We have the lowest minimum wage in Asia Pacific. It’s high time to revise it

Bangladesh has experienced amazing economic growth in recent years. But the state of the country’s human resource minimum wage continues to paint a picture of disparity and inequality.

May 01, 2022, 10:30 a.m.

Last modification: May 01, 2022, 11:06 a.m.

Dr Md Asadul Islam and Dr Mohammad Enamul Hoque. Illustration: TBS


Dr Md Asadul Islam and Dr Mohammad Enamul Hoque. Illustration: TBS

Rising prices have been a global problem. It has reached a dangerous level since the Russian-Ukrainian war because these two economies contribute significantly to world exports of oil, gas and wheat. Disruption to the supply chain caused by the war has also caused turmoil in global commodity markets.

As a result, governments around the world are trying to justify rising prices. In such a time of pandemic and war, that might be a reasonable and plausible assertion. However, justifications alone will not be enough for frontline workers living on minimum wage.

Similarly, workers working outside the minimum wage ceiling also suffer the setbacks of price increases. Many salaried/day laborers do not even know the minimum wage as they have become accustomed to being paid below the nominal amount.

They should receive wages that at least follow the minimum wage scale. Otherwise, their vulnerabilities can create anarchy at different levels of individual, family, community, social and even national life. Such a social calamity will hamper the rapid progress of the country’s infrastructure, such as the Padma Bridge, which is expected to be completed this year.

Bangladesh has achieved astonishing economic growth, averaging more than 5% per year over the past decade, and has continued to make strides in infrastructure development in recent years, a feat that has been hailed by almost all international associations. .

However, when it comes to paying our workers – our human resource – minimum wage, Bangladesh finds itself at the bottom of the ladder. When comparing the minimum wage with neighbors such as India ($215), Nepal ($396), Pakistan ($491) and Sri Lanka ($247), it is evident that our minimum wage of only $48 (ILO, 2019) is dismal.

Focusing on real wage growth in Bangladesh between 2010 and 2019, real minimum wages declined by 5.9% (annually), which paints a dire picture. Bangladesh is the only country in the Asia-Pacific region where the minimum wage does not even come close to the lowest international poverty line.

Additionally, the price of commodities has risen significantly in recent years, but minimum wage reviews or increases have not been implemented in favor of the poor, since December 2018. Bangladesh reviews the minimum wage every five years. However, the review period should be shorter in such a rapidly growing country to adapt to national and international issues.

A disturbing fact is that the garment sector is the only sector where a minimum wage of Tk 8,000 is enforced, while many other sectors directly or indirectly ignore labor laws or minimum wage guidelines. Other than that, the minimum wage application process is fraught with pitfalls. The reality on the ground for day laborers looks grim.

Although the Bangladesh Bureau of Statistics reported an inflation rate of between 5.4% and 5.7%, and more details on food and non-food inflation are presented in Chart 1, the study real market shows a different picture.

Infographic: TBS

Infographic: TBS

Infographic: TBS

Vegetables and many other staples are currently sold 2-3 times more than in fiscal year 2019. Therefore, the numbers are not compelling. In addition, the central bank’s inflation expectations survey also revealed that the annual average inflation rate is expected to cross the 6.0% level by the end of the current fiscal year. It could even reach 8.5% by the end of December this year. In a recent report, the IMF is also cautious about the inflation rate, and it should be higher than expected given the current economic and international situation.

“The Gini index is a measure of the distribution of income within a population. A higher Gini index indicates greater inequality, with higher income people receiving much larger percentages of the population’s total income. “, says the report. The trend between the years 1992 and 2016 (as shown in Chart 2) shows that income inequality has increased in Bangladesh, a trend that is also evident in the US economy.

Furthermore, the World Bank (WB) 2016 report shows (Chart 3) that the income share of the bottom 40% of Bangladeshis is about 21%, while the share of the top 10% is 27%. However, given the trend of the past 5 years, it is possible that income distribution is unlikely to have improved. As such, it can be expected that inequality has increased in recent years and may increase further in the future.

The gap between rising prices and the minimum wage not only exacerbates inequalities in the lives of workers, but also influences lower-middle-class families with children and elderly relatives who may require medical attention.

This gap has also created a work-life imbalance, especially in urban areas. Rising prices also impact the nutritional status of women, who traditionally sacrifice their food and other health-related needs for the sake of children and male family members.

As a result, in the long term, malnutrition levels could skyrocket, not only destructively affecting women’s health, but also ruining families. According to medical experts, most women in Bangladesh already have problems with malnutrition, and a price hike could make the situation worse.

Our GDP has grown enviably and it is a matter of judgment, but if the majority of the population, that is to say the workers, do not benefit from it, we cannot deny our participation creating an unequal society where more people are malnourished than healthy.

We recognize that the government is tirelessly taking initiatives to combat rising prices. But while ensuring price stability, it is high time to consider raising the minimum wage for the common people who are the backbone of our economy.

Md Asadul Islam, PhD and Mohammad Enamul HoqueDBA are assistant professors at BRAC Business School

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.

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