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New Wage structure for RMG workers; Analysis and Possible Aftermath

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Farzana Alam Piya, Research Assistant, Textile Focus

Edited by Maeen Md. Khairul Akter, Managing Editor, Textile Focus

Introduction

The growth of RMG export from Bangladesh is sustainable but retaining enough profit to expand business is becoming harder day by day. Amid this situation another hike in the worker wage is appearing like a huge burden for the manufacturers. From January 6th to 15th many of the industries were closed due to the RMG workers unrest demanding adjustments in the newly declared wage structure by the government. Meanwhile, the stake holders had to repeatedly sit for discussions to tackle the situation and take decisions on how convince the RMG workers and get them back to work. This article tries to portray the whole scenario with analysis and possible aftermath.

What really happened on the streets

From the beginning of the new year 2019, the mid-level workers wanted a rise in their salary. So as soon as the election ended & the new government formed, they started protesting against the new wage scale which they used to call a “Discriminatory wage board”

On 6th January, more than 5,000 workers from around 20 garment factories, located at Azampur & Abdullahpur, blocked the airport roads at Uttara in Dhaka from 9 am in the morning. Vehicular movement on the road was stopped. With the help of Police, after 2 pm the workers moved away & vehicular movement became normal. On the next day the workers blocked the Dhaka-Mymensing highway, for five hours from 9 am. On the same day, over a hundred workers of two factories of standard Group were agitating in Hemayetpur Tannery Road. Industrial police dispelled them at around 9:00pm.

screenshot-60On 9th January Garment Workers Front held a rally in front of Jatiya Press Club demanding justice for Sumon Mia and other injured workers due to clash between them. The workers’ rally which was presided over by the President of the organization, Ahsan Habib Bulbul who demanded compensation as well as arrest of those who were responsible for the murder.  On the other hand, thousands of garment workers started demonstrations in different parts of Ashulia, Savar, Abdullapur and Gazipur, for the fourth consecutive day. They blocked the Dhaka-Aricha road at Kalampur in Dhamrai, for one hour. Traffic movement on Bypile-Abdullahpur highway also remained suspended for about an hour. Garment workers of Ulail and Genda areas were witnessed to set fire on tyre and hurled brick chips at their factories, during the demonstration. Several clashes took place between the workers & the police and around 50 workers were injured. On the same day, a tripartite committee consisting 10-member was formed with representatives from the government, union leaders and factory owners, headed by Afroza Khan, Labor & Employment Secretary, to resolve the labor unrest.

screenshot-59On 10th January the new committee sat for their first meeting at 2:30 pm. After the meeting Afroza Khan said, “We have found disparity in three grades: grade three, grade four and grade five. As the salary of these grades was not raised according to the expectations of the workers. But there were no issues with grades one, two, six and seven.” She added that, “The committee will sit for another meeting on Sunday for deep analysis for wage board.” On the other hand, RMG workers continued their demonstrations for the fifth straight day, blocking roads of Savar, Ashulia, Gazipur and Abdullapur. and When police tried to disperse them, a chase and counter chase took place where at least 20 workers got injured.On 12th January workers continued their demonstration for day, vandalizing at least 20 vehicles and 25 garment factories in different areas. They also blocked different roads in the capital, Savar, Ashulia, Mirpur and Gazipur for hours causing traffic gridlock. A number of passengers were also injured then. On the same day, Prime Minister Sheikh Hasina ordered to readjust five of the seven grades in wage structure for RMG workers, when labor & Employment Minister Monnuzan Sufian and Labor & Employment Secretary Afroza Khan were called in at the PM’s official residence the Ganabhaban.

screenshot-58On 13th January, the government announced a revised wage structure for the RMG workers. The gross hike ranges from a token Tk 15 to a modest Tk 747, effective from December last year and to be adjusted from February. In the new pay scale, which comes after years, the annual increment has been fixed at 5 percent. The gross pay in grade 7 remains unchanged at Tk 8,000, while wages in other 6 grades increased. The government gazetted the new wage structure for RMG workers setting Tk 8,000 as the minimum monthly pay, on 25th November 2018, ordering the garment factories to implement the new structure from Dec 1

On the same day, President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Siddiqur Rahman told the workers to go back to work. He also threatened to keep all the factories shut for an indefinite period if the agitating workers do not go back to work by Monday, mentioning “No Work, No Pay!”. On the other hand, workers blocked Dhaka-Tangail highway since morning. When police tried to disperse them, a chase and counter chase took place where at least 20 workers of several readymade garment factories were injured, in the area of Narsinghapur of Ashulia.

On 14th January, some apparel workers continued to protest, despite a salary increase in six grades of their wage structure. Rejecting the revised salary, about a thousand workers from five factories—in Ashulia industrial zone blocked the Abdullahpur-Baipayl highway, in Narshinghpur at 8:30 am. Chase and counter-chase took place between the RMG workers and police and 5 garment workers were injured.
On 15th January workers started to work at their factory from the morning. No untoward situation or agitation among the workers, was reported. However, law enforcing parties were deployed in different areas to avoid any untoward situation. Welcoming the revised wage structure, RMG workers said that they are looking for immediate implementation of it.

Changes in the new wage structure

The following table depicts the wage structures proposed by different parties, the changes ni the new wage structure also comparative wage structures of the competing countries along with their per capita income.screenshot-53

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Analysis and Possible Aftermath

Due to the current worker’s unrest maximum factories of Bangladesh remained closed for about 8-10 days, from 6th January to 14th January, due to the protest of workers. It caused a huge production loss. Those orders the factories had, could not be handed over on time. It will also demotivate the regular and new buyers to work with our country.

We all know that China is the largest RMG exporting country having the market share of almost 35%, consisting 158 billion dollars. While Bangladesh is the 2nd largest RMG exporting country, having the market share of only 6.5%, consisting export value of 29 billion dollars. So the difference between the largest & 2nd largest RMG exporting country is high. As we all are aware that, China is moving to more value added sectors then textiles, Bangladesh had a scope to grab the textile’s market that China had. Due to the recent protests & incidents took place in our country, a negative impact about Bangladesh will be created among the buyers of different countries. As a result, they may lose their interest to work with Bangladesh and the country may lose its opportunity of catching up the market of China. It may also affect some regular buyers & investors. On the other hand, it will become beneficiary for Vietnam, India, Pakistan & other RMG exporting countries.

As the salary of the workers increased, the owners are facing difficulties to pay their workers according to the new pay scale. Especially for the small garments factories it will become next to impossible to pay their workers at a higher rate. Hence, many small industries will not be able to sustain their business and shut down in the process. If this continues then the unemployment of the workers working in the small industries may become a big problem.

Already at present around 3 million people in our country are unemployed, where 80% are youth. Being the largest industry, textile sector consists of 20.5 million direct & indirect employers. If this sector decreases the number of employment, then the unemployment problem of Bangladesh will only get multiplied. It will affect the lives of the whole population of the country.

The textile sector of Bangladesh is RMG based. The factories need to import yarn, chemical and other textile raw materials from different countries to make the garments, and again export them to the buying countries. So, the profit margin is very limited.  Now with the increased pressure of worker wage hike will only add to the miseries of the manufacturers. According to different statistics, by the end of 2019, around 500 small factories may shut down their business due to these reasons.

Conclusion

The wage of the RMG workers grew six folds in the last one decade and it is now close to the wage structure of the competing RMG manufacturing countries like India, Vietnam and Indonesia. This clearly gives a message that the labor cost is not going to be cheap any more in the upcoming days.  So depending only on the cheap labor cost will not be sustainable for the manufacturers any more. As a result, product diversification, value addition and resource optimization is becoming undeniable to keep business running. And this is possible only by developing the technological fundamentals of the industries and improve the innovative capacity of the stake holders so that the industry can retain more profit from diversification and manufacturing value added products. Proper policy making and smooth communication between the management and the workers are also essential to ensure a sustainable future of the RMG industry.

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