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Name: Tamzid Ahmed Anik

ID:1911031

Code: HRM 370

Submitted to: Dr. SHIBLY KHAN

Date: 5 July, 2022

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How Bangladesh determines wage rate for it’s Ready Made Garment Industry’s worker?

Introduction

The introduction of new minimum wages for Bangladesh's export-focused readymade clothing
(RMG) industry in August 2018 had revealed a number of non-compliances- a) considerable
discrepancy between the needs of workers and the proposed increased minimum salaries; b)
failure to comply with intergrade skill-based salary setting; and c) failure to comply with the new
pay requirements. Only one-fifth of the sample workers found the new wage to be what they
anticipated, making the proposed basic rates for workers in grades I, II, and III unusual. The
wage gap between skilled and unskilled workers was further reduced as a result of the less
importance given to workers' skill while setting the new rates. The inadequate implementation
method did not show any discernible change-only one-third of the sample's employees received
formal notification; female employees knew less about the changes to their pay structures; and
workers' organizations did not take workers' needs into consideration. In order to address these
non-compliances, the Minimum Wage Board must be strengthened in order to set minimum
wages, The Department of Inspection for Factories and Establishments (DIFE) monitoring
system should be strengthened, awareness-raising efforts should use better communication
means, and worker organizations should be strengthened to aid in the implementation process.

Background

In August 2018, the government of Bangladesh announced a new minimum wage for the ready-
made garments(RMG) industry, which is heavily reliant on exports. In November 2018, the
corresponding Gazette was released. Dec. 2018 marked the decision's entry into force. Regarding
a number of topics, workers did, however, express their displeasure and disagreement with the
new pay proposal (referred to as Wage 2018 in this study). Workers’ major concerns were as
follows:

 Under the Wage 2018, the base pay for various grades was fixed with a small upward
modification, especially for higher grades;
 For various classes, new gross pay were disproportionately increased;
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 Grades III, IV, and V skilled workers' new gross earnings barely slightly increased;
 In December 2018, a number of businesses failed to pay wages in accordance with the
new structure (Wage 2018);
 A certain group of employees did not receive the annual raises that were required by the
Gazette of 2013 (5% of the base wage).

Workers expressed their displeasure with the Wage 2018 between December 2018 and January
2019 through a variety of protest movements. In the industrial belts, there was agitation. The
original unrests were primarily localized in nature, but as time went on, they grew in scope and
intensity, spreading to neighboring industrial hubs like Dhaka city, Gazipur, Ashulia, Tongi,
Savar, and partially Narayanganj. Given the circumstances, a number of institutional actions
were taken, including the creation of a 12-member tripartite committee to provide
recommendations on the changes needed in the new wage structure. The Government's Ministry
of Labor and Employment (MoLE) made the required adjustments in light of the ideas and
published the Gazette for revised minimum salaries.( to be referred as ‘Wage 2019’). in 2019
January 13 Workers' agitation subsided once the revised new minimum salaries were announced,
although harassment of workers in various forms persisted, as reported in the national dailies.
The incident of labor unrest caused by the modification of new minimum wages exposed
numerous instances of non-compliance in the RMG sector's implementation of a new pay scale.
These comprised:

 issues with the Wage 2018 framework;

 weaknesses in the Wage 2018's monitoring and enforcement procedures carried out by
public organizations;
 noncompliances at the enterprise level during the installation process;
 victimizing employees when it is being implemented;
 workers' organizations' shortcomings in the implementation process.

In previous instances, workers had been the only ones accused of non-compliance in the
implementation of new salaries because they had not extended the essential cooperation.
However, it has frequently been neglected how other stakeholders can be affected by non-
compliance (Rahman, Bhattacharya and Moazzem, 2007). The failure to implement new
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minimum wages in 2018 was caused by a lack of accountability on the part of the majority of the
important stakeholders, including employers, regulatory agencies, workers, and consumers.

Three types of wage 2018-related non-compliances can be categorized:

 significant discrepancy between the needs of workers and the proposed increased
minimum salaries;
 noncompliance with the requirements for intergrade skill-based pay setting; and
 Inconsistency between what has been suggested and how those are put into practice.

The current study looks at the roles that the government, business owners, employees, and
brands/buyers played in the failure to adopt increased minimum wages. The report makes
conclusions from the analysis and offers a number of recommendations for ensuring that the
major parties involved in the implementation of new minimum salaries adhere to compliance
standards.

Wage data of Bangladesh

Minimum wage trends in the RMG industry

Table 1: RMG Wage 2018 (published on 29 November 2018):

Source: Ministry of labor and employment.

Data analysis and findings:

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The minimum wage for entry-level employees, as proposed by the RMG workers' minimum
salaries, which were revealed in August 2018, was BDT 8,000. (i.e. grade VII). This sum was
nominally around 51.9% greater than what was announced in 2013. (BDT 5,300 for grade VII
workers). However, the rate of pay growth was substantially slower. Workers have received a
5% annual raise on their base salary since the minimum wage was last changed in December
2013. By the end of 2018, a grade VII employee would earn BDT 6,460 per month in light of
that. So, when compared to the gross income received in 2018, the effective incremental wage
increase under the proposed compensation structure was just 23.8%. The increase in gross pay
for other classes was small in comparison, with grade VI employees seeing a rise of 21.1%, and
grade V employees seeing a gain of 19.6%. percentages for grade V employees, grade IV
employees, grade III employees, and grade IV employees, respectively. In accordance with the
same reasoning, basic pay under the Wage 2018 were modestly enhanced; even in terms of the
number of grades, projected basic salaries were lower than what employees received in 2018.For
grade II employees and grade I employees, the percentages are 7.8% and 7.5%, respectively.
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Significant mismatch between the proposed Wage 2018 and workers’ demands

Differences in basic pay: suggested in August 2018 and received in 2018 (with a 5% annual
increase since 2013):

Data analysis and findings:

The prevailing raises and benefits that employees had been receiving at the time of the wage
negotiation were to be at least minimally taken into consideration by the new minimum wage.
For instance, the suggested base salaries for various grades in 2018 (Wage 2018)were
inconsistent, at least in a few grades, with the necessary modifications. Since employees should
not be denied access to any of their currently due perks while receiving a raise, It was discovered
that With regard to the highest three grades—I, II, and III—such compliance was broken. The
proposed basic salaries for these three tiers were BDT 408, BDT 414, and BDT 41, respectively,
less than the current basic wage payments. Such a disparity in the suggested structure suggests
that there hasn't been any discussion or negotiation between the parties over the workers' current
entitlement to wages.
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Worker perception of the 2018 wage as being "reasonable"

Data analysis and findings:

The suggested Wage for 2018 was far lower than what garment workers wanted; it was just half
of what they wanted (i.e. BDT 16,000 for grade VII workers). In fact, compared to prior years,
the discrepancy between the recommended salary and the wage demanded by workers grew even
wider in 2018. It was discovered that the wage discrepancies between suggested and expected
levels were roughly 18%, 13%, and 16% greater in cases of grades V, IV, and III, respectively.
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Costs of living adjustments for workers between 2013 and 2018

Data analysis and findings:

From the above table, despite a large increase in salaries, over 52.2% of workers live in shared
housing, 86% use shared restrooms, 85% share a kitchen, 17% sleep on the floor, and 16% lack
ceiling fans in their homes. 32.2 percent of employees take out personal loans, which they must
pay back in monthly installments. It has been discovered that RMG employees lack access to
several essential amenities in their neighborhoods and towns. The majority of workers like to
live close to their place of employment; it would be most practical for them if inexpensive
amenities like public healthcare and medical facilities as well as schools and universities for
children were located nearby.

References

Moazzem, K.G., 2019. New minimum wage of the RMG sector addressing the issues of non-
compliance in implementation.

Golam Moazzem, K., 2019. New Minimum Wage of the RMG Sector: Addressing the Issues of
Non-Compliance in Implementation (No. 129). Centre for Policy Dialogue (CPD).