Last month, a coalition of 15 fashion brands, including sports giant Adidas and fashion brand Levi Strauss and Co, sent a joint letter to Bangladesh Prime Minister Sheikh Hasina asking for the minimum wage review mechanism to incorporate all stakeholders' views and reflect the country's economic realities.
The 15 signatories, 10 of which are Fair Labor Association (FLA) members, stated they 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.
The letter said: "Bangladesh's commendable sustainability efforts in the garment, footwear, and travel goods sectors have garnered well-deserved recognition. We value this critical partnership."
The fashion brands said they remain "optimistic that the final increased minimum wage reached [in Bangladesh] will make significant strides towards ensuring worker welfare by properly reflecting the severe economic challenges that garment workers have faced through the pandemic, the subsequent supply chain crisis, and the current rate of inflation".
The brands ask the government to consider three important points. Firstly, that the consultations should be inclusive and include all relevant stakeholders, including a constructive dialogue with labour groups and trade unions. Secondly, that 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 needs and takes into account inflationary pressures. The signatories note the average monthly net wages for garment workers in Bangladesh has not been adjusted since 2019 (although it was announced in 2018), while inflation has increased significantly over that time. They recommended that the government of Bangladesh adopt an annual minimum wage review mechanism to keep up with changing macroeconomic factors.
Thirdly 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. They also strongly urged the government to ensure that there is no retaliation against participants both during and after the minimum wage review to foster and promote an atmosphere of open dialogue and inclusivity through the minimum wage negotiations, and beyond.
The fashion brands also acknowledged their own responsibility in enabling the above recommendations and stated: "We are committed to implementing responsible purchasing practices to fulfil that role."
This week however, instead of the cooperative and orderly process recommended by these brands, the world saw violent street clashes break out between police and the workers, after they rejected a 56 percent hike in the minimum wage for the sector.
In fact, the workers had been demonstrating since October 23, in anticipation of the imminent announcement of a new minimum wage. The fact that these demonstrations coincided with a major movement by the opposition to try and force the government to resign and pave the way for a caretaker government to conduct the next elections, made things even tougher for the police by adding to the tension on the streets.
The minimum wage that was eventually announced, Tk 12,500 per month, was certainly closer to the Tk 10,500 recommended by the factory owners and employers, essentially the BGMEA, than what was being asked for by workers (ranging from Tk 21,500 to Tk 25,000) from the Minimum Wage Board, that has representation from both sides. Although the workers' demand has often been presented as a maximalist position in the media, it is interesting that a study released by a leading think-tank, the Centre for Policy Dialogue, last month came up with its own recommendation, Tk 17,568, that was closer to the workers' demands than the factory owners' concession, and even what has eventually been recommended by the board falls far short of this.
Who is right, and who is wrong?
While presenting their findings and sharing their recommendation last month, CPD noted the sector had witnessed an average annual growth of over 5 percent in real gross value added per worker from 2010 to 2017 and ranked second highest among South Asian apparel-exporting countries. However, despite this growth, the monthly real wage for Bangladeshi RMG workers remained the lowest in South Asia and among the competitors. This disparity persists, as the minimum wage in Bangladesh remains at USD 72.42 per month, retaining its position as the lowest in the region, primarily due to significant currency devaluation amid economic challenges. Indeed, it is the lowest in the entire world.
CPD said the standard family food cost is set at BDT 16,529, but garment workers can only afford to spend BDT 9,198, which covers 56 per cent of the required amount. In fact, for grade 7 workers, the gap is even higher, as they can only spend BDT 5,344 on food. As a result, the workers are forced to abstain from including essential items like eggs, sugar, fruits, and milk in their diets, compromising their access to a healthy nutrition.
In 2023, there has been a 25 per cent increase in the non-food cost for workers' families, bringing the mean expenditure to BDT 12,882, compared to the 2022 figure of BDT 10,313. The escalating expenses of children's education have also played a role in driving up the overall non-food costs for workers' families.
These are some of the findings of the CPD study titled 'Revision of the Minimum Wage of RMG Workers in 2023: A UNGP perspective'. The objective of the study was to propose a minimum wage for the RMG workers based on the analysis of the performance of key indicators, as well as reviewing the performance of state and enterprises in the process of discussion and negotiation.
Based on this study, the dialogue titled 'Revision of the Minimum Wage of RMG Workers in 2023' was organised on Sunday, October 8 at the Lakeshore Hotel, Dhaka.
In his keynote presentation, Dr Khondaker Golam Moazzem, Research Director, Centre for Policy Dialogue (CPD), proposed the following minimum wage adjustments for different grades - Grade 7 at BDT 17,568, Grades 5 and 6 at BDT 19,310, Grade 4 at BDT 21,808, Grade 3 at BDT 23,533, Grade 2 at BDT 34,603, and Grade 1 at BDT 41,005.
He urged "The minimum wage board should reinstate the share of basic wage to at least 55 per cent in the new wage structure'. He added that, instead of specifying a fixed amount, other elements of the wage structure should be established using a percentage-based system."
Dr Moazzem recommended that the new minimum wage board should include child allowance in the existing wage structure. They should streamline the wage structure by merging grade 6 and grade 5 while leaving grade 7 and others unchanged.
'Workers often remain in their positions for extended periods without any promotion' highlighted Dr Moazzem. Hence, a mandatory time-bound rule should be established for factories to promote workers by grade. Associations, Department of Inspection for Factories and Establishments (DIFE), and Ministry of Labour and Employment (MoLE) can work together in this regard. The DIFE must also provide a report in June 2024, highlighting the implementation status of the new minimum wage.
Tamim Ahmed, Senior Research Associate, CPD, who worked with Dr Moazzem on the study, underscored "Many factories are not adhering to the grading system, resulting in workers receiving salaries below the minimum wage and missing out on necessary increments." He proposed the establishment of a tripartite committee within the next three months to oversee and facilitate this process.
While discussing the brands' role in improving the minimum wage, the senior research associate of CPD said "Brands and buyers should express their commitment to the implementation of the new minimum wage by issuing an official letter, which will require increasing the price of the product by 7 cents to adjust the cost proposed minimum wage."
Meanwhile the chairman of the Minimum Wages Board, Liaquet Ali Molla, apparently quite taken by the CPD's presentation, said: "Once the gazette for the minimum wage is published, RMG organisations should promptly communicate its details within the factories. This will ensure that workers are aware of the wage revision and have a clear understanding of their rights."
Also in attendance that day was Faruque Hassan, president of BGMEA, who mentioned that factories are currently struggling to operate while also retaining their workforce. This seems to be an eternal complaint of the RMG factory owners. They are always struggling to make ends meet. Nevermind that in the meantime they have taken over ownership of the entire country, enjoying unparalleled influence in the corridors of power, and pretty much direct involvement in policymaking.
The BGMEA president that day was understandably non-committal, uttering some inanities about the industry's main focus now being to increase earnings to enable "the retention of employees". It was a clever way to try and deprioritise the wage negotiations, even though the five-year stipulated by the last Minimum Wage Board was set to expire.
Faruque Hassan did add later that 'although increasing the minimum wage remains a priority, its execution will require more time and effort.'
Meanwhile Mohammad Hatem, president of the BKMEA, the BGMEA counterpart for the knitwear industry, tried to make it sound like a payoff between higher wages, and other forms of compliance and general factory upgrades.
"Factory owners invested in automation, greening RMG factories and are also attempting to ensure compliance. However, buyers have not raised the product price despite of these efforts," he said. That last point he makes is of course a crucial one, yet if only that could make some of the factory owners understand the plight of the workers, when they sit down to negotiate better terms for themselves. And you can be sure that when they do, these workers have far more riding on the outcomes of those negotiations than our factory owners do when they sit with the global brands for better prices.
Md Siddiqur Rahman, another owners representative as a former president of BGMEA, tried to point out that higher wages may drive buyers to cheaper markets, potentially causing businesses to lose customers and workers to lose jobs.
But that isn't quite how it works of course. Siddiqur Rahman makes it sound as if paying cheap wages to labour is the Holy Grail for the businesses, and that is why they flock here. But rather it's the overall cheap cost of manufacturing that draws in the international buyers.
For whatever the reason might be, there is no question that Bangladeshi workers have been getting a raw deal for far too long now, and the owners' callous disregard for their condition is regrettable. Even after the increased offer, Bangladesh's RMG workers will remain the worst-paid workers in the world, in what is a very lucrative industry, although like most consumer goods retailers, fashion companies are grappling with high inventories and a slowing global economy, where shoppers in key markets are buying less as they feel the pinch. Retailers in the United States and Europe are the main buyers of Bangladesh-made clothes.
The good news is that global fashion retailers including H and M and Gap are now committed to raising purchase prices for Bangladesh-made clothing to help factories there offset higher workers' wages, according to a US-based association representing more than 1,000 brands.
Factory owners had said the wage hike, which comes ahead of a January general election, would eat into their profit margins by increasing costs 5-6 per cent. Labour accounts for 10-13 per cent of total manufacturing costs, industry estimates show.
Asked if they would raise purchase prices by the 5-6 per cent that costs will rise, Stephen Lamar, chief executive of the American Apparel and Footwear Association (AAFA), told Reuters: "Absolutely".
"As we and our members have reiterated several times now, we are committed to responsible purchasing practices to support the wage increases," Lamar said in an email.
"We also renew our pleas for the adoption of an annual minimum wage review mechanism so that Bangladeshi workers are not disadvantaged by changing macroeconomic conditions."
Whatever the case may be, the violent crackdown we have witnessed against the workers can hardly be justified, and has drawn international condemnation from governments and human rights organisations. The US Department of Labor's Deputy Undersecretary for International Affairs Thea Lee on Wednesday condemned the alleged police shootings of two readymade garments workers -- Rasel Howlader and Anjuara Khatun.
She also urged the Bangladesh government to revisit the recent minimum wage decision to ensure that it provides equitable compensation that meets the needs of workers and their families. Lee made the calls in a statement on the recent violence against unionists in Bangladesh.
"The U.S. Department of Labor is deeply concerned over the escalation of violence and crackdown on workers and trade unionists in connection with Bangladesh's minimum wage review. The department condemns the alleged police shootings of Rasel Howlader on 30 October, 2023, and Anjuara Khatun today (Wednesday)," the statement reads.
It further said, "A 26-year-old maintenance operator at Design Express Factory and member of the Sommilito Garments Sramik Federation, Howlader was killed during a protest. Khatun, a 23-year-old sewing machine operator and mother of two, was also killed during a protest.
"We call on the government of Bangladesh to respect workers' freedom of assembly, end the violent crackdown on workers and conduct a full investigation of alleged police involvement in Howlader and Kahtun's killings.
"We also call for the immediate release of Jewel Miya, a labour organiser from the Bangladesh Independent Garment Workers Union Federation arrested in connection with the minimum wage protests.
"We urge the government of Bangladesh to revisit the recent minimum wage decision to ensure that it provides equitable compensation that meets the needs of workers and their families. To prevent future unrest, we also urge the amendment of existing labour laws to guarantee that all workers can fully exercise their right to freedom of association and collective bargaining, as called for by the International Labor Organization."
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