Rising inflation, sticky wages keep hurting working class

Forty-six-year-old Mumtaz Hossain was sitting at the Panthapath intersection in the capital at around 10am on Sunday with his shovel, baskets and other tools. A day labourer by profession, he was joined by Azizul who had been waiting in the same spot since 7am.

They were yet to get any work. Perhaps, it would be another day when there would be no work again. Mumtaz recalled a time a few years ago when one could earn Tk600-700 per day. Nowadays, according to him, people are not even willing to pay Tk500.

Even if Mumtaz managed to get work 20 days a month, after paying rent, electricity bills and other expenses, he says it is still difficult to run a family of five. At the same time, both Mumtaz and Azizul said the increasing price of daily commodities, including rice, pulse, oil and salt, only worsened their suffering.

And while expenses continue to skyrocket, work is harder to come by. As the price of materials increased, construction work has decreased, leading to a loss in daily wages.

The Consumer Price Index and the labour survey by the Bangladesh Bureau of Statistics (BBS) both show that Azizul and Mumtaz are not anomalies.

In a report released yesterday, the BBS said consumer prices in the country rose by 6.17% in February compared to the same period last year. This rate of overall inflation, however, was the highest in the last 17 months. On the other hand, the wage rate increased by only 6.03% at the same time.

Economists say if wages do not keep pace with the rise in commodity prices, the real income and purchasing power of the workers decreases. In order to meet additional expenses, they are forced to reduce the expenditure in necessary sectors, including food and education.

According to the report of the Bureau of Statistics, the wage rate of workers in Dhaka division has come down by 4.92%. Wages rose 1.25 percentage points lower than national inflation.

A review of a series of data from the Bureau of Statistics shows that the capital's wage rate has fallen to its lowest level in seven years.

Experts say commodity prices in the market have risen faster than data shows. Workers in the informal sector ravaged by Covid-19 have found it hard to return to their former states. As a result, many are no longer able to afford daily necessities.

Economist Ahsan H Mansur said that if the wages of the workers are less than the increase in the price of goods, they will not be able to buy the same basket of goods.

He said that despite the double-digit growth in per capita income year after year, the real income of the workers was declining, meaning the working class was not getting the benefits of GDP growth and per capita income growth.

Renters are the ones who benefitted the most from the growth.

He further said that with the decline in income, the working class first tried to reduce the amount of food consumed. Many were forced to take their children out of educational institutions and made to work. Others cut down on medical expenses.

If efficient human resource development is hampered, productivity decreases in the future. The economist suggested strengthening the supply of food products at a discounted price among the poor people. He also recommended increasing the allocation under the social security program.

At the same time, efforts to monitor wages have also failed.

A gazette issued in August last year fixed the daily wage of construction workers at Tk1,020 in cities and Tk940 in villages. However, workers are being forced to work for half the wages, said Abdur Razzak, general secretary of the Imarat Nirman Sromik Union Bangladesh (INSUB).

He said that even though the lowest grade workers were supposed to get a wage of Tk680, they were paid Tk400 for the construction of government buildings.

Razzak said the prices of rice, pulse, oil and other commodities were rising but wages were falling. If this trend continues, it will not be possible for the workers to survive.

He demanded that rations should be provided to the workers, as well as effective measures taken, to control the market.

For the construction sector, wage rates have been far below inflation for several years now. Wages of construction workers rose by only 4.44% last month from 4.31% in the previous month.

A similar situation prevails in many other industries.

In 2018, the minimum wage for garment industry workers was set at Tk8,000. Labour leader Moshrefa Mishu claimed that the gazette did not comply with the directive to increase wages at the rate of 5% per annum.

He said that although the regular wages were increased in a few factories, it was not done in many others. In some factories, wages have increased once in three years, while for some no increments have been registered at all.

Mohammad Hatem, vice president of the Bangladesh Knitwear Manufacturers and Exporters Association, claimed that most garment factories regularly increased wages.

He said that due to a manpower crisis, wages were being raised to retain manpower, adding that the BKMEA would take action if it received any complaint that a factory was reluctant to increase wages in line with the rules.

Mirza Nurul Gani Shovon, president of Bangladesh Small and Cottage Industries Association of Bangladesh (NASEB), said that after Covid-19 it was not affordable for many employers to increase wages.

Some may have started a business with a loan, while many have been forced to leave the business.

"The skills and productivity of our country's workers are very low," he said, adding, entrepreneurs will not be reluctant to increase salaries if productivity increases.

February inflation

The economy faced 6.17% of inflation in February which is 31 basis points higher than January inflation and the highest in the last 17 months.

Furthermore, food prices increased by 62 basis points in a single month.

On the other hand, non-food inflation reduced by 16 basis points in the last month and stood at 6.1%. Inflation in this segment was 6.26% in January.

Inflation in rural areas increased sharply in February and stood at 6.49%, which was 6.07% in January. The urban areas also observed slightly higher inflation in February at 5.59%, which was 5.47% in January.

Moving average inflation of the last 12 months stood at 5.69%, which is a little bit higher than the budgetary target of the government.

Dr Fahmida Khatun, executive director at the Centre for Policy Dialogue, told The Business Standard that it is very difficult to match the BBS inflation data with the reality.

Reining in inflation has now become a global challenge owing to rising food prices alongside a hike in fuel prices. Besides, prices of various products and services have also picked up an uptrend in the country because of their import dependence.

She said prices of some goods increased by even 30%. In this situation, it is unusual for inflation to increase by only 6%.

Fahmida further said the people in urban areas used to spend 43% of their total expenditure on food in 2016, which was 50% in rural areas. The share of food spending was 55% and 59% in urban and rural areas in 2010.

Although the share of food spending has been steadily declining, food has been contributing 56% of weight in inflation calculation for the last 20 years. That is why a massive hike in the price of other commodities has a lighter impact on inflation if the rice price increases on a lower magnitude.

The BBS inflation data does not reflect the real market situation as the Consumer Price Index was made on the two-decade-old base year, Fahmida pointed out. She recommended taking immediate steps to update the base year.