Basic wage as a proportion of total wage for RMG workers has been falling | The Daily Star
12:00 AM, January 11, 2019 / LAST MODIFIED: 12:00 AM, January 11, 2019

Basic wage as a proportion of total wage for RMG workers has been falling

Dr Khondaker Golam Moazzem, Research Director, Centre for Policy Dialogue, talks to Nahela Nowshin of The Daily Star about the recent demonstrations of RMG workers and the underlying reasons behind them.

 

Could you shed some light on the demonstrations of RMG workers that we have seen this week?

The demonstrations of RMG workers as reported in the print and electronic media in the last several days reflect the spontaneous reaction of general workers regarding the discrepancies in the new minimum wages. Although the demonstrations were initially localised in nature, they may spread over other regions unless the issues are properly addressed. However, workers' unrest on wage-related issues in the RMG sector is a perennial problem due to less attention being given to workers' concerns amidst discussions and negotiations on minimum wage. Workers only become fully aware of the revision of minimum wages when they receive the wages in hand. Discussions on minimum wage of RMG workers began in February 2018 and continued till August 2018, the gazette was published in November last year and the minimum wage came into effect last December. Now we are in January 2019 which is when workers seem to have finally realised just how much they will be benefited.

Workers were demanding a minimum wage of Tk 16,000 and finally the government set the wage at Tk 8,000 (for grade 7 workers). CPD in its study on livelihood expenditure of RMG workers proposed a detailed wage structure for different grades. However, the announced wages were way below the proposed wages. More importantly, CPD and other organisations had said that the basic wage as a proportion of the total wage would actually go down as a result. When the minimum wage of Tk 5,300 was declared in 2013 for grade 7 workers, basic wage was Tk 3,000 which accounted for 56.6 percent of the gross wage. But last year when the minimum wage was set at Tk 8,000, the basic wage of Tk 4,200 accounted for 52.5 percent. The basic wage as a proportion declined for workers of other grades as well.

We had said even back then that there would be various consequences of such a move. Firstly, overtime pay and other benefits (e.g. festival bonus) which are calculated based on the basic wage would fall (as reported in national dailies and electronic media). So despite an increase in the total wage, workers would be less benefited when you assess basic wages and other benefits as a proportion of the total wage.

Secondly, starting from 2013 until 2018, workers have gotten an increment which is five percent of their basic wages. But now workers have realised that there isn't much difference between their basic pay under the new wage structure and the basic pay that they used to get earlier under the system of five percent increment. This is why a sense of dissatisfaction is festering among workers, particularly those who belong to upper grades. There is a tendency to excessively focus on grade 7 or entry level workers. And wages of upper grade workers did not rise by as much as that of the bottom-tier workers, partly due to cost-related reasons. The demonstrations that we have seen in the last couple of days reflect the fact that workers' expectations have not been met; even though they didn't get the wages they had asked for, they had hopes that they'd get certain net benefits which didn't materialise either, particularly for upper grade workers.

 

RMG workers' discontent about wages seems to have reached a boiling point. What is the way forward?

In the gazette notification, there are 17 conditions and I believe solutions to workers' grievances lie within condition no. 9, 12 and 13. Ordinarily, entry level workers tend to be better off than older workers under a new wage structure and factory owners are usually cautious about any dissatisfaction that may arise among senior workers as a result. The introduction of increment with basic wages during the period of revision of minimum wages in 2013 was a new initiative. Unfortunately, this issue did not get proper attention when the discussion on minimum wage in 2018 took place. In fact, this increment issue has introduced a new dimension in the workers' wage structure—new wage structure should not only indicate the wage scale but also needs to indicate the “fixation of wages” in the scale.  

To assess equitability of workers' wages under different grades, a measuring indicator is used which shows whether a sufficient gap between median wage and entry level wage has been maintained. For example, in 2013, a grade 7 worker got 79 percent of a grade 4 worker's wage. In 2018, a grade 7 worker got 86 percent of a grade 4 worker's wage. This shows that the gap between the wages of a grade 7 worker and grade 4 worker has reduced. This can work as a disincentive for a skilled worker. And the demonstrations of RMG workers we are seeing are a manifestation of this. Compared to other major garment-exporting countries, the wage gap is far less in Bangladesh.

Unfortunately, in Bangladesh's RMG sector, discussions have remained limited to wage increase of entry level workers alone and incentivisation of skilled workers has not received the attention that it deserves. In CPD's recent research study, we have proposed that upper grade workers get proportionally higher wage increases so that workers can be incentivised in a progressive manner (the proportionate rise of wages following promotions from grade 6 to grade 5 would be 7 percent; from grade 5 to grade 4 would be 10 percent; from grade 4 to grade 3 would be 13 percent; and from grade 3 to grade 2 would be 15 percent). It is important to take into account that jobs in the RMG sector are increasingly becoming complex-operation-oriented because of the changing product composition (shift towards high-value, more complicated products).

I think the existing gazette of workers' wages could be used for solving the problem. Taking the fixation issue into account, worker's wage under each grade (except grade 7) should be fixed by including the number of increments received by the workers since the last revision of wages in 2013 (no. of increments will be a maximum of five). Hence, the new wage can be fixed by adding five increments with the announced basic under the gazette. For example, the basic of grade 3, 4, 5 and 6 could be re-fixed at a maximum of Tk 6,480, Tk 6,163, Tk 5,838 and Tk 5,463 respectively. This change in the basic wage in different grades would reflect wage-skill matching in the operation of RMG workers.

 

The fact that some factories have been paying workers following the old wage structure has emerged as another grievance during the recent demonstra-tions. So there is also a legitimate concern about the proper implementation of new wage structures.

It seems that traditional problems with regard to implementation of the new minimum wage could not be avoided this time either. In 2013 when the minimum wage for RMG workers was first declared, we came across several issues: (i) time required for full implementation of the new wage; (ii) discrepancies in the early period in ensuring benefits and wages according to their grades; and (iii) complaints regarding decline in grade despite an increase in wage.

These issues must be kept in mind when implementing a new wage structure. The gazette has stipulated conditions so that a worker's grade does not go down and wages don't decrease. If these conditions are met, workers' dissatisfaction could be contained to an extent. There is a need for strict monitoring by the Department of Labour, DIFE, BGMEA and BKMEA. A part of the responsibility should also be taken by brands, buyers and consumers to ensure decent wages for workers.

Furthermore, we have to look beyond wages and acknowledge the reality that workers have to face in their day-to-day lives such as rising living costs. CPD has made a number of proposals with regard to this in its recent report. Along with wages, the government should also think along the lines of a “community development” approach, which includes provision of healthcare facilities and housing, in RMG clusters for the welfare of our workers.

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