Independent University, Bangladesh

Critical Analysis of Minimum Wage Decisions and

Consequences in Bangladesh

Prepared By: Team Be

NAME ID
Ibrahim Mohammed Abul Hashem 1710020
Tauhidul Hoque Nirob 1610194
Tabassum Shahriar 1610276
Faysal Siam 1620167
Suceta Bhadra 1621640

Department of Human Resource Management

Ms. Bushra Sanjana

HRM 370: Labor Economics and Compensation Theory

Section 1, Spring 20’

31st March, 2020

Letter of Transmittal

31st March, 2020

Ms. Bushra Sanjana
Lecturer, School of Business
Independent University, Bangladesh

Subject: Submission of Report on Critical Analysis of Minimum Wage Decisions and

Consequences in Bangladesh

Dear Mam,

It is an enormous pleasure to submit this report on our critical analysis of minimum wage
decisions and its consequences in Bangladesh. It was an exceptional opportunity for us to
work on such a report, which helped us understand and also evaluate the structure of
minimum wage and its implications - especially in the Ready-Made Garment industry.

Despite the challenges confronted while conducting our research, we tried our level best to
arrange this report in the requisite standard as instructed. We thoroughly enjoyed our
collective efforts to complete this report. Throughout the whole report, we gained immense
knowledge and experience which will enhance our career development in our respective
fields.

Therefore, we request you to eagerly accept our report and enlighten us with your valuable
suggestions and feedback. We sincerely thank you for giving us the opportunity.

Sincerely yours,

Team Be
 Executive Summary
The minimum wage of the export-oriented apparels sector or ready-made garment
sector (hereinafter RMG sector) in Bangladesh is now 8,000 BDT which is set by the
‘Minimum Wage Board’. The Board was convened in June 2018 after the last revision
of the minimum wage of the RMG sector was made in October 2013. There are three
major concerns: first, no proper definition is available on the minimum wage in the
national rules and regulations (Labor Act 2006; Amended Labor Act 2013); second,
there is a lack of an acceptable methodology which could be followed by the Board for
estimating the minimum wage; and third, there is a dearth of available sector-specific
and macroeconomic data on key indicators in the public domain. As a result, negotiation
and discussion on the minimum wage has hitherto been carried out without proper
definition and methodology of the minimum wage and also without proper information
on relevant indicators.

Due to the recent changes, a “quality of life” improvement for workers was brought by a
change regarding lunchrooms. Previously, lunchrooms with adequate facilities were
required to be provided only if more than 50 workers were employed there, thus only
impacting larger workplaces. Moreover, some company in the RMG sector provides
workers families to keep their children in day care center while they work which is
incredibly helpful. Now, however, the Act allows for medium-sized workplaces to also
benefit from this facility, as a lunchroom is now required to be provided for workplaces
employing more than 25 workers. Workers' families have been greatly benefited by a
change regarding payment when a worker die. One of the most impactful changes
brought about by the Act guarantees financial benefits to new mothers after they give
birth. The amendments not only benefited the workers, it also benefited the employers.
It now balances the right of both workers and employers.

Due to recent riots The RMG industries are facing many problems as the worker
demanding 16,000 BDT instead of 8,000 BDT. This report is concluded how the
solutions will affect on the short-run and long-run decision that will increase the
“standard of life” of low earning workers if their minimum wage is increased.
 Table of Contents
Chapter 1 .................................................................................................................................. 1
The Concept of Living Wage ................................................................................................. 1
Minimum Wage Calculation Process..................................................................................... 2
Chapter 2 .................................................................................................................................. 3
Legislation Regarding Wage (Recent Changes) .................................................................... 3
Wage Comparison with Other Industrialized Nations ........................................................... 5
Clean Clothes Campaign: .................................................................................................. 6
ACCORD International: .................................................................................................... 7
The Recent Riot in RMG Industry ......................................................................................... 8
Chapter 3 ................................................................................................................................ 10
Problem Analysis ................................................................................................................. 10
Sustainable Solutions ........................................................................................................... 13
Short Term Impact: .......................................................................................................... 14
Long Term Impact: .......................................................................................................... 14
Reference to Defend Our Argument: ............................................................................... 15
Chapter 4 ................................................................................................................................ 15
Conclusion and Recommendations ...................................................................................... 15
References ............................................................................................................................ 17
Appendix A ...................................................................................................................... 17
 Lists of Tables and Figures
Figure 1 ...................................................................................................................................... 1
Figure 2 ...................................................................................................................................... 5
Figure 3 ...................................................................................................................................... 6
Figure 4 ...................................................................................................................................... 7
Figure 5 ...................................................................................................................................... 8
Figure 6 ...................................................................................................................................... 9
Figure 7 .................................................................................................................................... 12
 Chapter 1
The Concept of Living Wage

A living wage refers to a theoretical income level that allows a person or family to afford
adequate shelter, food, and other basic constraints. The purpose of a living wage is to allow
workers to earn enough income for a satisfactory standard of living and to stop them from
falling into deficit.

Economists say the cost of living should be substantial enough to see no more than 30% of
households spend. The cost of living provides the most basic cost of living for the income-
earner and his family without the need for government support or poverty programs. With a
living wage, an individual can take pride in his work and enjoy the dignity of a life beyond
poverty. A living wage is a full consideration of the cost of living. Wages vary according to
location as the cost of living varies.

For example, in rural Louisiana, the living wage is approximately $9.33, while in Washington
DC, it is closer to $15 per hour. The living wage, contrary to the federal poverty threshold,
takes into account the factors needed to estimate the actual costs of a particular geographic
area. The cost of living is first measured by the essential cost of living for a worker and his
family.

Figure 1

This includes food for the family (for low-cost nutritious food), housing (for basic healthy
housing), and other necessary expenses for a family that has children's education, good health

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care, transportation, recreation, clothing, household goods, small margin for freight,
communication, personal care and emergency and unforeseen events.

The Economic Policy Institute's "Basic Family Budget" and the Wider Opportunities for
Women's "Self-Sufficiency Standards" use comprehensive research on the seven aspects of
living costs to achieve similar minimum incomes.

Minimum Wage Calculation Process

Minimum wage is an essential macroeconomic mechanism for the wellbeing and smooth
development of any economy. The minimum wage is the lowest wage permitted by law or by
a special agreement. As we are focusing on the RMG sector of Bangladesh, the minimum
wage for this sector is TK 8000. Although the minimum wage is not defined by the Labor Act
2006, it sets out industry-wise minimum wage rates. The government declares the minimum
wage rate on an industry basis, following the recommendations of the Wage Board, a
specialist tripartite established under Article 138 of the Labor Act 2006. The wage board
takes into account the cost and quality of life when recommended also considers the cost of
living, cost of production, productivity, price of products, business efficiency, inflation rate,
economic and social conditions of the country, related areas and other associated factors. Any
changes to the above criteria (within one to three years) shall be binding on the Minimum
Wages Board (MWB) to amend the recommendations. The government may set the
minimum wage rate for any industry every five years. Minimum wage rates are determined
on an industry basis, which affects all concerned employers.

The minimum wage determination and calculation is shown below as per the Wage Indicator
organization:

Working hours

• Days per week specified: 5.5

• Hours per week specified: 48
• The minimum monthly wage is determined based on daily and weekly working hours,
which is 8 hours per day and 40 hours per week.

Monthly Wage are fixed on the basis of number of working hours per day and per week,
which is 8 hours per day and 40 hours per week. According to the Bangladesh Labor Act
2006, the monthly minimum wage is determined by the number of working hours per week.
Regular working hours are 08 hours per day and 48 hours per week.

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Overtime pays one and a half times the standard hourly wage rate.

Vacation pay for working on weekends and public holidays is 1 1/2 times the daily rate or
double the rate of remuneration.

Chapter 2
Legislation Regarding Wage (Recent Changes)

The Bangladesh Work Act 2006 (the "Act") has as of late been revised by the Legislature of
Bangladesh. In general, it is outstanding that the privileges of laborers have been extended,
yet the corrections don't concentrate exclusively on laborers' privileges. Bosses, additionally,
have been profited by specific changes and their obligations have decreased in explicit
circumstances.

In September 2018, the Bangladesh government moved to raise the month to month the
lowest pay permitted by law for piece of clothing laborers - without precedent for a long time
- to Tk 8,000 (USD 96), up from the past Tk 5,300 (USD 63). Still many articles of clothing
laborers are disappointed with the expansion, as laborers' privileges associations and worker's
organizations had been calling for in any event Tk 16,000. Others were troubled about an
error in the expansion among junior and senior laborers. While laborers guarantee the
expansion isn't sufficient to take care of expanded living costs, manufacturing plant
proprietors state they can't stand to pay expanded wages for which both the gatherings are not
very still. Labor inspectors are authorized to ensure implementation of labor law including
minimum wage provisions. A worker who is paid less than the minimum wage may apply to
the Labor Court for recovery of the same within one year from the date on which the amount
became due to the worker. Moreover, an employer who pays his workers’ wages at a lower
rate can be punished with imprisonment for a term which may extend to one year or a fine
which may extend of 5,000 taka or both.

In January 2019, because of the ongoing changes, a "personal satisfaction" improvement for
laborers was brought by a change with respect to break rooms. Beforehand, lounges with
sufficient offices were required to be given just if in excess of 50 laborers were utilized there,
therefore just affecting bigger work environments. Presently, in any case, the Act takes into
account medium-sized working environments to likewise profit by this office, as a break

3
room is currently required to be accommodated working environments utilizing in excess of
25 specialists.

Laborers' families have been extraordinarily profited by a change with respect to installment
when a specialist pass on. Already, upon a specialist's passing, the business would give the
wholes payable to a Work Court, and from there on be never again subject. Presently upon
death or by reason of the specialist's whereabouts not being known be that as it may, the cash
must be offered straightforwardly to a chosen one of the expired laborers or their legitimate
beneficiary. This new system, along these lines, benefits laborers' families since it guarantees
that the cash legitimately contacts them at the earliest opportunity, or if not, in any event goes
to the government assistance of different specialists and their families through the
establishment.

It has additionally become simpler and more affordable for laborers to enlist Worker's guilds,
in this manner assisting with protecting the rights and interests of laborers. It can surely be
said that the principle recipient of these changes has been the laborers. The Act currently
covers a more noteworthy extent of laborers – as already, the Demonstration didn't matter to
laborers in maritime vessels. This having presently been canceled, such specialists can now
completely make the most of their privileges under this Demonstration. Different
classifications of laborers have increased extra advantages – for instance, laborers in the tea
business upon retirement gain fiscal advantages as well as different advantages, for example,
their current recreation offices.

One of the most effective changes realized by the Act ensures budgetary advantages to new
moms after they conceive an offspring. Beforehand, if a lady had not pulled out preceding the
introduction of her kid, in the event that she did as such after the birth, she could in any case
profit maternity leave for a time of as long as about two months a while later.

Despite the fact that the changes profited both the laborers and businesses, it additionally has
made a few kickbacks alongside it as well. There are still a few divisions which are
exceptionally discussed much after the progressions that occurred. Countless changes center
around decreasing the detainment terms, for the two specialists and for managers in instances
of negation. For instance, if laborers act in an unlawful strike, the detainment term has been
brought down from 1 (one) year to 6 (six) months. This goes the two different ways, so
assuming then, a business demonstration in an illicit lock-out, their detainment has likewise
been decreased from 1 (one) year to 6 (six) months. In spite of the fact that this may seem to

4
conflict with the severe execution of the Act, what is required is a fixing of the lawful
arrangements alongside a superior controlled usage so as to protect higher consistence with
the Act.

This has been an important step in the journey towards a better labor law. Recent social
changes and higher expectations of workers have been reflected. For example, the recent
changes in Bangladesh of women entering the workforce in larger numbers than ever before
have been reflected in the provisions for better maternity terms, and higher expectations of a
better workplace manifested itself in the provisions for lunchrooms for medium-sized
workplaces.

Wage Comparison with Other Industrialized Nations

Figure 2

Bangladesh remains the second biggest attire exporter on the planet, after China, as indicated
by the World Exchange Association (WTO) information. The information said that
Bangladesh clutched its status on the planet in FY 2017-18, representing 6.5 percent portion
of the market. Vietnam traded $27 billion worth of article of clothing items in 2017 with its
5.9 percent piece of the pie, the WTO information said. In the RMG division both
Bangladesh and Vietnam are pretty much the equivalent. The present the lowest pay
permitted by law of Vietnam is around US $125-$180. As per the report's discoveries, 99% of
Vietnamese piece of clothing laborers that were examined win beneath Asia's living pay rate
proposed by the Asian Floor Compensation and 74% of them acquire underneath the
worldwide living pay proposed by the Worldwide Living Pay Alliance. Piece of clothing
laborers are not simply exposed to low wages, they additionally succumb to the executive’s
misuse, with 23% report getting hollered and yelled at day by day. Article of clothing
laborers are likewise offered minimal decision and office the same number of are kept in

5
obscurity about their privileges, sets of responsibilities and unit costs for the items they made.
About 90% of laborers in the investigation didn't know about their activity grade, set working
hours or yearly leave arrangements. Feeble haggling intensity of worker's guilds, burnout and
potential loss of occupations keep these piece of clothing laborers from standing up for their
privileges. With regards to lawful security for these representatives, Vietnam misses the
mark. The absence of work examinations and the restriction of the statutory the lowest pay
permitted by law add to the issue. Besides, the report cautions that Vietnam's ongoing grasp
of global work strategies and exchange understandings, which implies a move towards a
market framework, will make greater helplessness for laborers and leave them even less
space for aggregate dealing.

Clean Clothes Campaign:

Figure 3

The Clean Clothes Campaign (CCC) is the piece of clothing industry's biggest union of
worker's guilds and non-legislative associations. Shaped in the Netherlands in 1989, the CCC
has crusades in 15 European nations: Austria, Belgium (North and South), Denmark, Finland,
France, Germany, Italy, Ireland, Netherlands, Norway, Poland, Spain, Sweden, Switzerland
and the Assembled Realm. The national parts of the CCC are independent associations of
buyer gatherings, worker's guilds, human and ladies' privileges associations, specialists and
activists. Delegates from every national battle meet three times each year to arrange universal
exercises.

The Clean Clothes Campaign (CCC) is committed to improving working conditions and
supporting the strengthening of laborers in the worldwide piece of clothing and sportswear
businesses. They teach and activate customers, campaign organizations and governments, and
offer direct solidarity backing to laborers as they battle for their privileges and request better
working conditions. The association works with a worldwide system of accomplices,

6
continually as indicated by our standards and with a solid conviction that enabling ladies is
critical to improving lives.

• CCC vision: All people working in the global garment and sportswear industries
enjoy and exercise their human rights at work and in the community and are able to
defend and improve these rights.
• CCC mission: The Clean Clothes Campaign network works to structurally improve
working conditions and support the empowerment of manufacturing workers in the
global garment and sportswear industries.

ACCORD International:

Figure 4

The Accord is a legally-binding agreement between global brands & retailers and Industrial
Global Union & UNI Global Union and eight of their Bangladeshi affiliated unions to work
towards a safe and healthy garment and textile industry in Bangladesh.

This understanding was marked in the prompt repercussions to the Rana Square structure
breakdown on 24 April 2013, which murdered 1,133 specialists and basically harmed
thousands more. More than 220 organizations marked the five-year Accord, and by May
2018, crafted by the Understanding had added to fundamentally more secure work
environments for many Bangladeshi article of clothing laborers. To keep up and grow the
advancement accomplished under the 2013 Accord, more than 190 brands and retailers have
marked the 2018 Progress Accord with the worldwide associations, a restored understanding
which went into impact on 1 June 2018. They have practical experience in wellbeing
preparing, manufacturing plant review and settling security protest.

The Accord Workplace Programs focus on informing workers about safety and their rights
under the Accord, building effective Safety Committees and providing a Safety Complaints
Mechanism.

7
The accord protects workers' rights to:

• Refuse unsafe work

• Participate in the work of their factory Safety Committee
• File a complaint when they see a safety problem in their factory
• Protection against reprisal for reporting safety-related matters
• Freedom of Association in relation to protecting their own safety

The Recent Riot in RMG Industry

The recent RIOT in the RMG industry took place back in January 2019. Garment workers in
huge numbers took their frustrations to the streets throughout Dhaka and Savar. Workers
gathered at some of the busiest and most congested roads and blocked all traffic movements
crippling the city for days. The workers got even more agitated when the authorities, instead
of negotiating with the worker's trade union to resolve the issue, decided to use force to
disperse the protests. More and more RMG workers decided to join the protest on the
following days. The main reason of the unrest rooted from the changes to monthly wage as
per the wage gazette published in December 1st, 2018. Wage for the entry-level workers, who
fall under the seventh grade, increased to Tk 8,000 from Tk 5,300. However, the wages of the
workers in other grades did not increase at the same rate - resulting in seniors in other grades,
who’ve been in such organizations for years, getting paid lower than the entry level workers.
According to The Daily Star, Senior operators who have been working for more than seven to
eight years, saw a rise of only Tk 500, whereas entry-level worker's wages increased by Tk
2,700 at one go.

The protests went on before the gazette was

published back in 2018. Workers demanded a
wage that met their living standards. Upon the
publication of the gazette by the Government
of Bangladesh, workers unsatisfied with the
new pay structure, headed to the streets again
demanding a wage of BDT 16,000, which is
considered to be the living wage. Even though
the demands for entry-level workers were met,
seniors and mid-level workers argued that the
rise of their wages did not reflect the ongoing Figure 5

8
inflation that directly affected the rise of household expenses. For the billions in dollar
amount of export in business the RMG industry has, the workers feel as though they aren't
being compensated enough. According to The Guardian, Bangladesh’s 4,500 textile and
clothing factories shipped more than $30bn worth of apparel in 2018.

The worker's unions on separate occasions announced riots after meetings with the wage
board provided no desirable outcomes. BGMEA President at the time, Mr. Siddiqur Rahman,
proposed TK 6,360 minimum wage while workers’ representative Jatiya Sramik League
leader, Shamsunnahar Bhuyian, proposed for a fairer wage of TK 12,020 at the time.
However, the Garment Worker's Trade Union had rejected both of the proposals and kept on
demanding a living wage of Tk 16,000 through their protests.

The second reason RMG workers protested was because in some cases the management of
several factories paid the workers following the old pay structure, defying the new pay
structure outlined by the new wage gazette. Workers continued to protest demanding a hike
in wages in all grades as well as demanding that the management implement the new pay
structure outlined by the gazette.

Figure 6

RMG workers continued with their demonstration for eight straight days. During protests, at
least 10 workers were injured in a clash with police at Narsinghapur in Ashulia, according to
The Daily Star. As many as 50 garment factories were shut down following the incident.
According to the police, the workers one day had started gathering on the Abdullahpur-

9
Baipail road where, upon the police's arrival to disperse the crowd, the workers responded by
hurling brickbats at the law enforcers, forcing law enforcers to baton charge in retaliation. In
many instants, Police had to resort to the use of tear shells and water cannons to disperse the
protesters.

Chapter 3
Problem Analysis

The RMG sector of Bangladesh contributes $30-Billion towards the economy of Bangladesh.
Take into account the fact that the industry also employs nearly four million workers, with
most being women, the industry is second to none when compared to other industries in the
country. The RMG sector has been growing at an average rate of 17% since the 1980's.
Although the industry has been booming, issues of minimum wages for the workers has
always been in the headlines. While an acceptable solution to the wage-related problems is
wished by all, the bureaucracy often involved in the process hampers any progress made.

One of the major issues these riots keep happening at frequent intervals has a lot to do with
communication between the workers union, the factories and the government.
Communication between the workers and management when it comes to discussion on wage-
related issues is almost close to non-existent. Due to lack of communication and not getting
to participate in negotiations for a better wage - workers only find out about the change in
pay structure on the payday itself.

For instance, negotiations between the workers union, the RMG factories, and the
government for a new pay structure began in February 2018 and went on for 7 months. The
gazette was then finalized and published in November, going into effect from December.
Throughout the entire process, majority of the workers weren’t aware of negotiations or had a
clue as to what was happening in regards to their pay structure, according to The Daily Star.
Workers demanded a fair living wage of at least 16,000 Taka but they ended up getting a
minimum wage of 8000 Taka only. When workers finally realized the outcome of the
negotiations in January after getting their monthly pay, protests ensued again due to the
disparity created by the new pay structure. According to The Daily Star, Centre for Policy
Dialogue in its study on livelihood expenditure of RMG workers, proposed a detailed wage
structure for different grades. However, the announced wages were way below the proposed

10
wages. More importantly, CPD and other organizations had said that the basic wage as a
proportion of the total wage would actually go down as a result. When the minimum wage of
Tk 5,300 was declared in 2013 for grade 7 workers, basic wage was Tk 3,000 which
accounted for 56.6 percent of the gross wage. But last year when the minimum wage was set
at Tk 8,000, the basic wage of Tk 4,200 accounted for 52.5 percent. The basic wage as a
proportion declined for workers of other grades as well (Uddin, 2019).

Another prevalent issue stems from the lack of difference between workers' basic pay under
the new wage structure compared to the old structure - even though the basic wage has
increased at an increment of 5% each year from 2013 to 2018. The lack of difference is even
more striking for workers who belong in the pay grades above grade 7 on the national pay
scale. Workers who fall under mid-level pay grades, had hoped that even if they did not get a
pay rise at the same rate as their lower-level subordinates would be getting, that they would at
least be compensated for that by certain net benefits. However, that did not materialize either
– agitating workers further.

Another underlying problem is that some factories choose to pay workers in the old pay
structure even though the new pay structure went into effect in 2018. The issue also
highlights the concern over how well these new wage structures are implemented. If we look
back at 2013, when a new wage structure was announced, garment workers faced a very
similar issue with their wages due to poor implementation of the newly formed structure.
Both the management of RMG factories and workers could not fully grasp the new wage
structure, resulting in discrepancies during the earlier periods.

The garment industry of Bangladesh is also known for exploiting loopholes within the
national pay structure. For instance, according to the minimum wage ordinance, apprentices
can be hired for Tk 500 to Tk 930 per month. Apprentices are considered to be those who
working in a factory but haven't been employed for more than 3 months. If they pass the 3-
month period, these apprentices are supposed to be promoted to helpers - eventually leading
to an entry-level position. However, these apprentices, mostly women, are taken advantage of
by labeling them apprentices for well over 3 months and discriminating against them in terms
of wage levels.

The issues surrounding minimum wage can be looked at from a different angle - the overseas
customers. Clothing brands like Marks & Spencer, H&M view Bangladesh as the cheapest in
terms of unit labor cost in South Asia. According to Nurul Islam, Bureau of Manpower

11
Employment and Training, the cost of producing a shirt in Bangladesh is just 11 Cents while
it costs 79 cents in Sri Lanka and 26 Cents in India. Even though this may seem like a
comparative advantage at a macro level, it certainly is the opposite when it comes to the
RMG workers themselves. Workers in those factories are, inevitably, paid very little and
expected to endure terrible working conditions as their employers are not in business for their
worker's well-being but rather the overseas customers. According to a study published by
International Islamic University Chittagong, The RMG factories claim to operate one eight-
hour shift six days a week. Workers are virtually compelled to work after 8 o’clock. In some
instances, they work until 3 AM in the morning and report back to start work again five hours
later at 8 AM. They are asked to work completely months at a time when the Factory Act,
which stipulates that no employee should work more than ten days consecutively without a
break.

Figure 7

In the growing phenomena of outsourcing cheap labor, bigger corporations like H&M, are
essentially trying to have the most amount of work done for the least amount of money - by
selling labor to the lowest bidder. As the graphic above depicts, 80% of respondents among
the largest clothing brands in the world, ranked Bangladesh within top 3 for outsourcing their
need of cheap labor. This, in turn, creates this continuous race to the bottom where the
worker who will work for the least amount will always get the job. This competition for the
cheapest labor ensures that the lowest working classes will continue to get smaller and
smaller - getting lesser money for the same amount of work, in a bid to maximize profits for
the corporations themselves. As a result, when negotiations or discussions do take place for a

12
fairer wage for the workers, union leaders in favor of the wage hike are shunned out. With
workers being kept in the dark throughout the whole process with no support from the buyers
or the government itself, the battle for a fairer wage is lost before it even begins.

Sustainable Solutions

The goal of our study is not only to identify the problems of the RMG Sector, but also to
develop sustainable solutions to overcome them. The primary focus is in bringing out the
sustainable future for Bangladesh RMG by measuring energy savings, workers & enhancing
quality in products. The goal of building a sustainable RMG sector starts with improving the
managerial skills of the people who matter the most in the day-to-day functioning of an RMG
manufacturer; that is the middle managers.

Since the beginning of the historical journey of Bangladesh’s export-oriented RMG industry,
the sector has been successfully giving significant returns to both local and international
RMG stakeholders, in spite of the risks and hurdles it had to overcome through the years.
Almost every company still in operation is generating earnings more or less, striving to
continuously improve their operations and are getting progressively competitive day by day.

The main reason is the adaptive and resilient nature of the people of Bangladesh. The RMG
entrepreneurs are quick learners and have increased their operational efficiencies when
required by the evolving nature of the global RMG business.

Although, the “Rana Plaza Collapse” & the second largest apparel exporter “Tazreen Fashion
Fire” created a bought of dilemma on Bangladesh’s safe handling of the work environment.

Despite the laudable achievements, the challenges identified such as unhealthy price
competition is putting the industry through a severe stress test, making owners of these
companies question the future of their companies to which they have dedicated their lives and
resources. As mentioned earlier, the existing international apparel buyers are constantly
pressuring manufacturers to produce value-added products, and yet not making any
compromises on prices. In order to remain competitive and to meet customer expectations,
many factory owners have started adopting value-added products even before properly
understating the true substance and meaning of value-added products.

13
Here are a few possible solutions:

• A common platform for owners and labors is needed, where both parties can share
their problems, and therefore find better solutions quickly.
• The platform can be used by not only the ‘owners’ and labors’ but also experts from
research organization can have their say.
• Restructure factory hierarchy by providing incentives to deserving employees while
keeping the salary at an indiscriminate level
• Training Institutes can ensure regular trainings for better industrial environment &
higher efficiency. Therefore, higher efficiency means higher revenues & higher level
of profits.
• Readjust the wages accordingly.
• Provide workshops on safety measures in case of emergencies.
• Invest in appropriate technology.
• Update the pay system accordingly.

Short Term Impact:

By increasing the minimum wage we can expect to fulfill the needs & demands of the labors
as well as pause the riots. Instead of all the hassle created regarding the riots on a regular
basis.

Thus, daily life can go back to its old self. Even if the riots being subjective to one particular
industry, it affects the adjoining industries too.

The recent policies have ensured organizations have to ensure healthy working environment
for labors so, do not have to work for long hours like they did in the past. This change makes
the workers more motivated and dedicated to their work, by increasing productivity.

Along all the positives, there might also be a few drawbacks.

Increasing the minimum wage will result the stakeholders to pay more now. Therefore, the
stakeholders might not be able to keep as many workers as before, causing job losses.

Long Term Impact:

In the long run, the relationship among the employees & employers act as a form of justice to
the society. The labors play a key role in each & every possible factory out there.

14
The organization’s productivity increases over time, so does the organization become more
cost efficient and the cost minimizes, as they do not have to provide trainings. Being
supportive towards workers will ensure a sense of ownership and employee turnover rate
decreases. Therefore, the factory can now ignore extra costs, like hiring cost. With the same
employees, who are skillful & loyal now they can perform better & obtain all organizational
goals. The less skillful workers will not be offered jobs due to the increased minimum wage
will force the stakeholders to consider many criteria’s. At some point, the unskilled workers
will drift away from the job market & will become unemployed.

The sudden rise in minimum wage might also lead to an inflation in the long run due to the
overall price hike.

Reference to Defend Our Argument:

By providing a safe environment and benefits as well as maintaining all types of health
facilities, the employee’s will feel more secured in their workplace. The organization should
therefore provide all kinds of facilities to achieve their employee’s dedication & loyalty. The
recent steps taken by government and BGMEA showed some progress in taking safety
measures in factories. The government and the owners of garments factories should be more
concerned about industrial safety related rules and regulations which will minimize their
expenses as well as the severe losses due to accidents. Inspection, reporting and compliance
of existing national and international laws and standards must be enforced properly to
minimize further incidents due to lack of occupational safety provisions. To be an upper
position holder in the world Garments Sector. there is no way except follow the above
recommendations. We hope by maintaining proper management and policy strategies our
country will take in the garment sector the apex position in future.

Chapter 4
Conclusion and Recommendations

From this report we can conclude that the main problem surrounding the RMG sector is the
miscommunication between the trade union bodies and the factory owners. These most
specifically happen when workers do not feel safe due to lack of proper working
environment, safety measures to ensure risk free working place, long working hours and
having no benefits and packages for them. This includes fire exits or emergency staircase and

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proper ventilation. The Ready-Made Garments (RMG) industry occupies a unique position in
the Bangladesh economy. It is the largest exporting industry in Bangladesh, which
experienced phenomenal growth during the last 25 years. Given the remarkable
entrepreneurial initiatives and the dedication of its workforce, Bangladesh can look forward
to advancing its share of the global RMG market.

For sustainable solution workers and trade unions should be able to sit with the owners in
regular basic as well as the pay system should be updated so that a change in pay occurs with
the economic development as living expenses increases, therefore there income should
increase, providing training to workers and facilitating them with newer equipment so that
they can learn on the job. Also this group of people in the RMG sector should be provided
with wage board, government intervention on illegal employment of foreign expats, legal
retirement benefits, medical benefit, etc.

Due to benefits and concerns from the industry the workers will get motivation to work more
and become loyal to the sector and riots can be avoided in the work place. Which will in term
increase the productivity. An organization should always recognize their employees and keep
their thoughts and hard works in concern for the betterment of the organization and therefore
improves the image of the company and its name.

16
References

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Uddin, H., 2019. Bangladesh RMG Sector: Cultivating Competitive Advantage Through A
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