Global brands are willing to raise purchase prices. But will that help push Bangladesh apparel workers’ wage?

An expert says the government and buyers should focus on proper distribution of profit among workers

The American Apparel and Footwear Association representing more than 1,000 brands has agreed to raise purchase prices of clothes from Bangladesh by 5 to 6 percent, taking the ongoing garment workers’ protests over wage hike into account.

Those in the industry say such assurances from buyers will help Bangladesh fulfil the workers’ demand for a minimum wage of Tk 25,000, while relieving pressure of growing production cost amid global economic headwinds from owners.

Following deadly protests and clashes between the police and workers, the government mandated an almost 60 percent raise to the minimum monthly wage to Tk 12,500, or $113, from December, the first increase in five years.

However, workers’ associations in Savar, Gazipur and other industrial zones did not relent in protesting and stuck to their demand of raising the monthly wage to Tk 23,000-Tk 25,000.

Over three weeks of movement, four workers have died reportedly in clashes with law enforcers, while many factories were vandalised and set ablaze as well. Many factories have also remained shut due to the protests.

Asked if they would raise purchase prices by the 5 to 6 percent that costs will rise, Stephen Lamar, chief executive of the AAFA, told Reuters: "Absolutely".

"As we and our members have reiterated several times now, we are committed to responsible purchasing practices to support the wage increases," Lamar said in an email.

"We also renew our pleas for the adoption of an annual minimum wage review mechanism so that Bangladeshi workers are not disadvantaged by changing macroeconomic conditions."

Low wages have helped Bangladesh, which is the world's biggest garments exporter after China, build its garment industry, which employs about 4 million people.

Readymade garments are a mainstay of the economy, accounting for almost 16 percent of GDP.

Even after the increase in minimum wage, which some workers said was too little, Bangladesh lags other regional garment manufacturing hubs such as Vietnam, where the average monthly wage is $275, and Cambodia, where it is $250, data from the International Labour Organization shows, according to Reuters.

Factory owners had said the wage hike, which comes ahead of a general election, would eat into their profit margins by increasing costs 5 to 6 percent. Labour accounts for 10 to 13 percent of total manufacturing costs, industry estimates show.

RELIEF FOR WAGE HIKE PROTESTS

The positive announcement from the buyers was “desired”, said Faruque Hassan, president of Bangladesh Garment Manufacturers and Entrepreneurs Association.

“I myself sent two consecutive letters to the buyers, asking them to raise prices of apparels. So, such initiatives from buyers will definitely help the industry. But only one or two buyers raising prices won’t help. Everyone has to come forward keeping the situation in mind.”

“That’s because the wage issue isn’t the only problem. Gas prices rose over the past year, so did electricity and transportation costs. Prices of everything are higher now. The wage issue just exacerbated the problem. Our purchase orders also plummeted over the last year.”

Faruque, however, gave no direct answer to whether the brands moving to raise prices would help them to meet the workers’ demand for higher wage.

“They [buyers] talk about fair wages for workers, ethical sourcing and fair pricing. Now we’ve raised workers’ salaries ourselves. I’m sure buyers will now make a move on prices.”

“I will send a letter to the American Apparel and Footwear Association to thank them. It will contain a call to all buyers to pay attention to the matter.”

Faruque said the proposed wage would raise manufacturing costs by 7 to 10 percent.

Taslima Akter, a workers’ leader and coordinator of the protests, said if the buyers decide to raise apparel prices, it will open up an avenue to fulfil the wage hike demand.

“The path to raising the proposed salary will widen. The industry owners talk about the limitation of their capabilities. Now if the owners, the government and the buyers together take the responsibility, it will create an opportunity to reconsider the wage workers are demanding. I think the move needs to be made swiftly,” she said.

“The responsibility to raise salaries of workers does not only fall upon the workers. The industry owners also need to direct efforts towards negotiating for higher prices and distributing [the earnings] among the workers.

“The price of things made in other countries are high. Those made in our country costing less with less wage for workers should not be the case.”

According to Taslima, workers demanded that the buyers raise garment prices a bit. “We’ve calculated that if the price of clothing is raised by 7 to 10 cents, it’s possible to fulfil the workers’ demand for Tk 25,000 wage.”

Sayema Haque Bidisha, a teacher at Dhaka University’s Department of Economics and an expert on wage, said the brands’ positive outlook towards raising prices lifted prospects of settling the minimum wage issue in Bangladesh.

“But whether the extra earnings will go to workers or into the pockets of owners remains to be seen.

“The buyers’ announcement should make it clear that raising prices has to benefit the workers. The workers have their interests while the owners have theirs. But the government and thet buyers also factor in. These two parties need to consider the workers’ interests while taking decision and incentive measures,” Sayema said.

In her words, the Tk 12,500 minimum wage set by the government was “unrealistic”. High prices of daily commodities need to be taken into account for proposing a wage increase.

She also pointed out that the workers’ voice needed to be strengthened in the price negotiation process while wages should be set based on studies and views of “external observers”.

“The demand of the workers may not be fulfilled, but we could get closer to what they want,” she said, adding that the workers would always want higher salaries with the owners trying to cap it lower.

“But it’s important to pressure the owners. Some people are even critical of Tk 17,000 in wages. But what I’d say is that getting Tk 17,000 is better than getting Tk 12,000. It’d be closer to what the workers desire, and fulfil much of their demand.”

[Writing in English by Syed Mahmud Onindo]