Bangladesh apparel workers are among the worlds lowest paid

Bangladesh apparel workers are among the world's lowest paid

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Despite continuing unrest on the streets of Dhaka by garment workers unhappy with the new pay deal agreed last week, it seems the compromise wage hike will go some way towards placating calls by retailers in Europe and North America for better pay in the country's clothing industry.

Many apparel buyers from retailers including Wal-Mart, Tesco, H&M, Zara, Carrefour, Gap, Metro, JCPenney, Marks & Spencer, Kohl's, Levi Strauss and Tommy Hilfiger, agreed in principle to support the wage hike.

The firms, which import in bulk from Bangladesh where costs are among the lowest in the world, have taken issue with the low garment worker wages amid fears that sweatshop allegations could taint their reputations as socially responsible companies.

Indeed, a group of global retailers in February advised the Bangladeshi Prime Minister that "swift action" was needed to tackle the problem.

The new minimum monthly wage of BDT3,000 ($43) was finally agreed by ministers, lawmakers and garment factory owners after months of demonstrations that resulted in violence, clashes with police, damage to dozens of factories and work suspensions.

The increase is more than 80% higher than the existing BDT1,662 ($24) monthly wage set in 2006 for the lowest entry level grade-7 worker.

The new pay structure will come into effect from 1 November 2010, and has seven grades. The minimum pay of the highest grade-1 has been raised to BDT9,300 ($133) per month from the current BDT5,140 ($74). The wage of an apprentice worker has been increased to BDT2,500 ($36) from BDT1,200 ($17) per month.

"We have done our best for the apparel workers," said Labour Minister Mosharraf Hossain last week.

Continuing campaign
However, the core apparel workers' groups, led by the left-leaning trade unions, claim it still fails to meet living costs and say they will continue to campaign for a minimum monthly wage of BDT5,000 (US$72).

"As the new wages will not help meet the increasing prices of food, essentials and rent, we will continue our protest demanding BDT5,000 per month as the minimum wage," said Mushrefa Mishu, president of the Bangladesh Garment Workers' Unity Forum.

The recommendations for a wage hike were submitted by the Minimum Wage Board (MWB) on a majority of board members, and come after seven months of negotiations.

But factory owners, represented on the board by the Bangladesh Garment Manufacturers & Exporters Association (BGMEA), only agreed to the rise if it was under-pinned by a series of benefits to help their businesses.

These included 120 days' delayed implementation of the new wages, the withdrawal of their advance income tax and VAT, reduced charges for utility and port services, lower bank interest rates, and the creation of a US$70m fund to build dormitories for workers.

"Many factories will not be able to pay higher wages as apparel buyers offer lower prices after the recession," BGMEA president Abdus Salam Murshedy told just-style.

Reviving after recession
Bangladesh's garment sector is only just reviving after the recession that reduced the price and demand of Bangladeshi apparel in its main export markets of the EU, US and Canada.

"Compared to the double-digit export growth in terms of income the situation was stagnant last year," said Murshedy.

During the financial year from July 2009 to June 2010, apparel exports reached US$12.496bn, a little above the US$12.347bn posted the previous year.

Members of the Minimum Wage Board (MWB) also believe factory owners complicate matters by paying wages irregularly and refusing to upgrade pay in line with rising profits. 

"A major wage hike was essential, but regular payment of wages can substantially minimise the workers' unrest," said MWB chairman Iktedar Ahmed, a senior district and sessions judge.

Separately, Fazlul Hoque, president of the Bangladesh Knitwear Manufacturers & Exporters Association (BKMEA), told just-style that garment factory owners are likely to see production costs rise 7% as a result of the pay increase.

He said retailers need to absorb some of this, with the three-month delay in implementation giving some breathing space for owners to renegotiate prices with their buyers.

By Jahir Ahmed.