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Bangladesh Factory Owners Push Back Against Reform

While the push for sweeping reforms of Bangladesh’s labor practices has been widely covered by the international press, comparatively little attention has been devoted to the resistance of factory owners.

Just recently, Bangladesh convened a meeting of the Minimum Wage Board, comprised of labor union representatives, governmental bureaucrats and factory owner representatives. Arshad Jamal Dipu, speaking on behalf of factory owners, proposed a minimum wage increase of no more than 20 percent, an increase of Tk 600 to Tk 3,600. Dipu said this number was the result of calculating several variables, including the costs of living and daily calorie consumption for workers.

Still, his primary rationale for the percentage he proposed was economic, citing an expectation of an increased cost of production of 12.5%. He also mentioned the rapid appreciation of the taka and its effects on the garment industry, rising 8.6% against the U.S. dollar. “Hidden costs of business are also on the rise,’ said Dipu.

Dipu’s proposal starkly contrasts with what factory workers have demanded. Sirajul Islam Rony, a labor leader also on the Minimum Wage Board, angrily called Dipu’s calculations “illogical and inhuman.” He recommended a new minimum wage of Tk 8,114 per month, a 170.5% increase from the current level. He said, “I urged the owners to reconsider the proposal as it is too low from our demand.”

The dispute between labor representatives and factory owners has been brewing ever since the Minimum Wage Board was assembled and Prime Minister Sheikh Hasina assured workers their salaries would be increased.

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Historically, a wage board assembles every five years to revisit the issue of compensation for workers. Given the ferment surrounding labor conditions in Bangladesh, especially in the still hot contrails of the Rana Plaza tragedy, the government decided it would be prudent to meet earlier than scheduled.

In her remarks, Hasina emphasized the importance of the garment industry to the whole of Bangladesh’s otherwise fragile economy. She discussed the sector as an antidote to poverty and an engine of gradual female empowerment.

Hasina also took the opportunity to announce new land in Baipayl that has been earmarked for the development of special “colonies” to be constructed in the future, designated for housing facilities for factory workers. For the time, separate dorms will be built exclusively for women workers.

Still, the high point of Hasina’s address were her comments on the possibility of wage increases, confidently delivered. Salaries for garment workers have not been raised since 2010. Then, it was lifted 82 percent.

The true costs of compliance are only now starting to come into sharper focus. Ismat Jahan, Bangladesh’s ambassador to the European Union, estimates that making garment factories safe will add about $0.10 to the cost of each garment. The total cost is estimated to be approximately $3 billion. He expects that Western consumers were be willing to bear the new cost increase. “I believe consumers in the West are ready to pay a small increase in prices for the millions of women who stitch for them in a faraway land,” he said.

However, Jahan was also cautious about the prospect of increasing prices too much. ‘Realistically speaking, unless we can ensure fair pricing of the products, any significant increase of the salaries will not be practical in this highly competitive industry.”

Paul Murphy, Ireland’s representative member of European Parliament, agreed that the costs of compliance would necessarily cut into profit margins. “Profits have to be cut into if workers’ rights in Bangladesh and other countries need to be protected.”

It remains unclear if Western retailers will ultimately side with workers’ demands or the calculations of factory owners. Jahan was especially critical of their collective commitment after only nine of them participated in a conference last week organized by the International Labor Organization in Geneva, Switzerland.