Wage growth pitches to five-year low | The Daily Star
12:00 AM, July 08, 2020 / LAST MODIFIED: 09:01 AM, July 08, 2020

Wage growth pitches to five-year low

Wage growth slowed to a five-year low in the just-concluded fiscal year driven by the income loss in the manufacturing and services sectors as the coronavirus pandemic-induced shutdown wiped out livelihoods of a major portion of the population in the last quarter.

General wage grew 6.35 per cent in fiscal 2019-20, which was 6.4 per cent a year earlier, according to the Wage Rate Index (WRI) prepared by the Bangladesh Bureau of Statistics (BBS).

This is the lowest wage growth since fiscal 2015-16.

The decline in wage growth in the manufacturing and services sector led the fall.

The industrial sector saw a 23 basis-point drop in wage growth to 5.99 per cent, the lowest in five years, from a year earlier. 

Similarly, the services sector's wage growth gave up 28 basis points to 6.41 per cent, also the lowest since fiscal 2015-16. 

The agriculture sector helped the wage rate end the fiscal year on a positive note: it advanced six basis points to 6.48 per cent, the highest in three years.

The wage growth of the three major sectors of the economy vanished in April, the first month that endured the devastating impact of the countrywide shutdown put in place to flatten the curve on coronavirus.

In April, the wage growth in the agriculture sector was 0.20 per cent in the negative compared with March.

The manufacturing sector's wage growth contracted 0.04 per cent and that of the service sector's 0.02 per cent.

Construction workers saw a wage contraction of 0.03 per cent and it was 0.05 per cent for the fisheries sector's workers, BBS data showed.  The wage growth in all sectors returned to the black in May and June.

Wage growth contracted in Dhaka, Chattogram and Rajshahi in April but it was in the positive territory in Rangpur, Barishal, Khulna and Sylhet.

Unlike all other divisions, Rangpur, however, saw a contraction in wage growth in May.

While the wage growth slowed in every month since March, it still stayed ahead of the inflation, suggesting that real wage was still rising, albeit at a slower pace. 

This is true for all sectors -- agriculture, industry and services, according to Zahid Hussain, a former lead economist of the World Bank's Dhaka office.

It is common knowledge that unemployment is rising rapidly and businesses are facing bankruptcies, especially since the advent of the coronavirus in March this year, he said.

Estimates vary, but there is a consensus that no less than 10 million to 15 million workers have either become already unemployed or are at risk of unemployment. 

Crop agriculture is the only sector where the virus may not have caused any major disruption. All other sectors have been severely impacted.

Average wages in construction and industry were 7.2 per cent higher in June than from a year earlier whereas inflation was slightly more than 6 per cent, implying a real wage growth of about 1.2 per cent, Hussain said.

"How was that possible at a time when labour demand in the industry and construction sectors has been collapsing with severe contraction in their levels of activity, and there is no reason to believe that labour supply to these sectors was diminishing?"

The only sector that could have had an excess demand for labour is agriculture during the boro harvest season.

Strangely, the year-on-growth in agriculture wages was lower in June at 6.2 per cent relative to the average wage growth in construction and industry, Hussain added.

As many as 88 per cent of the farmers have suffered economic losses because of the production and marketing challenges induced by the ongoing coronavirus pandemic, according to two surveys carried out by Brac recently.

This was experienced by 100 per cent of fish farmers, 97 per cent in the livestock sub-sector, 93 per cent poultry farmers and 81 per cent in the crops and vegetable sub-sector.

Earnings of 51 per cent households plunged to zero while a massive 95 per cent people suffered losses in income due to the coronavirus outbreak, the non-governmental organisation said in another study.

About 62 per cent of low-income wage earners lost their work opportunities after the public holiday was declared in late March, it showed.

Due to the income shock emanating from the pandemic, 77.2 per cent of the vulnerable non-poor fell below the poverty line, according to Brac.

 

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