The Financial Express

The decline in workers' wage growth

| Updated: July 26, 2021 21:46:59

The decline in workers' wage growth

That the wage growth of both low-paid skilled and unskilled workers dropped to a six-year low in the immediate past financial year (FY 2020-21), as measured by the Bangladesh Bureau of Statistics (BBS) in its Wage Rate Index (WRI), is unlikely to evoke any surprise. It is one of many inevitable consequences of the Covid-19 pandemic. The general wage, according to the WRI for FY'21, expanded 6.12 per cent in the slowest pace since 2015-16.

What is more worrying is that the wage growth fell by 44 basis points to 5.97 per cent in the last month compared to that of the May of the last FY. The ongoing 'lockdown' imposed by the authorities to contain the second wave of the pandemic might further affect the wage growth and its impact on the poor workers is not beyond anyone's comprehension.

Then again, the wage growth issue is linked to inflation, one of the key macroeconomic indicators. A decline in wage growth amidst rising inflation makes things difficult for poor wage earners and fixed income people. The average inflation in the FY'21 was 5.56 per cent, 24 basis points higher than the government's projection. In June last, inflation rose to 5.6 per cent.

The inflation in the economy, under the prevailing circumstances, is a cost-push one, not in any way demand-driven. Food inflation has been on the higher side in recent months because of the soaring prices of some essentials, including rice and edible oils. Unfortunately, the government made no serious efforts to rein in the soaring prices of most of the consumables. The price situation has made things worse for the poor and low-income people in particular.

The WRI also has not depicted the actual situation with wages and income of the poor and low-income people. The real wages in the manufacturing and construction sector declined during FY'21 not just because of higher inflation. The pandemic-induced slowdown was also equally responsible. Many factories had cut wages and fired their workers since they did not have enough work orders in hand. Only one sector - agriculture -- has remained unscathed until now and the farmworkers have witnessed no decline in their wages. The poultry and livestock subsectors, however, have suffered because of the falling demand for their produce, mainly in the main urban centres of the country.

The decline in the earnings of the poor and lower-middle-class has some unwanted consequences as well. It forces them to cut back on daily consumption of food that, again, leads to a drop in their nutrition level. There is yet another issue of concern. These classes of people, in most cases, are in debt to friends and relatives or non-governmental organisations or private moneylenders. Their debt burden may swell further under the prevailing circumstances. 

Millions of workers engaged in informal economic activities are also hard hit by the pandemic. Their income had gone down markedly during the first wave of the deadly infection. When the situation eased late last year, they tried to start life anew. But the ongoing second wave is causing major disruption to their lives and livelihoods. They direly need help. The government should extend that under a well-designed programme.    

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