Bangladesh Workers Solidarity Network

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Bangladeshi garments should not play poverty to outsiders

by Farhad Mahmud

New Age May 25, 2013

A COLLEAGUE once asked me: ‘If we force the issue of doubling the minimum wage and it is firmly imposed, there is a danger that costs will increase too rapidly and business will be lost. The strategy is to shame the foreign buyers to reduce their profits (by paying a higher price for the products to support higher wages). Will it work?’
My short answer to this question was that it won’t. I say this is from my experience as a businessman who had been involved in a similar trade for many years. In the case of the garment industry, the buyers had been advocating higher wages for garment workers for a very long time, not to see that it will come and finally land on their lap. Many say it was a PR exercise on their part, I don’t think it was, simply because too much effort went in from their side.
In 2010 the top ten buyers wrote a joint letter to our prime minister almost pleading that the minimum wages be increased. H&M, which led the advocacy, had this to say on their website: ‘In Bangladesh, the government does not review minimum wage levels regularly and systems for employees to negotiate directly with their employers are generally not sufficient. We see statutory minimum wages, sector standards and preferably collective agreements as being the only realistic systems for achieving sustainable development of wages across an industrial sector. We also believe that these systems must define wage levels that are enough to live on. Our Code of Conduct requires our suppliers to pay wages based on whichever of these systems provides the highest wages.’
Why were they doing this, if it is only low wages that they seek? I think they are much more aware of the ground realities than we are. While we are waiting for ‘credible’ research to tell us how much are the cost inputs that finally translate into price for the buyer, they ask the factory owners and some do tell them. I myself know from some of my garment owner friends (in some of their more disarming moments) that for every 100 of the final price to the buyer (not the price to the consumer) 31 comprise wages + profits, of them roughly 9 wages and 22 profits. When it comes to workers wages, our garment buyers would naturally think the buck should stop at the factory owner’s doorstep.
At this point, it might be helpful to look at the history of minimum wages in Bangladesh:
In 1994, after the minimum wage board was constituted in Bangladesh, pay for garment workers was fixed at Tk 950/month ($15), no change until 2006 (more than a full decade later) when it was reset at Tk 1,662.50/month ($24) and then the latest reset in 2010 at Tk 3,371/month ($43) after months of demonstrations/protests by the workers. Workers demanded Tk 5,000/month ($72); the then BGMEA president threatened closure of factories if that demand was accepted by the government. While the minimum wage is $300 in China, $106 in India, $92 in Vietnam, $116 in Pakistan, and $92 in Sri Lanka, entrepreneurs refuse to deal with $72 in Bangladesh.
H&M claims: ‘Until 2010, the minimum wage level for the garment industry in Bangladesh had last been reviewed in 2006. During this time living costs had increased, resulting in a reduction in the minimum wages in real terms. We request that the government creates a mechanism for automatic annual wage reviews to ensure that minimum wages keep pace with living costs.’
Inflation/rise in cost of living and food since 1994 has been at double digits. It is very easy to do maths on how much of Tk 3,371 is spent on food and accommodation (a major expense) at today’s rate of inflation and cost of living index in urban centres. Out of the Tk 112/day of wages, if Tk 60 is spent on food, which is below the minimum food intake for an individual to be able to work (at 2010 prices, ref: Department of Nutritional Sciences of Bangladesh), there goes more than half the salary, room rent will take out the next big chunk, the rest will barely sustain her. If she has a family to support, that’s just too bad. No wonder the World Bank calls it poverty level wages and the pope derides us for ‘slave labour’.
I think it is also important to make that distinction between ‘wages’ and ‘the wage bill’, the latter is what matters to the factory owner. The ratio of the wage bill in proportion to the total value of output can remain the same with the same number of workers and higher wages if productivity goes up, thus keeping the unit price the same. Because most of the factories produce at the lowest end of the efficiency ladder, simple shop floor management enhancement, improved skilling, better equipments and, yes, better working conditions can deliver much required efficiencies in these factories. It will be difficult for us to get the buyers to pay for such inefficiencies when they know that this will not incentivise the factory owners to do it themselves. Smart factory owners know this and are quite wary of advocating that the buyers ‘subsidise’ the factory workers’ wages, which in turn would mean ‘subsidising’ factory owners’ profits, much that they would want them to. If you take the strategy of naming and shaming the buyers, they will simply go away, rather than pay a higher price for the product, as they will deem the strategy grossly unfair on the part of the factory owners whose sole objective will be deemed as to cling on to their profits at the expense of theirs.
On whether most garment workers are getting higher