Problem of minimum wages and the prospects of RMG sector

Newspaper article; The Financial Express; Bangladesh ; publication date: 23-7-2010

Problem of minimum wages and the prospects of RMG sector

Basharat Hossain;
Assistant Professor of Economics; International Islamic University Chittagong; Bangladesh
Cite:
Hossain; Basharat (2010); Problem of minimum wages and the prospects of RMG sector; the
daily financial express-bd; retrieved from: http://www.thefinancialexpress-
bd.com/more.php?news_id=106968&date=2010-07-23

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BANGLADESH earns the largest portion of its export income from readymade garments and
knitwear. At first, Bangladesh exported the readymade cloths and knitwear of one million US
dollar to the USA through Riaz Garments in 1978.After that, Garments industry takes the
position of a leading industry of our export income by whipping the traditional jute industry,
which is illustrated by the following chart:

Chart -1: Percentage of total export income (1972-2009)

Year Jute and Jute goods Readymade garments

1972-75 86.73 0
1975-80 72.75 .03
1985-86 50.9 16.05
1990-91 22 50
1994-95 11.2 64
1998-99 7.1 76
2004-05 4.65 74.16
2008-09 2.68 79.33
But, it is frightening news for our country that this leading industry is now passing through
crucial moments. Recent volatile situation in different garments facilities is threatening it
existence. Since one year, the workers of RMG in different industries have been creating
violence in the form of procession, vandalizing and blockading the roads to hike their
minimum wage, attendance bonus and to ensure other facilities. These are common scenarios
in most of the garments factories of   Savar, Mirpur, Rupganj, Joydebpur, Gazipur, Kaspur,
Ashulia, Nishchintapur, Norashinghpur, Zamgara and in other garment factories. About 140
garments factories were closed last year due to unrest accompanied by the crisis of power and
gas, price hike of yarn, poor infrastructure, and low price offers from international buyers
amid increased production cost. These are the main reasons for shutdown of production of a
factory.

Whatever the situation, the authority will have to find out the path of solution to recover the
huge economic losses. Low wage is the key reason of workers agitation. The present
minimum wages paid by the garment factory to its workers is Tk 1662.50 per month while
the workers are demanding Tk 5000 per month. The current minimum wage is really a tiny
and insufficient amount against the current inflation — both in food (7.85%) and non-food
(5.49%) goods while general and average inflation are 6.89 % and 7.69% respectively (2009-
10, July-March, BBS).

Fixation of minimum wage in Bangladesh

Year Amount (in Taka)

1985 621
1994 930
2006 1662.50
2010 1662.50

The minimum wage of Tk.1662.50 was fixed on June 2006 when the cost of living was
certainly lower than now. The Bangladesh Bank and the Bangladesh Institute of
Development Studies, reported that since 2006 the cost of living of an RMG worker
increased by at least 35 percent. But the Centre for Policy Dialogue, a private think-tank,
reported that the average cost of living increased by around 70 percent because of increasing
house rent, gas and power price.

Important news is that, the minimum wage of Bangladeshi garment workers (less than $25) is
the lowest wages among the garment producing nations. At the entry point, a worker gets
$90, $101 in Vietnam, $135 in India and $217 in China.

Moreover, while garments workers are extreme poor, because they earn less than one dollar
per day international poverty line income is $1.25. Along wage, they are also deprived from
other benefits and facilities including bonus, insurance coverage, financial support for illness
and good environment to work. At this situation, to resolve wage problem, BGMEA proposed
Tk 2000 per month as minimum wage for entry level worker against the proposal of Tk 6200
from the representative of garments workers to the Minimum Wage Board (MWB). The
MWB is set to announce the minimum wage by July 27, 2010.

The authority should fix a minimum wage including other benefits to save this foreign
exchange earning industry as well as three million workers who are involved here.