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Garments

Financing Living Wage in Bangladesh’s Garment Industry

Zahid Hussain's picture

The Wage Board on garments in Bangladesh nearly doubled minimum wages on July 29, 2010. The minimum wage at the entry level will be raised to Tk 3,000 a month (or about $43) from Tk 1,662.50 ($24). The new pay structure, proposed to be effective from November 1, maintains the existing seven grades with the highest pay fixed at Tk 9,300 ($140) per month. About 3.5 million Bangladeshis work in the garment industry, which accounts for 80 percent of the country’s exports. International companies like Wal-Mart, JC Penney, H&M, Zara, Tesco, Carrefour, Gap, Metro, Marks & Spencer, Kohl's, Levi Strauss and Tommy Hilfiger all import in bulk from Bangladesh.

Garment workers apparently are unhappy over their wages, even after the proposed increase. They protested by smashing vehicles and blocking traffic in various garment sites in Dhaka following the announcement of the wage increase. Why has the frequency of violence increased?

The Dutch Disease has not Infected Bangladesh, not yet any way

Zahid Hussain's picture

The Netherlands’ discovery of large natural gas deposits in the North Sea in the 1960s had serious repercussions on important segments of its economy, as the Dutch guilder became stronger, making Dutch non-oil exports less competitive. This has come to be known as "Dutch disease" or “resource curse.” Although generally associated with a natural resource discovery, it can arise from any large inflow of foreign currency--foreign assistance, foreign direct investment and remittances, among others. A surge in remittances can be expected to result in appreciation of the currency in the receiving country with all its attendant consequences of crowding out exports, crowding in imports, and induce movement of resources into the production of non-traded goods.

Bangladesh has experienced a remittance boom since FY01—with annual flows rising from $1.9 billion to $9.7 billion in FY09—growing at a compounded annual rate of 22.6 percent for eight years and still counting! As a result, remittance has now reached nearly 11 percent of GDP and is now the single largest source of foreign exchange earnings.