Wage crisis hits workers






Despite everything, the average salary increased modestly last year. It is reflected in the National Wage Rate Index (WRI), the only official statistics on the country’s wage situation. The index measures the evolution of the wages of low-paid skilled and unskilled workers over time in agriculture, industry and services. As an estimate of the average trend in wage developments, the index does, however, provide a limited and partial picture of the country’s wage situation.

The index recorded a growth of 6.11% last December compared to a growth of 6.15% in December 2020. It indicates that the growth of the national average nominal wage over the past year has been lower than that of the ‘last year. In other words, the overall wage situation has not improved when the economy rebounds strongly.

Important economic indicators like trade and income showed robust growth last year. Tax revenue recorded growth of about 17% in the last half of 2021. The value of annual trade in goods jumped 35% last year compared to the previous year. These indicators showed that economic and commercial activities have surged, largely recovering from the damage of Covid-19. Hence, the Minister of Finance has affirmed that the economy of Bangladesh will grow by 7.20% and the per capita income will reach $2,785 in FY22. Due to the pandemic, the domestic product (GDP) of the country recorded a growth of 3.45% in FY20 and is expected to increase by 5.43% in FY21.

To what extent the recovery of the economy contributes to rising wages is a question. The answer is not readily available because the wage index, prepared by the national statistics agency, does not provide any information on the actual wage. The real wage is generally estimated after adjusting the nominal wage with the rate of inflation for a given month, quarter or year.

The Consumer Price Index, calculated and released monthly by the Bangladesh Bureau of Statistics (BBS), showed that the average annual inflation rate stood at 5.54 percent last year. The rate was 5.69% the previous year or in 2020. As the average annual inflation does not always provide a good measure of price level fluctuation, one must look at the monthly inflation rate. The monthly inflation rate last December was 6.05%, compared to 5.29% a year ago. In fact, inflation has been on the rise since last July.

By comparing the index of the monthly salary rate with the monthly inflation rate, it becomes clear that the inhalation of the surge has swallowed up almost the entire amount of the salary increase. This indicates that employees have little or almost no savings after meeting regular expenses. For example, the inflation rate last November was 5.98% while the nominal wage growth rate was 6.02%. Thus, the gap between wage growth and inflation was only 0.06 percentage points. Although it is not a standard way to estimate or calculate the real wage, it can be regarded as a proxy to find the trend of the real wage, because the BBS has stopped publishing the real wage index for a long time.

The proxy estimate shows that rising prices for basic necessities as well as other goods and services are weighing heavily on people with low and fixed incomes. Their real income has been greatly eroded. As 85 percent of the country’s jobs are in the informal and semi-formal sector, most of these wage earners and workers have no job protection and are still vulnerable to any shocks. This is why the blow of the pandemic was quite hard there.

Due to the pandemic, many people have lost their jobs and many have faced a pay cut. As the business grew, some of them kept their jobs. Nevertheless, a large number of them have to accept jobs with lower wages and salaries. In the absence of detailed wage and employment data and regular surveys, the sad thing is that they are not included in official statistics either. What emerges from newspaper articles, limited sample surveys by a few research organizations, and long queues to purchase subsidized essentials is that the overall wage situation has deteriorated.

Growing income inequality is another main reason for the deterioration. As some people profit from unearned income through rent seeking and corruption, they do not care about the high price of different products and services. Then there are the professionals and high-wage workers, many of whom also have multiple sources of income. All contribute to maintaining the strength of aggregate demand to some extent. The low earners cannot match them and are struggling to survive.

The International Labor Organization (ILO) said in a report last year: “When low-paid workers become unemployed, the average wage reflects the wages of higher-paid workers who remain employed.” He also added that in some countries, where unemployment has not risen as much – perhaps due to the use of wage subsidies and other job retention measures – average wages have remained stable. or declined, as working time was reduced or workers’ nominal wages froze or reduced. Workers in Bangladesh have faced both job losses and wage cuts without any subsidies or job retention. Thus, it is not employment, but the salary situation that is of concern here.

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