The Financial Express

Bangladesh lagging behind in wages

Bangladesh lagging behind in wages

'Cheap labour' is one of the catchwords coined by Bangladeshi authorities for attracting investments in the country. However, it is ironic that although the Bangladeshi workers produce comparatively more outputs by utilising lesser inputs, they get the least wage in the Asia-Pacific region.  According to the 'Global Wage Report 2020-21: Wages and Minimum Wages in the Time of COVID-19' published recently by the International Labour Organization (ILO), Bangladesh's standing is at the bottom of South Asia and Asia-Pacific region with regard to minimum wages. More importantly, the minimum wage in Bangladesh even fell below the internationally recognised poverty line, as the amount was only 48 US dollar per month in terms of purchasing power parity (PPP) during 2019.    

Bangladesh does not have anything called official minimum wage, although some specific sectors like garments and textiles have separate wage structures. Consequently, the figures provided by ILO are mostly based on wages in the unskilled and informal sectors. However, though Bangladeshi workers lag behind in wages, they have been much ahead in terms of productivity. Among the workers of the region, productivity growth rate in Bangladesh has been 5.8 per cent compared to 2.2 per cent in Pakistan, 4.3 per cent in Nepal, 4 per cent in Sri Lanka and 1.7 per cent in Afghanistan.

As Bangladeshi workers produce more with lesser wages, it is therefore natural that their productivity would rise further if the wages are enhanced. The government as well as the owners of businesses should therefore reconsider the existing wage structure at least to lift the workers above the poverty line. The business owners would benefit most if the workers produce more when better wages are awarded to them. They should certainly shun the tendency to earn more profits by depriving workers and forcing them to live in abject poverty.

According to ILO figures, Australia pays the highest wages in the Asia-Pacific region. Based on PPP, minimum wage in Australia during 2019 was USD 2,166, although average wage in the region was only USD 381. Other developed countries in the region like Japan, South Korea, Taiwan, and New Zealand also have very high wages compared to their regional counterparts. It would not however be proper to compare the status of Bangladeshi workers with those working in developed countries. But why should not they get wages similar to their South Asian neighbours like Pakistan, Nepal and Sri Lanka?   

The ILO report termed the wages in the RMG sector of Bangladesh as satisfactory, which is roughly double the country's minimum wage. But an Oxfam study showed wages in this sector to be much less compared to other competing countries. The ILO report also points out that whereas Bangladeshi RMG workers get only USD 50 per month, wage of USD 252 per month is required for a decent living. In contrast, only 200 US dollar is required for leading a decent life in India where workers earn more.

In the global context, the ILO report reveals that the global wage growth fluctuated between 1.6 and 2.2 per cent during 2016-19. But a downward pressure was observed on the growth rate of average wages in two-thirds of surveyed countries during the first half of 2020 due to Covid-19 pandemic. Average wages increased artificially in other countries mostly because of substantial job losses among lower-paid personnel. The wages of men and women were affected differently by the crisis, with the latter suffering excessively. As the lower-paid workers were affected disproportionately, the existing wage inequalities also exacerbated. Temporary wage subsidies however enabled many countries to compensate for the wage losses partially and thereby lessen the pandemic's adverse impact.

The report revealed that statutory or negotiated minimum wages exist in 90 per cent of the ILO member-states that totalled 187. But an estimated 327 million wage-earners including 152 million women are paid at or below the applicable minimum wages globally, which represents 19 per cent of all wage-earners. Three key factors have been identified on which the extent to which minimum wage might reduce income inequality depended. These are: effectiveness of minimum wages; the level at which minimum wages are set; and the characteristics of minimum wage-earners. The first factor is related to legal coverage and level of compliance. The second condition emphasises that setting a satisfactory minimum wage level entails social dialogue, due consideration of the needs of workers and their families, as well as economic factors. The third condition indicates that the potential of a minimum wage system for reducing inequality depends on a country's labour force structure. Females are usually over-represented among lower paid workers, and consequently minimum wages can narrow the pay gaps between men and women.

The ILO report points out that the Covid-19 pandemic has seriously threatened the survival of countless businesses along with the livelihoods of innumerable workers, thereby exacerbating vulnerabilities, imperilling recent socio-economic progress and worsening inequalities. Workers at the lower end of the wage scale have been found to be most vulnerable and hit hardest, which tended to deepen existing disparities. In this backdrop, adequate and balanced wage policies should be adopted and implemented in the short run through inclusive social dialogue. Adjustments to minimum wages should be carefully calibrated through full participation of relevant stakeholders. Massive state intervention may also be required for avoiding a deflationary situation in the wake of growing and higher levels of unemployment. Besides, wage subsidies should be extended for supporting economic recovery.                   

The figures shown by the ILO report have been mostly taken from 2019. But the status and condition of Bangladeshi workers have worsened further during these corona-infected times of 2020. Innumerable workers have lost their jobs and wages have also declined in case of many. Moreover, the status of informal workers have worsened manifold compared to those working in formal sectors. The relevant stakeholders should always remember that higher outputs cannot be sustained with abjectly low wages. Neither would that facilitate rapid industrial growth or sustainable development in countries like Bangladesh.

Dr Helal Uddin Ahmed is a retired Additional Secretary and former Editor of Bangladesh Quarterly.
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