Between a rock and a hard place: Why are RMG workers prompting constant debate?

The apparel industry has long been hailed as an integral chapter of Bangladesh's economic success story. But one constant that has historically been simmering beneath this stellar narrative is the discontent, mostly related to wages, among the some four million workers directly employed in the industry.

With Bangladesh now ranking second in terms of global ready-made garments (RMG) exports and the industry constituting 84.6% of the country's total exports, earning $47 billion in the 2022-23 fiscal year, workers' demands for higher wages seem reasonable. 

And workers often take to the streets to complain that the minimum wages are not enough to survive on, especially when factoring in inflation and the fact that these workers also have to feed their families.

RMG factory owners, on the other hand, claim industrial inefficiency, high production costs, low prices and limited negotiating powers make it difficult to raise wages.

In face of recent protests in Ashulia, where workers demanded that the minimum wage for the lowest grade be fixed at Tk25,000, factory owners and the government ultimately bowed down to the pressure and agreed to form a committee to review the minimum wage regulations within six months.

But are Bangladesh's apparel workers really underpaid? If so, how much more should they get? And how feasible is it for factory owners to raise the wages without suffering losses or making a serious dent in their profit margins? 

Infographic: TBS

How much is the 'living wage' for workers?

According to data by the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the apparel industry in Bangladesh registered an export growth of 276% from FY10 to FY23. 

The gazette published in late November last year stated that workers of the lowest Grade 4 will get Tk12,500, Grade 3 workers will get Tk13,550, Grade 2 workers will get Tk14,273, and Grade 1 workers will get Tk15,035.

So, on paper, minimum wages for RMG workers grew by almost 317% for the lowest grade from Tk3,000 in 2010 to Tk12,500 in 2023. 

But the fairness of the minimum wage is up for debate.

A recent report by the Centre for Policy Dialogue (CPD), in collaboration with Christian Aid, concluded that for 2023, the total ideal food cost for RMG workers' families stood at Tk16,529, while the mean non-food cost of a worker's family was Tk12,882.

The report, titled 'Revision of the Minimum Wage of RMG Workers in 2023', determined that for last year, an RMG Grade 7 worker (the lowest grade at the time) should have been paid a minimum wage of Tk17,568 to cover living expenses.

Using the Anker method for calculating the recommended minimum wage, the report took into account food cost, non-food cost, household size, number of earners in a household (two based on surveys), and discretionary savings. 

"Under the Labour Act, wages should be set by taking 12 indicators into account. Unfortunately, one or two indicators come up during discussions, but even that is not research-based. But the other indicators are never taken into consideration," said Dr Khondaker Golam Moazzem, research director of CPD and co-author of the report.

The indicators mentioned by law encompass cost of living, production costs, productivity, product pricing, inflation, work nature, risk, business capacity, and socio-economic conditions at both local and national levels.

What do Bangladesh's RMG workers actually make?

Factory owners, however, refer to the word "minimum" as a key factor, stating that workers' take-home wages need to be a part of the discussion.

The head of human resources (name withheld) at one export-oriented factory, which employs over 3,500 workers, said that workers of the lowest grade take home about Tk18,000 to Tk19,000 in wages at the end of the month. 

"Assistant operators, belonging to Grade 4, are paid Tk12,500 as the minimum wage. That is for eight-hour shifts a day. Then they have to be paid an attendance bonus of Tk500 at the end of the month. We also have to take into account overtime payments. An assistant operator logs in a minimum of 70-80 hours of overtime per month, and if we pay them Tk65 per hour as overtime, that contributes an additional Tk4,500 to Tk5,000. And workers who stay back after 8pm are given Tk30-Tk40 as tiffin bills," he explained.     

Minimum take-home wages for Grade 4 workers at this particular factory would then amount to Tk18,280. 

The official added that earned leaves, maternity leaves, Eid bonuses, health and welfare drives, food and school bills of workers' children also contribute to take-home wages and non-wage benefits.  

But a worker (name withheld) at an export-oriented factory, with over 2,000 workers, had a different story to tell.

"We do not get much apart from the minimum wage. They [factories] allow only two hours of overtime. As for the tiffin bill, they give it to a select few. When we do work after 8pm, they are supposed to pay the tiffin bills to us on the day, but they do not do that in practice. Instead, they say they will pay it at the end of the month with the wages, but not everyone gets that, nor is everyone aware of how much they are owed," she explained. 

The worker also went to claim that they are still owed night bills incurred three months. 

"The high prices of basic commodities have made it almost impossible to survive with my family of five. I am the only earning member in my family. I joined the industry 11 years ago for Tk5,300. And after over a decade, I earn only Tk12,500 now. Have I not learned enough and gathered sufficient experience in all these years?" she further said. 

She asked how much longer would she and her family have to survive on spinach curries? "Do we not deserve to eat better? I can barely pay my children's school fees with the overtime money. I have to pay Tk3,000 rent per month. My parents are old and cannot work." 

Leading labour activist Kalpona Akter further explained the reality behind the numbers to TBS in a separate interview.  

"Thirty years ago, when I was a garment worker, my tiffin bill was Tk8. Now, three decades later, workers' tiffin bills are Tk25. How is this possible? We have had so much inflation during this time. The price of eggs has increased from Tk2 or Tk4 to Tk15 now. Just one boiled egg costs Tk25. In this scenario, how will a worker meet their nutritional demand?" she said. 

"Besides, there is the attendance bonus among other incentives. No owner gives this to workers as charity — it is a win-win strategy. It ensures workers do not delay at work, and shipments are sent on time. But this bonus has been Tk500 for years. The workers are demanding it be increased to Tk1,000," added Kalpona, who is the founder of the Bangladesh Center for Workers Solidarity and the president of the Bangladesh Garments and Industrial Workers Federation (BGIWF).

After the first wave of unrest in Ashulia, the attendance bonus was raised by Tk225 and tiffin bills were raised by Tk10. 

Later, following the second wave of unrest, the BGMEA, the government and workers' representatives agreed that workers will receive an additional Tk225 as attendance bonus, with Tk10 added to the current meal allowance, and a Tk10 increase in the existing night shift pay, raising it to a minimum of Tk100.

Factoring in the problem of non-compliant factories  

It is important to note that not all factories are compliant with existing laws of the industry, leading workers to frequently protest for arrears, unpaid bonuses, etc. 

The CPD report noted that irrespective of the proposed amount for any minimum wage, it fails to benefit workers if not implemented properly. 

"A significant number of surveyed factories failed to maintain the minimum wage and relevant provisions adopted in 2018. It is important to note that this failure to maintain the minimum wage may not be entirely attributed to the limited capacity of the employers. Rather, the progress in export growth… suggests a potential lack of interest among employers to adjust their profit margins and allocate a fair share to their workers," the report reads. 

In addition, deviations can be observed in terms of bonus and increment payments, timely wage payments, timely grade-wise promotions, it further reads. 

According to the report, the issue of timely payment has also seen deterioration over the years, with 80.3% of surveyed factories having paid wages to their workers within the first week of the month in 2023, down from 86.8% in 2022.

Workers were also deprived of timely grade promotions, the report claimed, adding that as workers advance to higher grades, their promotions require increasingly more time.

Does higher wages equal losses for factories?

According to Shams Mahmud, managing director of Shasha Denims and former president of the Dhaka Chamber of Commerce and Industry, factories were already in a tight spot last year due to energy price hikes, customs harassment and shortage of dollars. 

"Then towards the end of the year, wages were raised. Earlier this year, two Eid bonuses for RMG workers also exacerbated the situation. That pushed many factories into becoming sick right then; many performing companies became non-performing ones. Banks also began to lend based on banker-client relationship, cutting down on the loans they gave out," he added.

This year, during the July uprising, RMG factory owners could not make any shipments for about two weeks. Those shipments were either cancelled, discounted or sent through air freight. 

"We accepted that for the sake of the country. But then shipments were also discounted during the floods. Then, because of the unrest in Ashulia, many existing orders were cancelled. And this is just the scenario for large industries. For SMEs, it has now become a question of survival," Mahmud further explained.

Syed M Sajjad, the chief operating officer (COO) of Majumder Garments Limited, noted that frequent factory closures lead to severe losses. 

"If there is no production for two weeks, we still have to incur other costs — energy bills, rent, workers' payments and so on. Shutting down production at a small factory like mine even for a week leads to losses of Tk20 crore, so about Tk40 crore for two weeks. Delays in deliveries then lead to order cancellations, discounts, air freight costs," he said.

BGMEA President Khandoker Rafiqul Islam recently told TBS that the orders lost or shifted to other countries due to the factory closures since 29 August would be around 30% for the next season.  

Furthermore, RMG exports growth has been accompanied by a concurrent increase in the cost of production. 

According to the CPD report, the unit cost of production (for the top exported product) from 2017 has seen a continuous upward trend. 

However, the rate of increase in price was not as pronounced; in 2023, the cost of production for the top exported product increased by 20.6%, while the price increased by 13.4% compared to 2021. 

"The brands failed to fulfil their [factories'] expectations, especially in providing them adequate price-wise support for implementing the newly adopted minimum wage in 2018. Right after the announcement of the minimum wage in 2018, brands of only 12% surveyed factories increased their price to adjust to the new wage, the CPD report reads. 

Moreover, brands of 2.7% of surveyed factories decreased their price despite the increase in the minimum wage. 

In the report, CPD suggested that implementing its recommended minimum wage of Tk17,568 per month would not detrimentally impact RMG employers' profit margins, provided that brands could accommodate a 7-cent increase in product unit price.

But raising prices is easier said than done.

"Buyers' purchasing powers have gone down due to the prevailing economic downturn. Prices are decreasing, costs are increasing, liabilities are growing. The business has already become unsustainable," said Sajjad.

Asked why negotiating higher prices has proved difficult for the apparel industry, Shams Mahmud said, "It is not the buyers' fault, rather our problem. The problem is that when we compete, if we do not invest in research and development and just work according to the buyers' recipe without any input from us, then we will not get better prices. 

"But if we were to give them an improved product through R&D and the buyer likes it, then they will give us a premium. This is the problem with our industry — we can't fight with products, so we offer lower prices. Ultimately we are shooting ourselves in the foot," he explained.

Labour leader Kalpona Akter agrees. 

"Bangladeshi owners compete among themselves. They should set a minimum threshold within their association, but instead, they compete on who can secure orders with a lower margin," she told TBS in the interview.

She said the workers' federation is ready to fight with buyers to raise prices, but asked what guarantee they had that the benefits will reach the workers? 

"The owners never admit when they make a profit," she said.

How can other countries pay higher wages?

The picture looks bleaker still when wages of Bangladesh's RMG workers are compared to that of other apparel exporting countries.

Compared to Bangladesh's minimum monthly wages of $104, Vietnam offers $140, Cambodia offers $204, India provides about $183, Pakistan pays about $110, and China offers the highest $303 (mean).

"Foreign countries offer higher wages because the cost of living is higher there," Sajjad stated.

"They also get higher prices. China, for instance, is the top global RMG exporter. Bangladesh is in the second position after China. But Bangladesh is number one in terms of volume of exports. So, China, despite exporting less products, earns a lot more."

China exported apparel worth $165 billion in 2023 (calendar year), while Bangladesh exported apparel worth $38 billion, according to data by the World Trade Organization (WTO).   

"Bangladesh is dominating the low-end product market while China has captured the high-end market. China cannot compete with us in the low-end market because of their high living costs. It is a different ball game. And hence different prices and wages," Sajjad added.

But what about Vietnam, the closest competitor to Bangladesh? What about Cambodia, India and Pakistan? 

"The economic logic is that if workers' productivity is high, then owners have the scope of paying high wages. This is applicable for China and Vietnam. In the case of Cambodia, the government has set and strictly enforced their minimum wage. This happened because of the Cambodian government's political intent," Dr Moazzem explained.

In India and Pakistan, the wages are set based on tripartite negotiations, he said, adding that there, the workers' rights bodies and trade unions are quite functional. 

"Bangladesh is weak in these terms. We lag behind in terms of productivity. The negotiation process is weak; workers' representation and negotiation capacity are both weak. The government's role in enforceability is weak and the factors that are legally mandatory are also not considered during negotiations. As a result we are lagging behind other countries in the wage setting mechanism and the wages," Dr Moazzem said.

"The tripartite negotiations that happen in the wage board actually turn into bipartite ones — the helpless workers on one side and the government and RMG factory owners on the other side. Beyond that, it has been seen that sometimes law enforcement and intelligence agencies put pressure on the workers. Since trade unions are not functional, workers are not able to press their demands in an organised manner. 

"And that is why we are nowhere near providing 'living wages' to our workers," he added.