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The Financial Express

Wage crisis hurting workers


Wage crisis hurting workers

Despite all odds, average wage has increased modestlylast year. It is reflected in the national wage rate index (WRI), the only official statistics of the country's wage situation. The index measures the movement of wages of low paid skilled and unskilled workers over time in agriculture, industry and services. Being an estimate of average trend of wage movement, the index, however, provides limited and partial picture of the country's wage situation. 

The index recorded a 6.11 per cent growth in December last against a 6.15 per cent growth in December 2020. It indicates that the growth of average national nominal wage in the last year was lower than the previous year. To put it in another way, the overall wage situation has not improved when the economy is rebounding strongly.

Important economic indicators like trade and revenue posted robust growth last year. Revenue earnings registered around 17 per cent growth in the last half of 2021. Value of annual trade in goods jumped by 35 per centlast year over the previous year. These indicators showed that economic and business activities have surged recovering the damage of Covid-19 to a large extent.  That's why, the finance minister has claimed that Bangladesh economy will grow by 7.20 per cent and the per capita income will reach  $2,785 in FY22.  Due to the pandemic, Gross Domestic Product (GDP) of the country registered 3.45 per cent growth in FY20 and is estimated to grow by 5.43 per cent in FY21.

To what extent the upsurge in economy is contributing to the rise in wage is a question. The answer is not readily available as the wage index, prepared by the national statistical agency, does not provide any piece of information regarding the real wage. Real wage is usually estimated after adjusting the nominal wage with the rate of inflation for a particular month, quarter or year.

Consumer Price Index, monthly calculated and released by Bangladesh Bureau of Statistics (BBS), showed that the annual average rate of inflation stood at 5.54 per cent last year. The rate was 5.69 per cent in the previous year or 2020. As the average annual inflation does not always provide agood  measurement of the fluctuation of price level, one needs to look into the monthly inflation rate.  Monthly inflation rate in December last stood at 6.05 per cent which was 5.29 per cent a year ago. In fact, inflation has been surging since July last.

By comparing the monthly wage rate index with the monthly inflation rate, it becomes clear that surging inhalation has eaten up almost the entire amount of the increased wage. This indicates that wage earners have a tiny or almost zero savings in their hand after meeting the regular spending. For instance, inflation rate in November last was 5.98 per cent when nominal wage growth rate was 6.02 per cent. Thus, the gap between the wage growth and inflation was only 0.06 percentage points. Though this is not a standard way to estimate or calculate the real wage, one may consider it a proxy to find real wage trend as BBS has stopped publishing the real wage index for long.

The proxy estimate shows that rising price of essentials along with other commodities and services is taking heavy toll on the low and fixed-income people. Their real income has eroded sharply. As 85 per cent of the country's job is in the informal sector and semi-formal sector, most of these wage earners and workers have no job protection and are always vulnerable to any shock. That's why the blow of the pandemic was quite hard there.   

Due to pandemic, many people have lost their jobs and many have faced wage cut.  With the  business looking up, some of them have retained their jobs. Nevertheless, a large number of them have to accept the jobs with lower salaries and wages. In the absence of wage and job related data in detail and regular survey, the sad thing is it is also not captured in any official statistics. What is visible from newspaper reports, limited sample surveys by a few research organisations and the long queues to purchase the subsidised essential items is that the overall wage situation has deteriorated.

Growing income inequality is another main reason behind the deterioration.  As some people have been enjoying unearned income through rent-seeking and corruption, they don't bother about high price of different products and services. Then there are high-salaried professionals and workers, many of whom also have multi-sources of income. All of them are helping to keep the aggregate demand strong to some extent. Low-wage earners cannot match them and are struggling to survive.

International Labor Organization (ILO) in a report last year said: "When low-paid workers become unemployed, the average wage reflects the wages of the higher-paid workers who remain employed." It also added that in some countries, where unemployment did not increase as much - possibly owing to the use of wage subsidies and other job retention measures - average wages remained flat or declined, as working time was cut or as the nominal wages of workers were frozen or reduced. Workers in Bangladesh have faced both job lossand wage cut without any subsidies or job retention.So, it is not the job, but the wage situation that isof concern here.

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