Workers in Bangladesh witnessed the sharpest fall in their real wages among their peers in Asia and the Pacific in the last decade despite higher productivity gains, according to a new report from the International Labour Organisation (ILO).
In Asia and the Pacific, real minimum wages increased in 22 countries and decreased in eight countries between 2010 and 2019.
"The largest decreases in real minimum wages were observed in Bangladesh and Sri Lanka," said ILO's Global Wage Report 2020/21, which was released yesterday.
The decline was 5.9 per cent in Bangladesh and 4.5 per cent in Sri Lanka.
However, Bangladesh had the third-highest annualised labour productivity growth of 5.8 per cent during the decade, trailing only China (6.8 per cent) and Myanmar (5.9 per cent).
The only country in Asia and the Pacific whose minimum wage does not reach even the lowest international poverty line is Bangladesh, the ILO said. That higher rates apply in the garment sector in Bangladesh.
According to the report, in Asia and the Pacific, the median value of the monthly minimum wage is $381 in purchasing power parity, with values ranging from $48 in Bangladesh to $2,166 in Australia. The wage for Bangladesh is below than the international poverty line in PPP of $1.9.
Results show that minimum wages are set, on average, at around 55 per cent of the median wage in developed countries and at 67 per cent of the median wage in developing and emerging economies.
In developing and emerging economies, minimum-to-median wage ratios range from 16 per cent in Bangladesh to 147 per cent in Honduras.
In Asia and the Pacific, Bangladesh is one of the few examples where minimum wages are set entirely according to industry, the ILO said.
As of 2020, around 18 per cent of countries (29 countries) with statutory minimum wages exclude agricultural workers, domestic workers or both categories from minimum wage regulations.
Of these, seven countries – namely, Bangladesh, Cambodia, Jordan, Lebanon, Pakistan, Sudan and Syria – exclude both agricultural and domestic workers.
Zahid Hussain, a former lead economist of the World Bank's Dhaka office, said the real annual wage in Bangladesh is not adjusted annually, taking into account the total labour productivity.
If the wage had been adjusted, it would not have eroded significantly, he said. "During the period, the policymakers have not reviewed it, and inflation has always been positive."
Bangladesh revises the minimum wage every five years and it last did so in December 2018, the ILO report said.
Rizwanul Islam, a former special adviser for employment sector at the International Labour Office in Geneva, said a decline in real wages or the inability of real wages to keep pace with the growth of labour productivity are essential mechanisms through which income inequality can increase.
Sayema Haque Bidisha, a professor of the department of economics at the University of Dhaka, said the laws related to minimum wages and trade unions apply to a few industries in the formal sector.
"We don't have proper legislations. There are a lot of people in the informal sector. So, the country is yet to take the minimum wage to a level through strong trade unions, proper legislations and formalisation and documentation of workers."
Prof Bidisha called for expanding the legislation of the minimum wage to bring more industries under its framework.
She said the wage has to be related to the inflation rate. If the growth in wages is not higher than the inflation rate, it would not be meaningful for workers.
In Bangladesh, inflation has averaged more than 6 per cent in the last decade.
The ILO report said the pandemic made it more difficult for national authorities to collect statistics. However, there is abundant case study evidence of workers having to accept – at least temporarily – shorter hours and/or wage cuts.
In a press release, ILO Director-General Guy Ryder said: "Our recovery strategy must be human-centred. We need adequate wage policies that take into account the sustainability of jobs and enterprises, and also address inequalities and the need to sustain demand."
Adequate minimum wages can protect workers against low pay and reduce inequality, said Rosalia Vazquez-Alvarez, one of the authors of the report.
"But ensuring that minimum wage policies are effective requires a comprehensive and inclusive package of measures. It means better compliance, extending coverage to more workers, and setting minimum wages at an adequate, up-to-date level that allows people to build a better life for themselves and their families."