Bangladesh should annually review minimum RMG wage amid inflation pressure: Study

Bangladesh should annually review its wage-setting process, as apparel workers in the country who are paid the minimum wage are losing income year-on-year due to current inflation rates, said a policy brief from Cornell University. 

The brief, titled “Waiting Game: Minimum Wage-Setting in Bangladesh’s Apparel Industry”, by the Global Labor Institute (GLI), a part of Cornell University ILR School, was published recently. It made five key recommendations, including institutionalising the annual review of minimum wages and scheduling a review of the 2023 minimum wage in 2025. 

The GLI, which is dedicated to independent quantitative research and action, analysed Bangladesh’s national minimum wage-setting policy as the new government plans major updates to labour laws and practices. 

The researchers note that the long-time minimum wage policy—which reviews wages every five years—combined with high inflation, favours employers over workers. 

In addition, they noted that the local ‘purchasing power’ of workers’ wages in Bangladesh is significantly lower than that of workers in competing apparel-producing countries. 

Regarding employers’ argument that rising labour costs in a labour-intensive sector would make their industry less competitive, the brief showed that there is no evidence to support this. It also highlighted that the experiences of Vietnam, Indonesia, Cambodia, and other countries in recent years undermine this argument. 

Citing data, the brief said apparel brands and retailers' advocacy for meaningfully higher wages and a regular wage-setting process has been ineffective. The 2023 wage revision and the fall of the Hasina government in 2024 have drawn the industry’s attention once again. 

As a result, the researchers are calling on Bangladesh’s government to simplify the minimum wage structure and adjust wages annually. 

It also recommended that “genuine trade union representatives chosen by labour federations be appointed to a wage board.” 

Speaking to The Financial Express on Thursday, Jason Judd, executive director of Cornell ILR, explained that Cambodia’s apparel industry is a good example for Bangladesh to follow, citing growth in wages and output. 

Judd, who is in Bangladesh for a short visit until Friday, said the Cambodian government took a similar approach when it overhauled its wage-setting policy a decade ago.

“The experience of Cambodia’s apparel industry in remarkably similar circumstances is very clear,” he said, adding that a decade ago, after street protests and government violence against workers, brands joined the campaign for change, and wages and output have grown steadily since. 

“Wages have grown regularly alongside orders and output since then in Cambodia,” he told The Financial Express. 

He cited one of the Institute’s reports conducted in 2023, where workers interviewed estimated spending Tk 3,500 on medicine and Tk 2,000 on electricity at home in the hottest months when they had to run a fan constantly to sleep. 

Monthly bills of this size equal 61 per cent of the average monthly rent payment of Tk 9,000, and workers reported borrowing against their personal belongings and paying high interest rates to afford electricity and medicines in May, June, and July. 

“The Bangladesh industry’s price advantage has been maintained in part because of this downward pressure on real income for workers, as their low wages and the five-year review period work to keep production prices down and, therefore, enable competition with larger countries like China,” he said. 

“There is a clear need and room—both political and economic—for an annual wage-setting process in Bangladesh. It’s long overdue. Imagine waiting five years for a raise while inflation rages [sic] at 10 per cent—that’s the situation for workers under the current scheme,” he said. 

The brief said concrete actions the government of Bangladesh can take in the coming months include collecting explicit reassurances from brands that they support wage increases through higher prices. This includes references to labour-costing practices and the persistence of below-cost pricing by brands. 

Other recommendations included distinguishing genuine worker representatives from others in the wage-setting process and social dialogue more generally. 

It also called for extending freedom of association and bargaining rights to workers in export processing zones, complementing democratic representation of workers and wage enforcement efforts. 

Munni_fe@yahoo.com