Bangladesh should have annually reviewed its wage-setting process, as apparel workers earning the minimum wage were losing income year after year due to rising inflation, said a policy brief from Cornell University.

The brief, titled ‘Waiting Game: Minimum Wage-Setting in Bangladesh’s Apparel Industry’, published by the Global Labor Institute (GLI) at Cornell University, also made five key recommendations, including institutionalising the annual review of minimum wages and announcing a review of the 2023-set minimum wage for 2025.

The GLI, dedicated to independent quantitative research and action, analysed Bangladesh’s national minimum wage-setting policy amid plans for major updates to labor law and practices.

The researchers noted that the longstanding policy, which reviewed wages every five years, combined with high inflation, favoured employers over workers.

In addition, it noted that the local ‘purchasing power’ of workers’ wages in Bangladesh is significantly lower than those of workers in competing apparel producing countries.

Bangladesh reviews the minimum wage for apparel workers every five years, with the latest review in 2023. This long delay creates significant tension between workers, employers, and the government. Without annual reviews, workers’ real (inflation-adjusted) income can decrease over time, it said.

Over employers’ argument of rising labour cost in a labour intensive sector would make their industry less competitive the brief showed that there is no evidence to support this and the experience of Vietnam, Indonesia, Cambodia and elsewhere in recent years undermine the argument.

Citing data, it said apparel brands a retailers advocacy for meaningfully higher wages and a regular wage-setting process has been ineffective and the 2023 wage revision and the fall of the Hasina government in 2024 have drawn the industry’s attention again.

As a result, the researchers are calling on Bangladesh’s government to simplify the minimum wage structure and adjust wages annually.

It also recommended ‘genuine trade union representatives chosen by labor federations are appointed to a wage board’.

Talking to the FE on Thursday, Jason Judd executive director of Cornell ILR executive director, explained that Cambodia’s apparel industry is a good example for Bangladesh to follow citing growth in wages and output.

He, who is in Bangladesh for a short visit until Friday, said Cambodian government took a similar approach when it overhauled its wage-setting policy a decade ago.

The experience of Cambodia’s apparel industry in remarkably similar circumstances is very clear, he said adding a decade ago after street protests and government violence against workers, brands joined the campaign for change and wages and output has grown steadily since.

‘Wages have grown regularly alongside orders and output since then there in Cambodia,’ he said.

He cited one of the Institute’s report conducted in 2023 where workers interviewed for that report estimated spending TK 3500 for medicine and Tk 2000 for electricity at home in the hottest months when they have to run fan constantly to sleep.

Monthly bills of this size equal 61 per cent of average monthly rent payments of TK 9000 and workers reported borrowing their personal belongings and paying high interest rate to afford electricity and medicines in May, June and July.

‘The Bangladesh industry’s price advantage has been maintained in part because of this downward pressure on real income for workers, as their low wages and the five-year review period works to keep production prices down and, therefore, able to compete with larger countries like China,’ he said.

‘There is a clear need and room—both political and economic—for an annual wage-setting process in Bangladesh. It’s long overdue. Imagine waiting five years for a raise while inflation rages at 10 per cent—that’s the situation for workers under the current scheme,’ he said.

The brief said concrete actions the government of Bangladesh can take in the coming months included collecting explicit reassurances from brands that they support via higher prices the increase in the minimum wage (including references to use of labor-costing and to the persistence of below-cost pricing by brands).

Its other recommendations included distinguishing in the wage-setting process, and social dialogue more generally, between genuine worker representatives and others.

It called for extending freedom of association and bargaining rights to workers in export processing zones as complements to democratic representation of workers and wage enforcement efforts.