latest announced new wage structure, his wages will be Tk 9,347, which is Tk 2,927 more than the 2,013 wage. However, a Grade 4 worker’s wages in the intervening period have not stayed stagnant, since the 2013 wage structure for the first time also stipulated the 5 percent yearly increment,” he explains further.

His calculations reflect the actual increase in wages for a Grade 4 worker in that case works out to around half the Tk 2927, around Tk 1457. He says workers had actually flagged the issue beforehand, through a notification preceding the implementation of the new pay structure on November 25. Somewhat mysteriously though, or perhaps not so mysteriously, the issue was not even acknowledged in the following gazette notification that came out on November 29.

Not getting their share

The groundbreaking Garment Worker Diaries was a yearlong research project led by Microfinance Opportunities in collaboration with Fashion Revolution and supported by the C&A Foundation. Over 12 months, researchers visited 540 workers (180 per country) at their homes to learn about what they earn and buy, how they spend their time each day and what their working conditions are like. The final report released in April 2018 intended to be a tool for advocacy groups to force international brands to improve conditions of work at their manufacturing houses.

Of the three countries in the study, the Bangladeshi women earned the least per hour—about half what the women in the other two countries earned. On average, they worked 60 hours a week and earned an hourly rate of Tk 28 (the equivalent of 0.95 USD in purchasing power parity). They earned less than the minimum hourly wage 64 percent of the time and there was significant evidence to suggest that the more they worked the less they earned. Outside of work, men controlled earnings that were spent on basics like food and rent and rarely improved a household’s quality of life.

This is despite the size of the industry in Bangladesh dwarfing that of the other two. The study was conducted before the announcement of the a wage structure in September 2018, although remarkably even then, if the exchange rates held, Bangladesh’s workers would be earning just below their Cambodian counterparts, and still well below India. The latest revision to it meanwhile, summarised above, hardly makes any difference. It marks the continuation of a disappointing trend whereby wages in Bangladesh continue to lag behind not only India and Cambodia, but the entire world.

According to a November 2018 survey report of the Japan External Trade Organization (JETRO), which took into account the announced pay hike that was set to be imposed from the following month,  Bangladesh still enjoys the lowest cost for labour in manufacturing clothing products in the globe. The report notes that it offers manufacturers a definite competitive advantage among its peers in the global export market. In Bangladesh, as per the latest wage structure, an entry-level operator in apparel sector (Grade 7) will get $95 (Tk8, 000) a month. Note that the revision this week did not change wages for Grade 7 workers, so this is still the same. The $95 monthly minimum wage is the lowest in the globe, JETRO notes.

The survey, conducted between December 2017 and March 2018, reveals that labour in Bangladesh is still cheap and the average monthly wage is just $101, compared to $135 for Myanmar, $170 for Cambodia, $234 for Vietnam and $518 for China.

 

As we can see from the very useful wage benchmarks for Bangladesh provided by the Fair Labour Alliance, the new minimum wage of Tk 8,000 is above the World Bank’s international poverty line, but far short of The Global Living Wage Coalition (GLWC) Estimate (Tk 13,620). It obviously falls short of the workers’ demands, and is not even in the same ballpark as the The Asia Floor Wage (Tk 36,384.90) published by the Asia Floor Wage Alliance.

The workers’ representatives in the Minimum Wage Board at one stage placed a proposal that stipulated a minimum wage of Tk 12,020 in the seventh-grade. According to Khondaker Golam Moazzem, research director of leading think-tank the Centre for Policy Dialogue, his organisation had proposed Tk 10,028 as the minimum wage in the sector. In the end, when the announcement came, it failed to meet all expectations. Except possibly the owners’, who haggled for it to be pegged at Tk 6,300 (up from the Tk 5300 set in 2013). And still managed to place more than 300 complaints about the Tk 8,000.

While the booming garment industry is definitely contributing to an overall growth rate that now comfortably tops 7 percent, economists say it is suppressing wages and crowding out higher value sectors.

“Bangladesh has not been able to produce more lucrative products — there are barely any exports except ready-made garments,” says Rashed al Mahmud Titumir, a professor of economics at Dhaka University. “There is no better option, so people go into the ready-made garment sector. It means return on labour is low — lower than the return on capital — and there is real wage repression.”

Meanwhile, Dr Anu Muhammad, chair of the economics department at Jahangirnagar University and a longstanding advocate of workers’ rights, characterised the persistent scenario whereby wages remain sticky downwards in the otherwise lucrative sector, in the following way:

“It is said that the industry collapses when wages increase. But the information available to us says the opposite. In 1994, the minimum wage was Tk 930, the export earnings from garments was $2.1 billion; in 2006 the export earnings increased to $6 billion dollars. After increasing the minimum wage to Tk 1662 in 2006, garment export earnings stood at $13 billion by the year 2010. After the minimum wage was fixed at Tk 3,000 in 2010, garment export earnings amounted to $25 billion by 2013. After fixing the Tk 5300 minimum wage in 2013, export earnings in the year 2014 was $29 billion dollars. The export figure growth following a wage hike is always seen to outpace the wage hike Yet there is no end to lying, cheating and torture.”

There can be little left to the imagination as to who the last sentence is pointed at. Railing against the class that are the owners of capital is a matter of course for Dr Muhammad, arguably Bangladesh’s most enduring Marxist, yet the argument he puts forward with data (his export figures are on a January-December calendar) is a compelling one, and puts the lie to the owners’ frequent claims of impending doom in case of a substantive increase in wages in the sector. Rather they would like the international buyers to pick up the tab for it. There’s a fair argument to be made there. But the pot of honey coming into the country every year cannot be denied. Export earnings from RMG were nearly $31 billion in the last fiscal. If an IndustriALL Bangladesh Council estimate that only 12 percent of that is being spent on workers is correct, clearly that is far from enough.

 

Wage Benchmarks in Bangladesh

For Bangladesh, the Fair Labour Alliance has selected a range of wage benchmarks that reflect the most recent thinking and methodologies. Where necessary, the FLA has made numerical adjustments to wage benchmarks to make each figure consistent and comparable; adjustments include conversion to net monthly equivalents, adjustment for inflation, and extrapolation of basic needs for households.

The National Upper Poverty Line (Tk 4,986.74) is published by the Bangladesh Bureau of Statistics using a Cost of Basic Needs method to calculate a food poverty line, estimating a non-food poverty line by sampling the expenditures of households near the food poverty line (the National Upper Poverty Line is the sum of the food and non-food poverty line).

 

The Local Legal Minimum Wage (Tk 5,290). The current legal minimum wage was set in 2013 by the Bangladesh Minimum Wage Board, and applies to seven groups of workers categorized by ‘Grade’ or experience. This report focuses on the lowest minimum wage paid to the least experienced workers (Grade 7 workers) as its Local Legal Minimum Wage Benchmark.

The World Bank International Poverty Line (Tk 6,784.17). The World Bank considers a daily wage of 2011 PPP$3.10 as an internationally comparable metric for poverty. This figure is not to be confused with the World Bank International Extreme Poverty Line of 2011 PPP$1.90 a day.

The Global Living Wage Coalition (GLWC) Estimate (Tk 13,620). This living wage estimate is published by the GLWC using the Anker Methodology and is calculated using three expenditure groups (food, housing, and essential needs) with an added small margin for emergency events.

The Global Living Wage Coalition (GLWC) Estimate (Tk 13,620). This living wage estimate is published by the GLWC using the Anker Methodology and is calculated using three expenditure groups (food, housing, and essential needs) with an added small margin for emergency events.

The Worker Minimum Wage Demand (Tk 16,000) was made by 150,000 garment workers during a strike in December of 2016, and is meant for the lowest paid category of workers.

The Asia Floor Wage (Tk 36,384.90) is published by the Asia Floor Wage Alliance and is meant to cover all of Asia. The figure assumes income is spent on food, non-food necessities, and discretionary spending at a proportion of 50, 40, and 10 percent, respectively. Unlike the other wage benchmarks, the Asia Floor Wage is calculated under the assumption that a worker supports herself or himself plus two-adult-equivalent dependents (all other wage benchmarks listed assume only a two-adult-equivalent household).

The FLA has adjusted these wage benchmarks to reflect net values. All wage benchmarks have been adjusted to account for Income Taxes and Bangladeshi Revenue Stamp when applicable. In addition to reflecting net values, all wage benchmarks are adjusted to monthly values, in 2017 Bangladeshi Taka, and converted to USD using 2017 average exchange rates or to PPP international dollars using 2017 average conversion rate. All adjustments for inflation, and Purchasing Power Parity, relied on data from the International Monetary Fund’s World Economic.

Outlook Database. Source: Fair Labour Alliance

  • For a living wage only
  • Issue 28
  • Vol 35
  • DhakaCourier

Leave a Comment