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Bangladesh poised to hike garment wages, but may not end strikes

By: | at 01:41 PM | Channel(s): International Trade  

The world’s second largest clothing exporter hopes to announce a new minimum wage early next month, bowing to international pressure after a string of fatal factory accidents that thrust poor working conditions and pay into the spotlight.

Workers want the minimum wage, which was last raised in 2010, to go up to 8,000 taka ($102) a month - 2-1/2 times the current rate.

Factory bosses have formally offered 3,600 taka. Several, however, told Reuters they anticipated that Bangladesh’s official wage board would set rates in the 4,500 to 5,500 taka range, and they intended to seek between 5 and 15 percent in price hikes from retailers.

The wage board was due to meet on Monday before submitting a draft proposal to the government.

“These workers’ rights are being discussed all over the world now and the government is nervous,” said Amirul Haque Amin, the head of the National Garment Workers Federation, an umbrella group representing 37 unions.

“There is this pressure now,” Amin said in an interview in his ramshackle office, decorated with satirical posters of harangued factory workers and fat tycoons. “This has given us the opportunity to raise our voices.”

The wage negotiations must somehow strike a balance between Western fashion giants, politically-connected factory owners and protesting staff.

The government did not respond to strikes over wages last year, but since then accidents including the collapse of the Rana Plaza factory complex near Dhaka, which killed more than 1,100 garment workers, have put the authorities on the back foot.

Rock Bottom Wages

Rock bottom wages and trade deals with Western countries have propelled Bangladesh’s garments sector to a $22 billion industry accounting for four-fifths of the poor country’s exports, with retailers such as Wal-Mart Stores Inc, JC Penney Co Inc and H&M Hennes & Mauritz AB buying clothes from its factories.

Wal-Mart spokesman Kevin Gardner said the retailer “continues to work with other stakeholders in encouraging the Bangladesh government to review minimum wages for workers in the garment industry to ensure worker needs are met.”

H&M said it had urged Bangladesh to raise the minimum wage and revise it annually.

“Wages are one of the issues that are at the top of our agenda to drive improvement in the textile industry,” Helena Helmersson, H&M’s head of sustainability, said in an emailed response to Reuters.

JC Penney did not immediately respond to a request for comment.

The minimum monthly wage for garment workers is 3,000 taka($39), around half of what those in rival Asian exporters Vietnam and Cambodia earn and just over a quarter of the rate in top exporter China, according to International Labour Organisation data from August.

Most Bangladeshi workers take home at least $54 a month because of overtime pay, according to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

Smaller factories will be hardest hit by the expected hike, factory bosses said. Muzaffar Siddique, whose mid-sized factory in Dhaka employs 650 people, said he would have to charge retailers 30 percent more if wages went up to 4,500 taka.

Image Problem

The government is revising the minimum wage as part of efforts to address the industry’s “image problem” and hopes to announce the new rate during the first week of November, said Mikail Shipar, the top official at the Labour and Employment Ministry.

Sirajul Islam Rony, a member of the six-person independent wage board, also told Reuters that it was due to announce a figure by next month. It must then be approved by the law and labour ministries.

Export growth is forecast to slow to 7 percent during the fiscal year that started in July, down from almost 11 percent last year, as Western retailers grow nervous about doing business in Bangladesh, according to an Asian Development Bank report.

Garment factory staff went on strike over wages for six days in September, affecting production at almost 20 percent of the country’s 3,200 factories, according to the BGMEA. The strikes followed similar protests over the summer.

Workers also held a factory owner captive in his office for more than 18 hours earlier this month until he paid bonuses owed to them for the Muslim festival of Eid al-Adha.

Wages have not kept up with inflation, which is running at a nearly 9 percent annual average since the last hike in July 2010. They would need to hit 3,877 taka just to keep pace with inflation, which is more than factory owners have offered.

Factory bosses counter that they would like to pay workers more but can only cover this cost by charging Western retailers more, which could jeopardize Bangladesh’s sole appeal - its bargain basement rates.

“It’s a very simple equation - wherever they get a cheap price, they will go there,” BGMEA president Mohammad Atiqul Islam said of the retailers. “It’s not like they’re here because like the Bangladeshi food or the Bangladeshi man.”

Retailers have this year cut rates by 3 percent on average, Islam said.

Some factories are already struggling with higher costs due to retailers demanding stricter safety standards after the accidents, said Kutubuddin Ahmed, the chairman of the Envoy Group, which exports $200 million worth of garments a year to high-street brands including JC Penney and Inditex SA’s Zara.

A factory fire 40 km (25 miles) from Dhaka on October 8, in which seven people died and 50 were injured, has raised concerns that standards have not changed significantly since the April building collapse.

“This is an issue for the small factories. They need money to become compliant,” Ahmed said, defining small factories as those that employed up to 500 people, which accounted for a third of the sector.

More Strikes?

Many workers say they will go on strike again if their demands for a pay hike are not met, which would be a blow for the ruling Awami League ahead of an election due by January.

While some staff would accept an offer below the 8,000 taka their unions are demanding, anything under 6,000 is likely to spark widespread protests, said Kalpona Akter, the executive director of the Bangladesh Centre for Workers Solidarity, an NGO that helps workers form unions.

Garment factory workers need around 6,450 taka a month just for their basic living costs, according to a survey by the Centre for Policy Dialogue, a Dhaka think-tank, published in September, with many relying on small loans.

“If it’s less than 8,000 taka, we have to press the government or the factory owners to increase,” said Mosammat Jhumur, a 24-year-old factory worker who shares one bed in a Dhaka slum with two other women and went on strike in September. “If we need to go on the road to demonstrate, then we will do that.” (Reuters)